He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under the first President Bush. He is a graduate of Harvard College and Harvard Law School. He is author of The Obamacare Disaster, from the Heartland Institute, and President Obama's Tax Piracy, and his latest book: America's Ticking Bankruptcy Bomb: How the Looming Debt Crisis Threatens the American Dream-and How We Can Turn the Tide Before It's Too Late.
Latest posts by Peter Ferrara (see all)
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While President-Elect Donald Trump was blazing a new electoral trail for Republicans, few noticed that Speaker Paul Ryan was organizing his House Republican majority to blaze new policy trails. Earlier this year, Ryan appointed 6 policy task forces of Republican Congressmen, which this summer produced reports on their respective policy areas.
Most immediately relevant are tax reform and health policy. The Tax Reform Task Force, led by Ways and Means Chairman Kevin Brady, produced a comprehensive tax reform proposal that was quickly embraced by Trump.
Ryan-Brady replaces today’s seven income tax rates with just three – 12%, 25%, and 33%. The middle rate applies to married couples earning $75,000 to $225,000.
The plan provides an income tax cut for all taxpayers. Lower income families benefit in particular from the proposed sharp increase in the standard deduction to $30,000 for families, $15,000 for singles.
The poorest benefit from the continued, refundable Earned Income Tax Credit and Child Tax Credit. Those credits plus the current minimum wage are sufficient to guarantee that all families with at least one full time worker would have incomes equaling or exceeding the poverty level.
Ryan-Brady would also reduce the federal corporate income tax rate of 35% (highest in the world adding state corporate rates of nearly 5% on average) to 20%. A new rate of 15% would apply to “pass through” incomes from smaller businesses organized as sole proprietorships, S-Corps, Limited Liability Corps (LLCs), and partnerships. Their plan also abolishes the death tax and the Alternative Minimum Tax.
Trump has proposed this same reform plan, with one major change, reducing the federal corporate income tax rate to 15%. The Tax Foundation scores his plan dynamically as a revenue loss of $3.9 trillion over 10 years.
The Trump plan would be powerfully pro-growth, serving as the foundation for long overdue, booming economic recovery. The Tax Foundation scores the plan as creating 2.2 million new jobs, restoring real wage growth of 6.3% annually above inflation, with real GDP rising 8.2% after 10 years.
Wilbur Ross, private equity fund manager, and Peter Navarro, Economics Professor at University of California, Irvine, both Trump campaign policy advisors, score the plan dynamically in context of Trump’s entire economic growth plan as creating 25 million new jobs.
They argue that with much lower tax rates, lower long run energy costs from Trump’s deregulatory liberation of American energy producers, freeing them to lead the world in production of oil, natural gas, and coal, economic growth would double, producing $2.4 trillion in offsetting revenues. Counting Trump’s spending cuts, Ross and Navarro conclude that the plan achieves full revenue neutrality.
Ryan’s health policy task force proposed a comprehensive plan to repeal and replace Obamacare also appealing to Trump. That would include a Universal Health Insurance Tax Credit that would effectively extend the same tax preference for employer provided health insurance to everyone. Leading free market health policy economist John Goodman estimates that would be achieved with a credit of roughly $2,500 per worker, $8,000 per family.
Ryan’s Task Force, including Chairmen of all Committees with jurisdiction, further proposed to block grant Medicaid to the states. CBO has scored that as saving nearly a trillion over 10 years. That would grant states plenary power over Medicaid, including authority to provide the poor with vouchers supplementing the health insurance tax credit to help the poor buy the private health insurance they choose in nationally competitive markets.
That would greatly benefit the poor, who would then be able to get the same health care as the middle class. Private health insurance has to satisfy competitive pressure to pay adequate compensation to doctors and hospitals to ensure those who choose that insurance can get timely care, which Medicaid fails to do today.
The Task Force would provide states with funds to help each state establish its own uninsurable risk pool, assuring coverage for all pre-existing conditions. That would be assured for all who maintain continuous health coverage as well.
The Task Force would also repeal the employer mandate and the individual mandate, restoring health insurance regulation to the states. That plus repealing nearly a trillion in Obamacare taxes would further contribute to booming growth, with millions of new jobs and rising real wages. Nationally competitive markets plus expanded Health Savings Accounts open to all would provide meaningful cost controls, further increasing health insurance coverage.
[Originally Published at the Daily Caller]