As House Speaker Paul Ryan (R-WI) has been rolling out his “Better Way” policy agenda, he’s been promising new ideas. And the same was true when he unveiled the latest plank on tax reform, which he said offered “a new direction.”
But the plan is packed full of ideas that Republicans have offered up over and over again.
The plan lowers tax rates generally, but the wealthy and corporations make off with the biggest gains. The corporate tax rate would drop from 35 percent to 20 percent. Certain smaller businesses that report income on individual returns would also face a lower tax rate of 25 percent.
The rich also do well. The top tax rate paid by the wealthiest individuals would fall from its current level of 39.6 percent to 33 percent. Taxes would also be lowered for money made through capital gains and dividends investments, which already gets taxed at a lower rate than income made from a salary, something that overwhemingly benefits the well off. And the plan gets rid of the estate tax, paid by the richest 0.2 percent of families and estates, which not only generates significant revenue but also helps keep wealth from concentrating in the hands of a very few.
None of these ideas are new for the Republican Party. They all appear in presumptive presidential candidate Donald Trump’s plan, although many of the benefits for the wealthy are even larger in his proposal. They also appeared in 2012 candidate Mitt Romney’s plan. And Ryan himself put forward most of them in his 2013 tax overhaul proposal.
Ryan and the other Republican lawmakers who put the plan together say that it won’t raise the deficit. But they also assume the loss of at least $1 trillion in tax revenue compared to current law from repealing the Affordable Care Act taxes and keeping tax breaks that are set to expire — that doesn’t include any loss in revenue from lower rates on corporations and the rich. While the plan isn’t detailed enough for a full analysis, analyses of Trump’s plan find it would cost the government $9.5 trillion over a decade.
They also promise the plan will create economic growth and jobs. But there’s little evidence that lower rates lead to higher growth. Since World War II, it’s generally been higher when the top marginal tax rate was higher and lower when rates were substantially lower. And studies have found that tax cuts under both Presidents Ronald Reagan and George W. Bush didn’t spur economic growth.