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A Project of The Annenberg Public Policy Center

Outdated Attacks on Ryan

The Obama campaign points to old proposals by Rep. Paul Ryan in saying that Mitt Romney would pay “less than 1 percent in taxes” under Ryan’s plan and that seniors would pay $6,000 more for Medicare. Ryan’s 2010 budget proposal would have eliminated capital gains and dividend taxes — which were indeed the bulk of Romney’s tax burden for 2010 — but Ryan dropped that specific measure from subsequent budgets. The Medicare claim, too, pertains to a less generous plan Ryan released last year, not his most recent budget.

Obama’s deputy campaign manager, Stephanie Cutter, said on CBS’ “Face the Nation” Aug. 12: “It says something about Mitt Romney that he’s picking someone who has a budget plan under which Mitt Romney would pay less than 1 percent in taxes, but the middle class would pay more than $2,000 more in taxes.” Cutter later added: “That’s the budget that Paul Ryan has on the table.” Meanwhile, on CNN’s “State of the Union,” David Axelrod, an Obama campaign senior adviser, was more careful to specify that this was an old Ryan plan, though viewers may not be aware that the proposal had been updated. Axelrod said: “Congressman Ryan had a proposal in 2010, if you took Governor Romney’s tax returns and applied the changes that Congressman Ryan wanted to make to the tax system, Governor Romney would pay less than 1 percent on his taxes. We know he paid 13.9 percent.”

It’s true, as Axelrod said, that Ryan’s 2010 plan would have meant a less than 1 percent tax rate for Romney, as several news organizations have calculated. That’s because the 2010 Ryan budget called for eliminating taxes on capital gains, dividends and interest, and that’s where the bulk of Romney’s 2010, and 2011, income came from. Romney, in fact, said in a primary debate in January that he would have paid “no taxes in the last two years” if capital gains taxes were zero, a proposal being pushed by Newt Gingrich. Romney’s tax plan would “[m]aintain current tax rates on interest, dividends, and capital gains,” with one exception. He would eliminate those taxes for those who earn less than $200,000.

But Ryan has since released budgets that don’t call for the elimination of capital gains. On “Face the Nation,” Cutter clearly gave the impression that Ryan’s current proposal did, saying: “That’s the budget that Paul Ryan has on the table and that’s the budget that [the Romney campaign] just wrapped your arms around.” That’s simply not true.

Ryan’s 2010 budget plan was proposed when Republicans were in the minority in the House, and it had no chance of passage. His later budget plans were proposed when Republicans were in the majority. Ryan’s 2011 and 2012 plans, which were passed on party-line votes in the House of Representatives, called for broadening the tax base, reducing the corporate tax rate from 35 percent to 25 percent, (as specified in the plan released in 2012) creating just two (instead of six) tax brackets of 10 percent and 25 percent, and repealing the alternative minimum tax. But there’s nothing specific on what would happen to capital gains taxes. He does make clear, however, that he opposes raising capital gains taxes, and may favor reducing them. Ryan’s latest budget says: “Tax reform should promote savings and investment because more savings and more investment mean a larger stock of capital available for job creation.”

Ryan, “The Path to Prosperity,” released in 2012: Raising taxes on capital is another idea that purports to affect the wealthy but actually hurts all participants in the economy. Mainstream economics, not to mention common sense, teaches that raising taxes on any activity generally results in less of it. Economics and common sense also teach that the size of a nation’s capital stock — the pool of saved money available for investment and job creation — has an effect on employment, productivity, and wages. Tax reform should promote savings and investment because more savings and more investment mean a larger stock of capital available for job creation. That means more jobs, more productivity, and higher wages for all American workers.

So, would Ryan reduce capital gains taxes, then? He said he couldn’t answer that in an early June interview with Bloomberg TV’s Al Hunt. Ryan said he’s leaving the details to the House Ways and Means Committee.

Al Hunt, June 8: Would you do 401 – would you lower the write-offs for 401(k)s or capital gains and dividends?

Ryan: I don’t know the answer to your question. What I do know is, we think the smart thing to do – a lot of other countries have done this – is to lower our tax rates.

It’s true that Ryan’s 2010 plan would have meant that those who get most of their income from capital gains and investments — like Romney — would pay a very low, potentially close to zero, percentage of their income in taxes.

Outdated Medicare Claims, Too

The Obama camp also repeats the old claim that Ryan’s Medicare plan would have seniors pay “up to $6,000 more for their health care,” as Cutter put it. On “Fox News Sunday,” Democratic National Committee Chair Debbie Wasserman Schultz had even more misleading things to say, claiming that seniors would “no longer have a guarantee for health care” and that Ryan’s plan would “make you pay about $6,300 more in premiums in order to be able to pay for that health care and essentially leave you with a gap between what the voucher provides and what the insurance company that you ultimately get coverage from charges you.”

We’ve been over this $6,000 claim a few times. It pertains to Ryan’s old plan that he released last year, which was less generous in terms of how the premium-support payments would increase over time. In a nutshell, Ryan’s plan would keep traditional Medicare as it is for those who are now receiving Medicare benefits. But for new beneficiaries, beginning in 2023, they’d choose a health plan from a new Medicare exchange, which would offer both traditional Medicare and private plans. And they’d get a government subsidy to cover, or partially cover, the cost of the policy.

It’s true that an analysis from the nonpartisan Congressional Budget Office indicated that under the plan Ryan released last year, seniors on the private plans would pay more than they would under traditional Medicare – about $6,000. But that plan had the premium-support payments, or subsidies, growing with the rate of inflation, and health care costs have risen much faster than that for years. Under the new Ryan plan, that premium-support payment would be tied to the second-cheapest health care plan, which can’t grow more than gross domestic product plus 0.5 percentage points. So, Ryan’s plan says the premium support would always be enough to cover the two cheapest plans. However, if the costs do grow faster than GDP plus 0.5 percentage points, the plan says Congress would have to step in and take some unspecified action to keep costs down.

CBO hasn’t conducted a detailed analysis of the latest plan, which is more generous but still calls for less government spending than the current Medicare system. CBO only said that “beneficiaries might face higher costs,” adding that there was a lot of uncertainty to making such an estimate.

More Political Gamesmanship

Cutter also claimed that Ryan’s budget plan “cuts their college scholarships for 10 million kids. Throws 200,000 kids off Head Start. You know, cuts veterans’ benefits, clean energy benefits, all of the investments we need to grow our economy.” And Wasserman Schultz said it would “potentially take 10 million students off of Pell Grants, cut health care, cut education.” But those claims are based on an assumption that Ryan’s spending cuts would be implemented across the board.

Ryan has given very little detail on how exactly he’d bring non-security discretionary spending below 2008 levels — that’s about $5.3 trillion less than what Obama has proposed over a decade. So, the Obama camp has filled in the details with across-the-board cuts. As we said when the president made similar claims about Ryan’s budget in April, this is “a classic case of political gamesmanship.” In this case, the Republicans boast of cutting the deficit more than the president, but don’t detail how what programs would have to be eliminated or reduced to achieve that. And the Democrats fill in the details, claiming popular programs like education are on the chopping block.

— Lori Robertson