As readers of this blog know, I've really enjoyed wrestling with the conservative opus that is Rep. Paul Ryan's roadmap. I've also the enjoyed the back and forth over Ryan's plan between two writers I greatly admire: the New York Times' conservative columnist Ross Douthat and the The New Republic's Jon Chait.
To sum up their positions quickly, Douthat acknowledges that taxes might inch up for the middle class and plummet for the rich. Chait goes further, writing that "the overwhelming thrust in every way is to liberate the lucky and successful to enjoy their good fortune without burdening them with any responsibility for the welfare of their fellow citizens." Douthat counters that Ryan's plan would actually our entitlement program more redistributionalist by eliminating the employer insurance tax subsidy (which benefits richer employees) and means-testing Medicare payments.
I think this Douthat-Chait debate gets to the heart of why I'm grateful as a blogger that this plan exists, and also fairly confident that it is a completely unworkable policy. Politicians are infamous for their caution. This plan swings away. Whereas all Republicans balk at new taxes, Ryan proposes a value-added tax beginning at a pretty rigorous 8.5%. Whereas bold tax reform plans like Wyden-Gregg tinker with deductions and exemptions, Ryan takes a sledgehammer to tax expenditures. Whereas most politicians (especially Democrats) are nervous to touch Medicare even as they anticipate its growing burden on the budget, Ryan institutes means-testing and strict budgets. Even if I don't agree with all of this, I admire its boldness.
But I'm also with Chait when he calls the Ryan proposal a "highly clarifying document" of conservative philosophy. If the conservative ethos is Tax Cuts, Now and Forever, Ryan delivers in spades. He cuts taxes for the richest one percent in half. By eliminating the tax on capital gains and dividends, he shrinks the effective federal tax on the top 0.1% -- who take in about 8% of national income -- to half the ETR of the bottom quintile. Yes, the tax code is largely flattened. But it also races away from progressivity in the top five percentiles. Meanwhile Ryan's value added tax raises the ETR on the middle 60 percent; he reduces the child tax credit; and he begins to shrink the entitlement program that is a keystone of middle class security.
So when Douthat writes that Ryan's progressive indexing for Medicare and Social Security means "the poor and middle-class get more; the rich get less," it's important to note that this is redistribution in a limited and technical and politically unconvincing way. From the perspective of the middle 60
percent, their federal tax burden will go up and their federal services will go down. That might qualify as definitional redistribution. Something like it might even be necessarily. But don't expect voters in that middle-60 to believe they're "getting more."
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