August 31, 2012 by Op-Ed
Mitt Romney’s vice-presidential pick, Rep. Paul Ryan of Wisconsin, is the metaphorical TNT placed within the U.S. political mountain that will trigger an enormous landslide victory for Barack Obama.
Before I begin, I will admit, Ryan deserves some credit for his tax plan. Although the details of the plan are — let’s be honest — complete nonsense, he at least had the guts to put a tax reform plan out there. Every politician these days debates about tax reform as well as how better to help the struggling middle class, but none of them actually do anything. Rather, they find it more convenient simply to sling political rhetoric back and forth. So thanks to Mr. Ryan for actually writing a plan, albeit a ludicrous one.
Ryan’s proposal, titled “Roadmap for America’s Future,” would eliminate taxes on capital gains, dividends and interest. I can’t understand why someone would eliminate taxes on the very things that most middle-class Americans have been calling to have a tax increase on. The capital gains taxes are already so low that billionaire and Berkshire Hathaway CEO Warren Buffett has admitted that he is in a lower tax bracket than his own secretary! Remember the recent fiasco concerning Mitt Romney releasing his past tax returns? Well, imagine his last tax burden being decreased by around 90 percent because the majority of his $21.6 million income in 2010 came from capital gains, dividends, etc.
Nobel Prize-winning economist Joseph Stiglitz said, “When we have special provisions for capital gains that allow speculations to be taxed at a lower rate than people who work for a living, we encourage speculation.” So, it seems the Romney campaign believes the middle class deserves only one thing: the middle finger.
Paul Ryan continues in his “Roadmap for America’s Future” to restructure the tax brackets currently in place by reducing the existing six tax brackets down to only two. He would give the bottom bracket a burden of 10 percent and the upper bracket a burden of 25 percent. This two-bracket system effectively reduces the top rate by 10 percent! Under this plan, the rich would get yet another tax break at the expense of the middle class. As Stiglitz would put it, and I would agree, we are incentivizing rent-seeking behavior. These rent seekers do not contribute to the well-being or advancement of others by inventing new machines or making scientific discoveries. Instead, they ascertain clever new ways of money transfer where they conveniently seem to be the ones reaping the rewards.
I shall conclude with one last point simply to complete my trifecta of examples, which should not be taken as a limit to the amount of flaws within Paul Ryan’s proposal. The tax breaks he has designed will decrease the federal revenue over the next decade by $4.5 trillion. However, the $5.8 trillion reduction in government spending through ridding the system of special-interest “loopholes” is intended to more than offset the loss from tax revenue. It amazes me how one can simply scribble down a number on a piece of paper and sell it to the public without any real proof of where the money is supposed to come from. No number crunching was done, and no specific areas of government were mentioned, so all the public is left with is $5.8 trillion coming from “loopholes.”
Nobel laureate Paul Krugman put it beautifully in his blog, The Conscience of a Liberal: “In reality, Ryan is nothing like that. He’s a hardcore conservative, with a voting record as far right as Michele Bachmann’s, who has shown no competence at all on the numbers thing.”
I don’t mean to join the leftist bandwagon in bashing Paul Ryan for his tax proposal, but it’s just too easy. Why on earth would anyone promote such a plan during one of the most economically charged political campaigns that the U.S. has seen in decades? The fact that Romney, who has already been slighted for his private equity career at Bain Capital and associating Wall Street connections, would pick a running mate such as Paul Ryan, with his ambiguous plan to cut government spending and his blatant intention to shift more of the burden onto the middle class, is downright foolish.
Economic indicators have been showing a modest recovery. If markets continue to recover without any major impeding events from Europe, President Obama will win this coming election with ease. I am excited to see how this all will play out in the upcoming weeks.
Douglas Hammond is a pre-junior majoring in economics and can be reached at email@example.com.