POLITICS
05/02/2009 05:12 am ET Updated May 25, 2011

GOP Budget Plan Assumes Americans Would Choose Higher Tax Rate

House Republicans set themselves a high bar last week when they promised to deliver an alternative budget that drastically slashed taxes while also cutting the deficit further than the White House has proposed.

The Republican budget blueprint released last week called for "a marginal tax rate for income up to $100,000 of 10 percent and 25 percent for any income thereafter," which would result in a massive reduction in government revenue and a generous tax break for the wealthy, who currently pay a 35 percent rate.

The Republican plan unveiled today by ranking budget committee Republican Paul Ryan (Wisc.) clears the bar they set for themselves in two ways. First, it sets the 10 percent rate for families making $100,000 or less and for individuals at $50,000, thus more than doubling taxes on individuals making between $50,000 and $100,000 -- at least as compared as to the original offer.

But the real way that Republicans offer the tax cut without factoring it into the budget's revenue is to suggest that Americans won't actually take advantage of the lower rates. Instead, the GOP budget permanently extends President Bush's 2001 and 2003 tax cuts. A Republican budget committee aid said that the revenues assumed in the GOP budget are based on the current tax structure that resulted from those cuts.

In other words, Republicans are assuming that given the choice between a higher rate and a lower rate, Americans will choose the higher rate. During the presidential campaign, Republicans slammed Joe Biden for suggested that paying taxes was a patriotic act in a time of economic crisis.

Under the current tax code, an individual making more than $160,850 pays a 33 percent rate; under the Republican plan, that taxpayer could choose to pay 25 percent instead. (For a family, the income threshold is $195,850.) For a family earning more than $349,700, the rate rises to 35 percent, but filers could still choose the 25 percent rate.

If taxpayers did decide to pay the lower rate, government revenue would plummet by roughly $300 billion per year, said economist Dean Baker of the liberal-leaning Center for Economic Policy Research.

"It would destroy most federal programs," Ways and Means Committee Chairman Charlie Rangel (D-N.Y.) told the Huffington Post.

But the Republican alternative budget doesn't drastically cut spending for most programs, rather freezing it in place through 2014. It rescinds some of the stimulus spending and contemplates major cuts to Medicare and Medicaid.

"What they're proposing [with regard to Medicare and Medicaid] far exceeds anything that's ever been accomplished before and would require deep eviscerating cuts, maybe even voucherizing the Medicare program," said Rep. John Spratt of South Carolina, the lead author of the Democratic budget.

The Republican budget committee aide said that no numbers were available to quantify the size of the cuts. In the standard budget process, he noted, the budget outline guides committees, which then come up with a specific ways to meet the goals. Because Democrats control those committees, however, the alternative budget would need to wend its way through an alternative Congress.

Until that's possible, give the GOP alternative a read and let us know what you think.

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