Kumbaya 5: Progressive Tax Cuts For Rich People

Ross Douthat is angry at liberals who do not understand Paul Ryan and accuse him of redistributing income to the rich:
This strikes me as an overstatement, to put it mildly. Ryan’s proposed changes to the tax code — his reduction in the highest rates, and his addition of a consumption tax — would shift the tax burden down the income ladder, just as Chait says. But nearly every other major element of the roadmap would make the American welfare state more redistributionist, rather than less so.
Because we do not see how Ryan's reforms will help the poor by eliminating the tax exemption on health benefits - half of which goes to households that have over $75,000 in income which would mean that the other half goes to households who make less than $75,000. That would mean that poor and middle income people with employer provided health insurance would pay the same income and payroll taxes that poor and middle income people without employer provided health insurance now pay. This would be progressive because it would make all poor and middle income people more equal.

And Ryan wants to make dramatic cuts to Social Security and Medicare:
Then continue to entitlements. Right now, Social Security is funded through a payroll tax that’s reasonably described as regressive, even as it pays out benefits to retirees irrespective of their wealth and income. The Ryan plan would means-test the program instead, indexing richer beneficiaries’ benefits to prices rather than wages and making the system considerably more redistributionist along the way.
A paragraph of description follows but really it boils down to this: There will be an increase in benefits for people at the bottom of the income ladder - those who earned minimum wage their entire working lives - at the same time benefits for everyone else will grow more slowly than they have in the past and eventually get close to benefits for those at the bottom of the ladder.

In Wonks Anonymous estimate this leaves benefits capped at about $6,400 per year adjusted for inflation.
That would be 32% replacement of an income between $15,000 and $20,000 per year. Lets be generous and say 32% replacement of a $30,000 income: $9,600.

Everybody gets the same low social security check. See how redistributionist Paul Ryan is.

If this were used to cut the onerous and regressive payroll tax
Wonks Anonymous might concede a point here but the payroll tax remains intact bringing Social Security into a surplus by 2070.

Instead the savings will be used to balance the budget if there is anything left over from massive changes in the tax system;
The Roadmap would create an alternative federal income tax system, with a broader tax base and a lower, two-rate tax structure. It would eliminate all current deductions and credits and exempt income from interest, dividends, and capital gains from the individual tax. Flow-through business income (i.e., income from sole proprietorships, partnerships, and S corporations) would only be taxed to the extent that it represents wage income.
In other words, tax changes which favor the rich over the lower and middle classes and which exempt property income from all taxation would be financed by a value added tax and by large cuts to social insurance programs which provide retirement security to the lower and middle classes.

But cuts would have their greatest impact on the better off members of the inferior classes. The gap between us and our betters would increase, as it should, but we could all console ourselves in our new found equality down here at the bottom.

 

What did you think of this article?




Trackbacks
  • No trackbacks exist for this post.
Comments
  • No comments exist for this post.
Leave a comment

Submitted comments are subject to moderation before being displayed.

 Name

 Email (will not be published)

 Website

Your comment is 0 characters limited to 3000 characters.