Ryan Budget to End Health-Care Law While Keeping Tax Revenue

Paul Ryan
Representative Paul Ryan, a Republican from Wisconsin and chairman of the House Budget Committee, in Washington on April 5, 2011. Photographer: Joshua Roberts/Bloomberg

Representative Paul Ryan’s budget proposal counts on more than $400 billion in tax revenue from the 2010 health-care overhaul he and other Republicans want to repeal.

Ryan, chairman of the House Budget Committee, in the plan unveiled today calls for repealing the health-care law while setting a revenue target that assumes the tax increases remain in place. The Wisconsin Republican’s budget plan seeks to collect $37 trillion over the next decade -- the amount the government would raise if the health-care law’s taxes take effect and some expiring tax cuts are extended.

House Republicans’ proposal to reduce the deficit by repealing the health-care law would work only by retaining the law’s higher tax revenue, said Jim Horney, a senior fellow at the Center on Budget and Policy Priorities. The Washington research group advocates policies benefiting low-income families.

“Otherwise, they wouldn’t be saving any money,” Horney said. “They’re certainly not clear in the documents that they put out.”

A House Budget Committee aide said the budget wouldn’t retain the tax increases in the health-care law. Instead, the same amount of revenue would be generated by a tax-code overhaul envisioned by Ryan, said the aide, who spoke on condition of anonymity to describe the rationale behind the proposal.

$2 Trillion Less

Even with the revenue called for under the health-care law, Ryan’s budget would raise about $2 trillion less over the next decade than the blueprint from President Barack Obama. Ryan’s plan would collect taxes averaging 18.3 percent of gross domestic product, while Obama’s budget assumes 19.4 percent.

The budget plan uses what is known in Washington as a current-policy baseline, which assumes that policies now in law will remain in effect. That baseline includes the tax revenue that would be raised by the health-care law, meaning budget-writers could replace it with other revenue without calling it a tax increase.

The 2010 health-care law included taxes on the wages and unearned income of the top 2 percent of taxpayers, along with fees affecting the health insurance, prescription drug and medical device industries. Most of the levies are scheduled to go into effect in 2013.

Cost of Repealing

When the law was enacted, the congressional Joint Committee on Taxation estimated it would raise $409.2 billion over the next decade. The cost of repealing them is likely higher now, because the earlier estimate included a time period in which the taxes hadn’t yet taken effect.

Ryan’s budget calls for a tax-code overhaul that follows principles outlined by Republicans on the House Ways and Means Committee. That group, led by Representative Dave Camp of Michigan, would lower rates and broaden the base with unspecified reductions in tax breaks.

They want two individual tax brackets -- at 10 percent and 25 percent -- and a repeal of the alternative minimum tax. That framework would reduce the number of brackets to two from six and would drop the corporate rate to 25 percent from 35 percent.

Republicans could lower taxes in the health-care law and replace them with elements of the restructured tax code.

The Republicans will need to find about $4.6 trillion in tax base broadening to reach their revenue targets, according to an analysis by the Tax Policy Center, a nonpartisan research group in Washington.

The analysis makes some assumptions about the budget plan, including an estimate that the break point between the 10 percent and 25 percent brackets would be where the 25 percent bracket starts now.

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