Paul Ryan's Tax Blueprint Looks a Lot Like Trump's
Paul Ryan made a big deal about not endorsing Donald Trump too quickly or agreeing with some of Trump's more colorful opinions. But looking over Ryan's catalog of policy prescriptions, the distance between them is narrowing.
They would both repeal Obamacare, gut the Dodd-Frank financial reforms and block climate-change regulations. Some differences remain, including over entitlement programs, which Ryan would cut and Trump would not.
On taxes, though, they are moving ever closer. This was especially apparent on Friday when Ryan unveiled the sixth and last of the blueprints that make up the House Republican agenda and, by implication, its 2017 game plan, assuming the party retains control of the House on Nov. 8.
Both would reduce individual taxes. Ryan would cut the top rate to 33 percent from 39.6 percent. Trump would bring it down even more, to 25 percent. Ryan would increase the standard deduction and eliminate the alternative minimum tax. So would Trump. Ryan would repeal estate and gift taxes. So would Trump.
Ryan would also end deductions for state and local taxes, which tend to benefit homeowners more in blue states than red. Trump would do the same, except by a different route: He would cap the value of deductions at 10 percent, such that filers in, say, the 20 percent bracket would lose half their tax break. Mortgage interest and charitable contributions would remain fully deductible under both Ryan and Trump.
Both would also lower taxes on investment income. Ryan would reduce the top tax on this income to 16.5 percent from 20 percent now. Trump would eliminate the 3.8 percent investment surtax that applies to individuals earning more than $200,000.
And both he and Ryan would reduce business taxes. The speaker would cut the top rate to 20 percent from 35 percent. Trump would bring it down to 15 percent. Both would allow corporations, which collectively have $2.4 trillion in untaxed profits stashed in overseas accounts, to pay less tax on those earnings. Ryan would tax them at 8.75 percent and Trump at 10 percent. Both would deem such earnings as repatriated and apply the tax, even if the earnings stayed offshore.
Get the picture? Ryan and Trump are following the supply-side gospel, in which tax cutting that mostly benefit upper-income households is dogma. Trump's rates are often lower, but in a few cases Ryan outdoes him.
Trump and Ryan have their differences, mostly when it comes to corporate taxes. Unlike Trump, Ryan would allow immediate write-offs for business investment (as opposed to basing those write-offs on depreciation). And the speaker would not tax the future profits of U.S. companies' foreign subsidiaries.
Ryan moves closer to Trump's world view by ending taxes on corporate exports while keeping them for imports. The shift would encourage companies to move their legal addresses to the U.S. and erase some benefits American companies have enjoyed by moving their headquarters abroad, a Trump pet peeve.
Ryan and Trump differ when it comes to the tax break companies now get for interest expenses. The speaker would get rid of it, depriving Trump, the self-described "king of debt," of one of his favorite business practices, which is to borrow heavily, claim the interest-expense deduction to lower his taxes, and then default on the loans.
The total cost of Trump's plan would be $10 trillion, even by the accounting of the Tax Foundation, a conservative think tank, and even after assuming his plan would stoke faster economic growth. We can't compare that estimate with one for Ryan's plan because he doesn't provide the cost or enough detail to let others crunch the numbers. But the speaker does envision at least $1 trillion in lower revenue over the next decade, a sum that would have to be offset either with higher taxes elsewhere or, more likely, spending cuts to meet congressional budget rules.
Hillary Clinton's tax and spending proposals, by contrast, net out almost dollar for dollar, according to a new analysis by the Committee for a Responsible Budget. Over 10 years, she would add $250 billion to the national debt, while Trump would add $11.5 trillion.
Ryan and Trump are often portrayed as uneasy allies on a number of political fronts. But when it comes to taxes and fiscal policy, they are kissin' cousins.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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