And an Explanation as to Why He Refuses to Provide Details
On an almost non-partisan basis politicians support the idea of reducing tax rates and making up the lost revenue by what is called “broadening the base” which is another name for making taxable income higher. Tax rates are applied to taxable income, and the differences between Gross Income and Taxable Income is the result of exemptions, deductions and exclusions written into the tax system.
The latest fraudulent scheme in this area is a proposal by Rep. Paul Ryan (R, Wi) who is regarded by many as a serious intelligent individual but who in reality is a tax fraud. Mr. Ryan proposes to change the tax system to one of two rates, 10% and 25% and to make the changes revenue neutral by “broadening the base”. This is done by eliminating those exemptions, deductions and exclusions.
The dishonest nature of Mr. Ryan’s proposal is that he will not disclose which of these items he will eliminate or how he will change any of them. The obvious reason for this is that once the details are announced, those persons whose taxes will go up will be unhappy, and those persons who benefit from the economic activity generated by the provisions will be very unhappy. Eliminate the mortgage deduction, for example, and incur the wrath of the real estate and home construction industries.
A second and less obvious nature of the dishonesty here is that the program won’t work. Thanks to the excellent economic Forum of Jared Bernstein we have a reference to research done by the Congressional Research Service. Here is their conclusion.
Given the barriers to eliminating or reducing most tax expenditures, it may prove difficult to gain more than $100 billion to $150 billion in additional tax revenues through base broadening. This amount could have a significant effect on reducing the FY2014 budget deficit—reducing the projected $345 billion deficit by 30% to 43%. This additional tax revenue, however, is equivalent to about 6% to 9% of projected FY2014 individual income tax, and, consequently, would not allow for significant reductions in tax rates (about a one or two percentage point reduction for each bracket).
So there you have it, Mr. Ryan’s plan, immediately endorsed by Mr. Romney is a flat out fraud. So don’t expect enactment any time soon. But do expect Mr. Ryan to be treated with dignity and respect and given access to all the talk shows. And yes, he did recently indicate he would accept the Vice Presidential nomination.