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Fabricated Details on Tax Reform

Posted By Curtis Dubay On June 26, 2012 @ 9:58 am In Economics | Comments Disabled

The Democratic staff of the Joint Economic Committee (JEC) fabricated details about the tax reform [1] outline passed by the House of Representatives as part of Budget Committee chairman Paul Ryan’s (R–WI) budget. Its “analysis” rests on thin air.

The Ryan budget provides a tax reform outline—nothing more. It’s a guidepost for a future tax reform plan. It provides few details beyond a top tax rate of 25 percent and the desire to eliminate some deductions and credits. It also says the reform is to be revenue neutral—meaning it wouldn’t lower or raise taxes. The details are to be filled in later by the Ways and Means Committee when the time is right to advance tax reform.

Undeterred by the lack of details necessary to do a legitimate economic analysis, the Democratic staff of the JEC  recently released a report [2] claiming that the outline would be a big tax cut for the rich financed by raising taxes on the middle class. This despite the Ryan outline requiring the final plan to be revenue neutral.

The JEC report premises this faulty conclusion on incomplete work from the Tax Policy Center (TPC). The TPC report is incomplete because, as it admits, there aren’t enough details for them to do a full analysis of the plan. Nevertheless, using the spare details available to them, they released a report showing the plan to be a tax cut [3] and called it as much in a subsequent blog post [4].

The TPC’s data cannot be used to draw any conclusions about the Ryan outline because it is incomplete. Despite the shortcomings of the TPC data, JEC still used it, and extrapolated further from it, to arrive at the faulty conclusion that the Ryan outline would be a tax cut for the rich financed by the middle class.

To arrive at this erroneous conclusion, JEC had to make all sorts of assumptions about intricate details in the tax reform outline provided in the Ryan budget.—details that simply do not exist. For instance, JEC Democrats assume that the Ryan plan would eliminate deductions for state and local taxes, mortgage interest and charitable contributions, and the employer-provided health insurance exclusion and tax 401(k) contributions.

Where did they come up with all that? They conjured it out of thin air.

The whole premise of their argument—that the Ryan plan is a tax cut—is faulty as well. As Americans for Tax Reform explains [5], JEC assumes, using the incomplete TPC data, that the revenue basis for the tax reform outline is what the current code would raise if the Bush tax cuts expire and all the other Taxmageddon tax increases [6] occur. This would push revenue to historic new heights.

The Ryan plan makes the much more reasonable assumption that revenue will remain at historical averages. JEC’s flawed revenue assumption makes the Ryan outline look like an enormous tax cut when it isn’t a tax cut at all.

The Washington Post, in an article by Lori Montgomery [7], reported the imagined elimination of deductions and credits, and revenue falsehood, as fact. Not so.

The economy badly needs tax reform, because the current code is from a bygone era. It strangles economic growth and keeps us from reaching our productive capacity. The blatant misrepresentations of the Ryan tax outline are just that. We should get past such distortions of plans meant to propel tax reform forward. If we don’t, tax reform will remain stuck in neutral.

[This post has been altered. The original post incorrectly implied that JEC and TPC worked together on the JEC’s report. It also stated that both JEC and TPC fabricated the deductions and credits the Ryan plan would curtail. Only the JEC explicitly listed those policies.]


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2012/06/26/fabricated-details-on-tax-reform/

URLs in this post:

[1] tax reform: http://www.heritage.org/issues/taxes/tax-reform

[2] recently released a report: http://www.jec.senate.gov/public/?a=Files.Serve&File_id=bc6c837c-cfbd-4212-a85f-9b88695dcb85

[3] tax cut: http://www.taxpolicycenter.org/numbers/Content/PDF/T12-0075.pdf

[4] blog post: http://taxvox.taxpolicycenter.org/2012/03/23/paul-ryans-budget-plan-more-big-tax-cuts-for-the-rich/

[5] Americans for Tax Reform explains: http://www.atr.org/jec-dems-push-fraudulent-tax-study-a6978

[6] Taxmageddon tax increases: http://www.heritage.org/research/reports/2012/04/taxmageddon-massive-tax-increase-coming-in-2013

[7] an article by Lori Montgomery: http://www.washingtonpost.com/middle-class-would-face-higher-taxes-under-republican-plan/2012/06/19/gJQAD4auoV_story.html

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