For years now, Rep. Paul Ryan, R-Wis., has bamboozled huge numbers of political journalists and Beltway insiders into believing he’s some kind of policy genius. It’s a reputation he parlayed into scoring a running-mate role with presidential candidate Mitt Romney in 2012 and eventually into obtaining a position as speaker of the House. Ryan uses big words and writes white papers that he releases with great pomp and circumstance, in order to burnish his credentials, but the debacle of his failed attempt to pass a bill to replace the Affordable Care Act has finally started to ding his reputation.
Paul Ryan's great skill is making the media think he is good at policy and legislating when is actually an amateur at both
— Dan Pfeiffer (@danpfeiffer) March 25, 2017
Harold Pollack at Politico wrote that Ryan “produced one of the worst pieces of major legislation in memory — and his reputation as a policy professional and legislative tactician may never recover.”
Ryan’s fall from grace is looking even more likely in light of the widespread expectation that his next move will be to try to pass a tax reform bill. Like his health care reform bill, such a legislative effort will almost certainly bring the phrase “dumpster fire” to mind.
Perhaps we need scare quotes around the phrase “tax reform.” After all, most people, when they think of the concept of tax reform, assume that it means cleaning up or streamlining or otherwise trying to make the tax system better for ordinary Americans. But Ryan’s ideas, which haven’t been put out in legislation but instead in a well-marketed plan called A Better Way, really don’t address tax reform in the way most Americans think it.
“The long-standing Republican agenda of cutting taxes on corporations has never been about” reforming the way normal citizens pay taxes, explained Marshall Steinbaum, a senior economist at the Roosevelt Institute, in a phone conversation.
Steinbaum is the lead author of a new report that analyzed Ryan’s ideas for tax reform and found that the plan doesn’t come anywhere close to fulfilling Ryan’s promises to put ordinary taxpayers first, create jobs or make the tax system fairer. In fact, Steinbaum and his colleague, Eric Harris Bernstein, discovered that Ryan’s plan does the opposite: It’s just a rehash of the standard Republican plan to redistribute wealth from the bottom 99 percent of the population to the wealthiest Americans.
“While the plan will make Trump’s cabinet of billionaires even richer, it won’t boost growth or create jobs for other Americans,” the report’s one-page summary said. “In fact, the GOP tax plan could dramatically increase prices for many Americans, cutting into family incomes and leaving the vast majority of households worse off.”
Harry Stein, director of fiscal policy for the Center for American Progress, said by phone, “It’s really remarkable the extent to which Paul Ryan’s ideas for tax reform are entirely about cutting taxes for rich people.” He added, “The biggest feature of the plan is cutting the top tax rate paid by wealthy individuals, cutting the tax rate paid by corporations and cutting the tax rate on income from investments, which almost entirely benefits the wealthy.”
Independent analysis of Ryan’s plan by the Tax Policy Center found that a whopping 99.6 percent of the tax-cut money would go to the top 1 percent of income earners. That’s the kind of number that’s unlikely to calm down the angry voters who have been showing up at town halls and calling their congressional representatives over the fear of losing health insurance.
Ryan uses a lot of flash and dazzle, but his arguments for why this will supposedly create jobs is just a tricked-up version of the same old “trickle-down” economic arguments that have been disproved before.
“What is the empirical basis for cutting taxes for corporations? There’s really no basis for it, in my considered opinion,” Steinbaum said.
Ryan’s claim is that the extra money that corporations would be able to keep would go to increased wages for workers or more jobs. Research has shown that instead it would just go to “increased payout for shareholders,” Steinbaum added.
When you cut taxes for rich people, in other words, they tend to keep the money for themselves or pass it around to other rich people, instead of giving it to their employees.
This theory — “that tax cuts for the rich will dramatically increase economic growth — has been consistently refuted by experience,” Stein and co-author Alexandra Thornton wrote in a 2015 paper debunking conservative tax myths. “In reality, economic growth in the United States since World War II has tended to be greater in times with relatively high top marginal income tax rates.”
