Republican vice presidential nominee Paul Ryan said he and running mate Mitt Romney aren’t specifying which tax breaks must be eliminated to maintain their negotiating power in talks over U.S. tax policy.
In an interview today with Bloomberg Television, Ryan pushed back against criticism of the Republican tax plan, saying the proposal would lower rates and maintain popular deductions.
“You don’t say to Congress, to Democrats that you want to work with, ‘Take it or leave it, it’s everything, it’s all my way or the highway,’” he said. “Obviously, the numbers add up. We’ve shown that.”
An August study by the nonpartisan Tax Policy Center in Washington found that Romney’s plan couldn’t simultaneously cut tax rates as much as promised, avoid increasing the U.S. budget deficit, preserve tax breaks for savings and investment and prevent the tax burden from shifting from top earners to everyone else.
The plan becomes arithmetically achievable -- though still politically difficult -- if Romney and Ryan start breaching some of those principles, according to the study. They could curtail tax breaks for savings, such as the tax-free status of gains inside life-insurance policies. In addition, they could rely on revenue generated by economic growth.
Romney floated the idea today of limiting deductions to no more than $17,000 in an effort to reconcile his vow to lower rates with his promise to keep the plan revenue neutral.
“As an option, you could say everybody’s going to get up to a $17,000 deduction; and you could use your charitable deduction, your home-mortgage deduction, or others -- your health-care deduction. And you can fill that bucket, if you will, that $17,000 bucket that way,” Romney said in an interview with Denver’s FOX31. “Higher-income people might have a lower number.”
Ryan, a Wisconsin congressman, dismissed the Tax Policy Center study as “faulty” because it doesn’t consider economic growth. He said the Romney-Ryan proposal has the “fiscal space” to keep some deductions favored by middle-class families and lawmakers. Their plan would start by targeting tax benefits for high-income taxpayers, he said.
“There’s clearly fiscal space for important preferences for middle-class people like purchasing a home, or donating to charities or health care,” Ryan said. “The key is, start with the high-income earner and then start with the special-interest stuff.”
When pressed on taxation of carried interest, or the share of profits that private-equity managers receive, Ryan wouldn’t say whether the preferential tax treatment would remain in place under a Romney administration. Carried interest is now taxed as capital gains -- at 15 percent -- rather than at the higher rates applied to ordinary income. President Barack Obama wants to tax it as ordinary income, maintaining that it’s more like compensation for management than a return on investment.
Ryan expressed support for keeping a preferential tax rate for capital gains while declining to answer the question at the core of the carried-interest debate -- how that income should be classified.
“We can get into an arcane argument about the definition of income, but our interest is not taxing capital more,” he said.
Ryan said he voted against the Simpson-Bowles commission leaders’ deficit-reduction proposal in 2010 because it didn’t address health-care entitlement programs.
“I would have voted against it again,” said Ryan, chairman of the House Budget Committee.
Romney economic adviser Kevin Hassett last week suggested that the Republican presidential nominee would scale back the 20 percent tax cut in his fiscal plan if there aren’t enough deductions and exemptions to pay for it.
“If you think the base broadeners don’t add up, if you think he can’t get to 28 percent, then the right thing that would happen, as you know, if you’re going to have a revenue-neutral reform, is that they would have a different change in rates,” he said in a Sept. 24 debate hosted by the National Association of Business Economists.