Taxing Progressively

Deconstructing the Paul Ryan Sound Bite

Real policy wonks bore people. The phony wonk from Wisconsin now driving Congress seduces, with a patter that leaves our wealthy almost completely disappeared.

By Sam Pizzigati

Rep. Paul Ryan from Wisconsin revels in his rep, inside the beltway, as America’s ultimate conservative policy “wonk.” He plays the part well. He knows his lines. He can rattle off, at the drop of a hat, a stream of stats that make his rich people-friendly budget nostrums seem eminently reasonable — and good for us all.

Debt and wealthLast month, for instance, Ryan smoothly dispatched an angry constituent who dared challenge the tax-no-rich federal budget plan that has made the Wisconsin lawmaker a right-wing hero.

That constituent, speaking at one of Ryan’s back-home town hall meetings, had just finished noting he saw “nothing wrong with taxing the top.” Ryan saw his opening — and pounced.

“We do tax the top,” Ryan earnestly responded. “Let’s remember, most of our jobs come from successful small businesses. Two-thirds of our jobs do.”

“You got to remember,” he went on, “businesses pay taxes individually. So when you raise their tax rates to 44.8 percent, which is what the President is proposing, I would just fundamentally disagree. That is going to hurt job creation.”

For Ryan, a perfect sound bite. He touched, in a matter of seconds, all the bases that make up the case against raising taxes on the rich.

The wealthy, that case goes, already pay taxes aplenty. As hard-working — and mostly small — businesspeople, they can’t afford to pay more. And if you try to make them, they won’t be able to create jobs.

Make-believe “wonks” as smooth as Paul Ryan can make this stream of half-truths and misdirects seem almost plausible. But we can, if we slow the stream down, expose the folly — and greed — behind it.

Do we in the United States, for starters, already “tax the top,” as Ryan rushes to claim? Not at anywhere near the rates we once taxed it.

Taxpayers at America’s tippy top — the taxpayers who report the nation’s 400 highest incomes — have actually seen the share of their total income that they pay in federal income tax drop a stunning two-thirds, from 51.2 percent of their income in 1955 to 16.6 percent in 2007, the most recent year with stats.

Ryan is blurring the distinction between the top marginal income tax rate and a taxpayer’s overall tax liability on total income.

How about Ryan’s claim that the President is proposing to up the tax rate on the affluent all the way up to “44.8 percent”? Not even close. Ryan here is blurring the distinction between the top “marginal” income tax rate and a taxpayer’s overall tax liability, from all federal taxes, on total income.

Our federal tax code currently sports a top marginal rate of 35 percent, down from 91 percent in the 1950s and early 1960s. President Obama does indeed want to raise our 35 percent top rate, to 39.6 percent. But this top marginal rate only applies to income over a set threshold, now $379,150, not total income.

Americans also pay a federal payroll tax for Medicare. Last year, in the health care reform act, Congress made a major move toward ending the free ride this payroll tax has given America’s most affluent.

Wealthy Americans will soon have to pay a 3.8 percent Medicare surtax on any income over $250,000 they make from their investments. Until now, none of this investment income has faced any Medicare payroll tax at all.

The health care reform act, on top of this surtax, sets in place a 0.9 percent payroll tax on wage income over $250,000. Paycheck income over $250,000 has also gone untaxed, at payroll tax time, until now.

Rep. Ryan, to get to the “44.8 percent” tax rate he wants us to think that small businesspeople could soon face, has mixed all these income and payroll tax rates together, a blatantly bogus exercise.

Most small businesspeople simply don’t make anywhere near $379,150, let alone $250,000. A Case Western Reserve analysis last November, working from IRS data, put the small business income average at just over $100,000.

But Paul Ryan, to smudge our economic picture, has to ignore another reality as well. He has to ignore a whopping loophole for America’s rich that sits right at the heart of the U.S. tax code: the preferential treatment for capital gains.

The really big money America’s rich make today doesn’t come from “creating jobs.” The big money comes from “capital gains,” the profits the rich make wheeling and dealing on stocks and other assets.

Most all these profits, under current law, face only a 15 percent tax. The White House wants to raise this rate, but just to 20 percent. For most of the 20th century, the capital gains rate ran at least 25 percent. And in some of those years capital gains received no special tax break at all.

Few average Americans make much money off capital gains. And few small businesspeople do either. Small businesspeople make their money when customers in their communities have jobs and money to spend.

These small businesspeople will not benefit from Paul Ryan’s budget plan, as enacted earlier this spring by the House of Representatives. The plan, the Center for Budget and Policy Priorities explains, would force mammoth federal spending cuts to pay for equally mammoth tax cuts — for America’s rich.

