Representative Paul Ryan, Mitt Romney’s choice for vice president, has offered a more far-reaching reshaping of the U.S. tax system than the man at the top of the ticket, while neither candidate has explained how to pay for his plans.
Like Romney, the Wisconsin Republican proposes cutting top tax rates for individuals and corporations in ways that would require eliminating hundreds of billions of dollars a year in tax breaks to avoid increasing the federal budget deficit.
Yet Ryan, 42, goes further than Romney, who would cut individual tax rates by 20 percent, drop the corporate tax rate to 25 percent and eliminate the estate tax and alternative minimum tax. In his 2010 “Roadmap for America’s Future,” Ryan proposed eliminating taxes on corporate income, estates, dividends, interest and capital gains. He would simplify the individual income tax system into a two-rate structure topping out at 25 percent and impose what is effectively an 8.5 percent value-added tax.
“You could not do that without substantially shifting the tax burden to the middle class and below” and reducing tax burdens on affluent households, said Edward Kleinbard, a tax law professor at the University of Southern California. “Those are just inescapable facts.”
Ryan and Romney, 65, have refused to provide details on what tax breaks they would curtail or eliminate to offset the revenue loss from their rate cuts. Romney has said that he won’t cut the share of taxes that the rich pay.
The Romney campaign has made it clear that it is the former governor of Massachusetts whose plans form the framework of his campaign for president. Yet Ryan’s 2010 roadmap, which never was adopted by his own party or the entire House, where he serves as chairman of the Budget Committee, represents the clearest distillation of his own views.
“As is true of the major federal entitlement programs, federal tax law cannot be corrected by merely tinkering with an excessively complex and burdensome tax code,” Ryan wrote in the roadmap. “What is needed is a thorough restructuring of the tax laws – one that is broad and yet achievable.”
After Republicans took control of the House in the 2010 elections, Ryan adjusted his roadmap for less-specific budgets that the House passed in 2011 and 2012.
Some of the tax details were dropped, including the consumption tax and elimination of taxes on corporate income, capital gains, dividends and interest. Ryan also dropped a feature that would allow taxpayers to keep the current tax code or switch to the simpler system with very few breaks.
In the most recent version, those details would be left to the House Ways and Means Committee. Ryan also serves on that panel, whose chairman is Representative Dave Camp of Michigan.
“In the budgets, it’s less detailed, and I think that’s a matter of inside congressional political necessity,” said Douglas Holtz-Eakin, a former director of the Congressional Budget Office who advised Republican presidential candidate John McCain in 2008. “Camp’s never going to give away that prerogative and let Ryan write the plan.”
See the full report on Ryan and Romney on tax reform at Bloomberg.com.