Heritage Foundation: GOP Budget Doesn't Cut Taxes, It Just Reduces Tax Rates

May 16, 2011 1:25 pm ET — Walid Zafar

This has got to be the most transparently deceitful defense of the Republican budget to date. Several experts at the Heritage Foundation have put together a myths list attempting to debunk the many criticisms of the House-passed budget. It seems, however, that they wrote the piece without even trying to be consistent in their dishonesty.

For instance:

Myth #1: The House budget recklessly cuts taxes by $4 trillion.

Fact: It cancels a future tax increase.

Critics charge that the House budget is not serious about deficit reduction because it includes a $4 trillion tax cut. This is patently false. The budget would keep tax rates at current levels. What critics call a $4 trillion "tax cut" is actually the cancellation of a $4 trillion tax increase that is currently scheduled to go into effect in 2013. Only in Washington is keeping tax rates at current levels considered a reckless tax cut. The House budget would leave tax revenues slightly above their 18 percent of GDP historical average.

Myth #2: The House budget increases the deficit by giving tax cuts to the rich.

Fact: The proposed change is a revenue-neutral tax reform plan that simplifies the tax code.

The House tax plan proposes reducing the top individual and corporate tax rates from 35 percent to 25 percent-and this is fully paid for by eliminating extraneous tax deductions, exemptions, and loopholes that currently allow some wealthy individuals and businesses to escape their fair share of taxes. Because this plan raises the same amount of revenue year by year as does current policy, it is not a net tax cut. The President's fiscal commission endorsed similar tax reforms because these reforms would make the tax code more efficient, fair, and pro-growth.

Did you catch that? The Ryan budget "keep[s] tax rates at current levels" and reduces "the top marginal and corporate tax rate from 35 percent to 25 percent." Only at the Heritage Foundation is cutting taxes to a historically low level for millionaires and billionaires the exact same thing as keeping everything unchanged.

The Ryan budget can't possibly keep rates as they are and reduce the marginal tax rate by 10 percentage points. Clearly, the first "fact" is absurd. But so is the second, as it is premised on a contrived argument that no serious critic of the Ryan budget has made — chiefly, that the Ryan budget is dangerous only because of its impact on the deficit. The fact is that cutting the marginal rate is bad policy because trickle-down economics simply fails to achieve its promised results. For instance, the Bush tax cuts were a massive failure that "fostered the weakest jobs and income growth in more than six decades." The tax cuts in the Ryan budget don't raise the deficit, but that's not because they pay for themselves. It's because they are paid for by dismantling Medicare, gutting several other worthy social programs such as Medicaid, and increasing taxes on everyone else.

The suggestion that "because this plan raises the same amount of revenue year by year as does current policy, it is not a net tax cut," is nothing but disingenuous. Again, no one is talking about a net tax cut or net tax increase. Opposition to the Ryan budget is driven by the fact that almost all of the tax benefits go to the wealthiest Americans while children, the poor, and the elderly are asked to shoulder most of the burden.

Print