Ryan’s other big promise is that his plan is “revenue neutral,” a term that’s supposed to mean that the government won’t start running up huge deficits even though he plans to slash taxes for the very wealthiest Americans. In the eyes of every economist outside the trickle-down cult, that argument is preposterous.
“If they actually want to do a tax reform that doesn’t increase deficits, you actually have to find ways to make up for the lost revenue,” Stein explained.
Ryan’s proposal to make up for lost revenue is something called a “border adjustment tax,” a deliberately snoozy phrase that hides the fact that it’s a huge shift in the tax burden away from the rich toward middle-class and lower-income people.
In essence, Steinbaum said, it’s a consumption tax: a tax on imports that will be passed along to the consumers.
Ryan’s ideas aren’t new, but he is good at “adapting a long-standing right-wing economic agenda to the political reality and interests” of the contemporary moment, Steinbaum continued.
In this case, Ryan has taken an ancient and widely hated Republican idea — the audacious notion of cutting taxes on the wealthy and replacing them with an inherently regressive sales tax — and repackaged it to reflect the “renewed economic nationalism in the age of Trump,” Steinbaum said.
By making it an import tax, Ryan can accomplish the goal of shifting the tax burden from the wealthy to ordinary people by pretending it’s a Trumpian plan for economic protectionism.
Both Stein and Steinbaum pointed out that the import tax idea is wildly unpopular with many of the corporate benefactors that Republican congressmen answer to, such as Wal-Mart. (Ryan’s plan is popular with huge exporters like Boeing, which would likely be facing lower taxes as a result.) The business model of a big-box consumer retailer is based on cheap imported goods, after all, and this idea would threaten that.
So what’s likely to happen is that Ryan will put this import tax in the tax-reform package, and then numerous Republican congressmen will demand its removal. If Ryan caves in on that issue, that means that there isn’t even a whiff of an effort to replace the government revenue he’s eliminating by cutting taxes on the wealthy. Which means that, if the law were to pass, the near-certain result would be rapidly ballooning deficits.
“What [Republicans] will then turn around and do,” Stein said, “and we know this because they’ve done it before, is turn around and say, ‘Look at this increase in budget deficits,’ which is, of course, the result of their tax cuts, and they will use that deficit increase to argue for the rest of the Ryan budget.”
Stein predicted that Medicaid, Medicare, food stamps, student loans and possibly even Social Security could be cannibalized to pay for the tax cuts. That, or the GOP will find some way to tax middle-class people more — either through a sales tax or a more direct manner.
This is who Paul Ryan is: not some kind of policy genius, but the same old conservative who sees working people as some type of piggy bank to shake down for every dime to give to the wealthiest 1 percent. His only skill is bamboozling reporters into thinking otherwise.
That said, passing Ryan’s ideas for tax reform into law might be an even bigger task than repealing Obamacare was.
“Paul Ryan and [House Ways and Means Committee Chairman] Kevin Brady are members of Congress,” Stein said. “Yet on health care and on taxes last year, instead of producing actual legislation and moving that through committee, or discussing it or having it scored by their own scorekeepers — the Joint Committee on Taxation, which is kind of like the [Congressional Budget Office] but for taxes — they wrote these white papers.”
The fact that these purely hypothetical proposals makes it possible to “paper over differences that would become apparent in legislation,” Stein explained. “The devil really is in the details and they haven’t engaged the details because they haven’t produced a bill.”
As Ryan learned when he tried to ram through his health care bill, the details tend to be exactly the sort of things that individual members of Congress can get hung up on, especially if their phones are ringing off the hook and protesters are showing up at their offices. Ryan’s “policy genius” act works best when it’s purely abstract. When the time comes time to write bills and get them passed, the fundamental shallowness of Ryan’s ideas is likely to become evident once again to legislators, journalists and the public at large.