Just in time for holiday party season, there’s a new drinking game certain to make things more jolly. It works like this: Every time Speaker of the House Paul Ryan says “tax reform,” “close loopholes,” “simplify the tax code,” “lower rates,” or “broaden the base,” Americans have to drink. After all, for more than six years Ryan has been peddling the same toxic swill mixing massive tax cuts for the rich while adding trillions in new red ink to the national debt. And for more than six years, the Republicans’ supposed ideas guy has been too chicken to name a single loophole he’d close in hopes of plugging the gigantic budget hole his magic tax reform scheme would necessarily create. Leaving that difficult job to others (like Dave Camp, former Ways and Means Chairman and Michigan Republican), Ryan just threw them to the wolves.
In his speech last week at the Library of Congress, the Boy Who Cried Tax Reform was up to his old tricks:
The only way to fix our broken tax code is to simplify, simplify, simplify. Close all those loopholes and use that money to cut tax rates for everybody. Take the seven tax rates we have now and collapse them to two or three. Look, I know people like many of these loopholes, and they have their reasons. But there are so many of them that now the tax code is like a to-do list—Washington’s to-do list. But Washington has no business micromanaging people’s lives—pure and simple. I also know many of these loopholes will be fiercely defended. All I can say is we will not be cowed. We are not here to smooth things over. We are here to shake things up.
I know Ways and Means Chairman Kevin Brady can’t wait to get to work.
Now, if you think you’ve seen this movie before, you have. It’s been running since at least April 2009.
In the first incarnation of his House GOP Alternative Budget six-plus years ago, Rep. Ryan proposed “a highly simplified income tax system:”
The simplified plan broadens the tax base by clearing out nearly all the existing tax deductions and credits, compresses the tax schedule down to two low rates.
But “clearing out” and “compressing” the tax code is hard to do and risky to take on. As it turns out, the math is brutal and the politics even worse.
To see why, start with the numbers. For fiscal year 2015, for example, the nonpartisan Congressional Budget Office (CBO) estimated federal tax revenue at $3.189 trillion dollars. Discretionary spending—the budget for everything outside of mandatory outlays on programs like Social Security, Medicare, interest on the debt, etc.—is about $1.1 trillion. Total spending is forecast at $3.656 trillion, yielding a projected deficit of $468 billion. But total tax expenditures, meaning all of the revenue lost to tax breaks, credits and loopholes, is estimated by CBO to reach $1.5 trillion in FY 2015. You read that right. Ryan's mystery "loopholes" add up to more than triple the entire annual budget deficit this year.
Which means if you lower tax rates to just two brackets of 10 and 25 percent, as Paul Ryan first proposed in 2010, you're not only going to produce a huge windfall for the wealthy: You're also going to hemorrhage red ink as far as the eye can see. Unless, that is, you close dozens of tax breaks that cost Uncle Sam hundreds of billions of dollars each year. But identifying even one tax break to limit or end is exactly what Chairman Ryan has refused to do for five years.
Since 2010, Ryan has offered some variant of his "Path to Prosperity" budget providing almost $5 trillion in tax cuts over 10 years with just two rates of 10 and 25 percent, slashing corporate taxes, repealing Obamacare, and gutting social spending. (Starting in 2011, 95 percent of congressional Republicans voted for the Ryan budget three years running.) While almost 70 percent of Ryan's spending cuts come from programs impacting poor and moderate income voters, already starved non-defense discretionary spending as a percentage of the U.S. economy would plummet to its lowest level since 1950. Meanwhile, according to CBPP, over its first decade Ryan's $5.7 trillion in tax cuts would deliver 55 percent of their benefits to the richest 1 percent of Americans. A family earning $1 million a year would pocket $330,000 a year while seeing its effective tax rate plummet to 15.4 percent. Yet even while—and precisely because—it pads the bank accounts of the gilded class, the Ryan budget inevitably drains trillions from the U.S. Treasury. So much for balancing the budget in 10 years.
Faced with oceans of red ink as large as $6 trillion in the various incarnations of his budget, Paul Ryan offered a magic formula for plugging the mammoth hole. He explained it to MSNBC's Morning Joe in March 2012:
Get rid of the special interest loopholes, special deductions, lower everybody's tax rates, bring in at least as much revenue to the government but grow the economy and create jobs, and get spending under control so we can pay off this debt.
But that answer only raises another question: Which of these "special interest loopholes" and "special deductions" would the Republicans' favorite wonk get rid of? Will Ryan call for limiting or ending the $99 billion-per-year home mortgage interest deduction? The $58-billion Earned Income Tax Credit Ronald Reagan called "the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress?" The $52 billion lost annually to the deduction for charitable giving? Almost three years in, it's a question Paul Ryan and his GOP colleagues still refuse to answer.
The identities of those mystery tax breaks have always been the problem with Ryan's bragging that his plan will "prevent an explosion of debt from crippling our nation and robbing our children of their future." Matthew Yglesias rightly mocked the 2012 version of Ryan's tax reform blueprint for its cowardly avoidance of those politically tough choices:
Thirteen pages dedicated to explaining his vision for revenue-neutral tax reform. And even so he manages to not name a single tax deduction that he's planning to eliminate. Home mortgage interest deduction? I dunno. Electric vehicle tax credit? I dunno. Deductibility of state and local income taxes? I dunno.
If Ryan knew, he wasn't saying. As the Washington Post documented in 2011, the $1 trillion-plus dollars in annual tax expenditures isn't just larger than Uncle Sam's total take from the income tax each year, but the "ever-increasing tax breaks for U.S. families eclipse benefits for special interests."