These spending cuts would then rapidly translate into job and pay cuts for local public employees and other workers — and fewer local customers for small businesses.

Ryan’s budget plan, to be sure, has no chance of passing the Senate, at least not as is. But Ryan’s “wonky” sound bites have distorted the federal budget debate. They’ve helped shove what we need — substantially higher taxes on the rich — off the political table. We need to get them back on.

Sam Pizzigati edits Too Much, the online weekly on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Read the current issue or sign up to receive Too Much in your email inbox.

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Discussion

7 comments for “Deconstructing the Paul Ryan Sound Bite”

  1. I’m sickened by this site talking so about how tough it is for the majority of the US citizens. Tax cuts for the rich, less for the working class etc.etc. After 700 years of plunder by the European’s and their descendents, the wealthiest among the bottom half of the world’s people lives on the equivalent of about $2.70 a day. People at the poverty level in the US have about 5 times more than them and 20 times more than the 2 billion people at the bottom. Plus Euro-descendents receive hundreds of benefits, like good schools, paved roads, subsidized food, various medical programs and securities of all sorts. That probably adds another $20 a day worth of benefits. And they still take more gold, oil and resources from Latin America and Africa at Walmart prices. It’s really tough living in North America or Europe with all the high prices for “necessities” made in the third world’s sweatshops at a fraction of the cost you would have to pay if made there. After using up all the cheap energy resources, causing climate change, bombing innocent people to stabilize access to oil and all the other exploitive activities that allowed such accumulations of wealth then what? Well after that then a great portion of the third worlds’ people will probably still be needing clean water to drink and a safe place to spend the night. If it gets any tougher we all know who will be hit the hardest with real problems like starvation, disease etc. I’d call this stuff you complain about “The Petty Problems of the Global Gluttons”

    Posted by Warren | May 9, 2011, 1:29 am
  2. I really don’t have any idea what
    Mr Ryan thinks he’s doing. I know
    he’s jacking all of the american
    people over making us so-called
    stupid lower class people pay the
    taxes as usual for the dirty rich.
    Mr Ryan, go home & stay there.
    You’re an embarassment to this
    country & your own party. Have
    your bankers, insurance fat cats
    among others pay their FAIR SHARE.

    Posted by John R Stockhausen | May 9, 2011, 10:49 pm
  3. This is a no brainer. If Ryan said ““We do tax the top,Let’s remember, most of our jobs come from successful small businesses. Two-thirds of our jobs do.”

    the clear response should have been to ask “How many SMALL businesses are at the TOP”? GE and Exxon are not “Small businesses”. Billion dollar a year+ hedge fund managers are not small businessmen, nor are their friends in the CEO suites.

    The sad fact here is that Ryan equated small businesspeople with the richest 1% and was allowed to get away with it. Repeat after me: “SMALL business is NOT the ‘TOP’”

    Get it?

    Got it?

    Good!

    Posted by drewfromct | May 11, 2011, 10:29 am
  4. Ryan supported Bush’s tax cut, which was supposed to create a lot of net new jovs. He supported the Wall Street and Bank Bailout, for the same reasons. He is a wealthy investor who admits to struggling to support his family on his rather lofty congressional salary. None of these promises ever increased net new jobs, and truly small businesses can’t get credit to make payroll. The evidence is that the 5% who control over 95% of our wealth, and over 80% of our national income are hoarding money and generally being miserable, to teach the lower forms of life an object lesson about voting in Obama, whom they privately think of in terms of vicious racial epitehts. Ryan, why don’t YOU take a pay and benefit cut? We’re all in this together! Chop the Top!

    Posted by jobless in Palm Beach | May 14, 2011, 1:13 pm
  5. Let me further state that Ryan, a welathy investor, is seeking to serbe himself and others in the ownership class, not seeking to serve the People. Shame shame shame! Congressional Recall, anyone?

    Posted by jobless in Palm Beach | May 14, 2011, 1:15 pm
  6. In Mr Ryans home state 66% of wisconsin regular corporations have zero as a federal tax liability. Taxes are based on net income.
    Mr Ryan is talking about raising taxes on a zero liability for 2/3 of the corporations he represents.
    Thats the definition of a wonk.

    Posted by MD | May 24, 2011, 9:38 am
  7. It seems that the Repugs like Ryan, who got to go to college because he was a Social Security survivor beneficiary, have a talking point that there are no rich people to tax. 38% Governor Le Page here in ME said so last night at his controlled-by topic-”town meeting” at Camden/Rockport, a stronghold of the richest in the State.

    Posted by Matt Clarke | June 19, 2011, 2:29 pm

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