That's right. Much of the estimated $1.3 trillion in annual tax expenditures in 2015 (a figure almost triple the size of the entire 2014 budget deficit and equivalent to about one-third of annual federal spending) benefit working and middle-income Americans. For example, the home mortgage tax deduction was worth $89 billion in 2011. Tax-deferred 401K accounts cost the Treasury $63 billion. The Earned Income Tax Credit had a similar $63 billion price tag that same year.
So what deductions and loopholes are actually in the mystery meat that is Ryan's budgetary dog food? As Paul Krugman explained in “Pink Slime Economics” back in the spring of 2012:
We're talking about a lot of loophole-closing. As Howard Gleckman of the nonpartisan Tax Policy Center points out, to make his numbers work Mr. Ryan would, by 2022, have to close enough loopholes to yield an extra $700 billion in revenue every year. That's a lot of money, even in an economy as big as ours. So which specific loopholes has Mr. Ryan, who issued a 98-page manifesto on behalf of his budget, said he would close?
None. Not one. He has, however, categorically ruled out any move to close the major loophole that benefits the rich, namely the ultra-low tax rates on income from capital. (That's the loophole that lets Mitt Romney pay only 14 percent of his income in taxes, a lower tax rate than that faced by many middle-class families.)
But the kind of cowardice Krugman, Yglesias, and others highlighted didn't just manifest itself in Ryan's silence. Making those tough calls on tax breaks, the GOP's vice-presidential nominee insisted, wasn't his job. But when host Joe Scarborough asked "Which one of those [loopholes] do you eliminate?" Ryan chickened out:
We want to do this in the light of day and in front of everybody. So the Ways and Means Committee, which is in charge of the tax system, sent us the plan here, which is a 10 and 25 percent bracket for individuals and small businesses, and then they want to have hearings and, in light of day, show how they would go about doing this.
Appearing on Face the Nation just days later, Ryan again claimed, "We're proposing to keep revenues where they are, but to clear up all the special interest loopholes, which are uniquely enjoyed by higher income earners, in exchange for lower rates for everyone." But he once again pleaded the Fifth when asked which "special interest loopholes" he would do away with:
"That's what the Ways & Means Committee is supposed to do. That's not the job of the Budget Committee," Ryan said on Fox News Sunday. "What we're saying is, we want to do this in the light of day, not in some backroom deal. We want to have hearings in the Ways & Means Committee that Chairman Dave Camp has already started that work, to say what tax benefits should go."
But much to the dismay of then-Senate Minority Leader Mitch McConnell, House Speaker John Boehner, and House Budget Committee Chairman Paul Ryan, Dave Camp finished his work two years ago. When the going got tough, the current Ways and Means Committee chief made the tough calls on loopholes he'd limit, deductions he would cap, and tax breaks he would end. (Some of them, like further limiting the mortgage interest tax deduction and ending the deduction for state and local taxes, would have disproportionately impacted blue state residents.) But when Camp delivered it in February 2014, it was dead on arrival. And it was the Republicans who killed it. As Forbes reported last year:
You can only stall so long on the details of tax reform. On February 26 the clock ran out. House Ways and Means Committee Chair Dave Camp, R-Mich., provided 194 pages of details, and now tax reform gold has turned to dust. The political damage will mainly be to Republicans who made tax reform part of their brand.
Where do we go from here? "I think we will not be able to finish the job, regretfully. I don't see how we can," said Senate Minority Leader Mitch McConnell, R-Ky. And when asked if he would allow a vote on the Camp draft, House Speaker John A. Boehner, R-Ohio, could only respond with what may be the quote of the year: "Blah, blah, blah."
After years of promising Americans that the Ways and Means Committee would answer the $6 trillion tax break question, Ryan turned his back on Chairman Camp:
He's a leading voice for Republicans on fiscal policy but Rep. Paul Ryan is noticeably restrained when it comes to his party's new blockbuster tax plan.
While applauding Ways and Means Committee Chairman Dave Camp's "courage" for releasing a comprehensive tax overhaul on Wednesday, Ryan (R-Wis.) ducked questions on the proposal's substance. He simply said he's excited to start a conversation about rewriting the tax code.
"This is the beginning of a good debate," Ryan said in an interview.
As Politico noted, "Other Republicans haven't shied away from expressing concerns about introducing legislation during an election year that puts in plain view the difficult choices that must be made to overhaul the code." It's no wonder Dave Camp had enough of Congress. And now that Rep. Ryan has picked up Camp's gavel, it's no surprise he's silent on that $6 trillion question. Nevertheless, the Wall Street Journal gushed last week:
Rep. Paul Ryan recently gave up a race for the presidency to devote all his energy to his long-time true passion - tax reform.
That was in January. By October 28, 2015, the Wall Street Journal cheered that “as Speaker, Paul Ryan can finally get tax overhaul done.” Days later, Politico joined the chorus with its headline, “Ryan's move could be big boost for tax reform.” And in his big “#ConfidentAmerica” speech last week, Speaker Ryan promised this time will be different:
"Even if [the President] won’t sign them into law, we will put out specific proposals and give the people a real choice...And I don’t mean just undo what the president has done—as if we could time-travel back to 2009. I mean show what we would do, what our ideal policy would be—looking forward to 2017 and beyond."
Of course, when it comes to tax reform, Paul Ryan hasn’t done that once in six years, not even when he was running to become Mitt Romney’s vice president.
So keep drinking America. At this point, to believe—let alone support—Paul Ryan, you pretty much need to be drunk.