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Romney, Ryan and Reagan: The Winning Team?

August 11, 2012 · 0 comments

“Mitt’s Choice for VP is Paul Ryan.”

That’s the message that Mitt Romney supporters received this weekend via his smartphone app.

And with that, many prospective voters went scurrying to figure out: Who is Paul Ryan?

Here’s the quick scoop on Ryan:

  • He’s Rep. Paul Ryan. He’s represented the 1st congressional district for Wisconsin in the U.S. House of Representatives since 1999. That means he’s in his seventh term.
  • He was born and raised in the midwest and attended college at Miami University in Ohio.
  • He’s married and has three children.
  • His religious affiliation is Roman Catholic.
  • He’s a former speechwriter for former U.S. Representative and 1996 Republican vice presidential nominee Jack Kemp of New York.
  • He was prom king at his high school.

Okay, the last bit doesn’t mean anything, really, except that it’s kind of fun.

And none of it actually has much to do with the meaty stuff: his politics. So let’s get to that – keeping in mind that my focus is tax-related.

Ryan currently chairs the House Budget Committee. That means he knows finance, budget and tax. And that’s where, arguably, Romney has been portrayed as weakest.

Ryan has also been cast as a strong opponent to President Obama, not afraid to back down on key policy issues. Most notably, he introduced The Path to Prosperity (downloads as a pdf) last year as an alternative to President Obama’s budget, and then helped introduce The Path to Prosperity: A Blueprint for American Renewal (downloads as a pdf) this year.

Of course, being at the forefront of a politically hot button issue (finance, budget and tax) means that Ryan was subject to a lot of criticism – even within his own party. Not all Republicans love Ryan, including House Speaker John Boehner (R-OH) with whom Ryan publicly split on the matter of extending tax cuts. I happen to think that’s in his favor.

In particular, last spring, then Presidential hopeful Newt Gingrich harshly criticized the GOP’s plans for Medicare reform, which were crafted by Ryan, saying:

I don’t think right-wing social engineering is any more desirable than left-wing social engineering. I don’t think imposing radical change from the right or the left is a very good way for a free society to operate.

I said, at the time, that “[i]t was one of those jaw dropping, rubbing your eyes, cleaning out your ears moments.”

It turns out that I was right. Gingrich’s star sharply plummeted shortly afterwards, while Ryan’s continued to rise. The fact that Ryan was willing to take a position on Medicare endeared him to many since taxpayers were growing weary of those in Congress who were willing to criticize the current system but not offer up an alternative.

The current system functions like this: Medicare is health insurance. As an employee, you pay into the system while during your work life so that you can benefit from Medicare later in life, most notably when you retire. In most cases, you are eligible for Medicare if you or your spouse worked for at least 10 years in Medicare-covered employment; you are 65 years or older; and you are a citizen or permanent resident of the U.S. If you aren’t yet 65, you might still qualify for coverage if you have a disability or with End-Stage Renal disease.

Under the system as it stands today, you pay a Medicare tax of 1.45% of your wages and your employer pays in a matching 1.45% for a total contribution of 2.9%. Unlike Social Security, there is no income cap, so all of your wages are subject to the tax; the cap on Medicare wages was removed beginning January 1, 1994.

Beginning in 2013, the health care act increases the Medicare tax on high income individuals by 0.9%, from 1.45% to 2.35% for wages over the income thresholds ($125,000 for married taxpayers filing separately, $200,000 for individual taxpayers and $250,000 for married taxpayers filing jointly); the employer contribution will remain the same at 1.45%. Additionally, Medicare tax will be imposed at a higher rate of 3.8% on investment/unearned income for high income taxpayers; previously, only earned income (like wages) was subject to the tax for all taxpayers. High income taxpayers means those individual taxpayers reporting income over $200,000 and married taxpayers filing jointly reporting income over $250,000. Investment income includes exactly what you’d think but excludes distributions from qualified retirement plans, including pensions and IRAs.

As has been noted before, if you do the math – especially if you’re currently paying for your own health care insurance – you can see that these dollars don’t add up under these facts. Assuming a real median income of just under $50,000 for taxpayers, that means a total Medicare contribution of $1,450 per year. The return is free health care insurance when you retired. When you can find private insurance for those kinds of dollars, you let me know. And that, of course, is exactly the problem.

Ryan isn’t a fan of the health care act signed into law under President Obama, nor the financial provisions as they relate to Medicare. But he understands that Medicare cannot survive if changes aren’t made. It’s too big and too expensive.

His proposal was to move Medicare to more of a defined contribution plan administered by the government but relying on private insurers. If you think you’ve heard the concept before, it is shades of the idea of privatization of Social Security proposed a decade or so ago. The idea is that opening up the market to competition should result in lower costs to consumers. But we know that doesn’t necessarily happen: that was the idea behind President Obama’s health care plan, too.

Concerns about premium increases caused Ryan to alter his proposal; the most current version approximates the existing system for federal employees. Ryan has referred to it as a “premium-support model” where the government would pay the insurer directly, in effect subsidizing the cost of a plan chosen directly by the insured. What has taxpayers on edge about the plan, however, is that seniors will be responsible for the remaining share of their own medical costs. That means cost savings for the government but potential increases for taxpayers, depending on costs and benefits. The fear is that it might force seniors into choosing less desirable – but more affordable – plans. That worry is on hold, however, since the proposal never became law.

The Medicare proposal isn’t the first time that Ryan has knocked heads with President Obama over strikingly similar plans. Last fall, both Rep. Ryan and President Obama suggested raising taxes on airline tickets. In that case, the key difference in the proposals was that President Obama earmarked the ticket prices for deficit reduction while Ryan wanted the additional taxes to be allocated to Homeland Security.

In 2012, Ryan took on the White House with his 2013 budget, accusing the President and the Democrats of “still refusing to take seriously the urgent need to advance credible solutions to the looming fiscal crisis” and “offering little more than false attacks and failed leadership.” While touting the Republican version of the budget, he acknowledged that “[b]oth parties share the blame for failing to take action over the years” – an interesting concession at a time when taxpayers are growing tired of the failure of Congress to do, well, anything.

The budget is exactly what you’d expect in this political climate. The thrust of the plan is to repeal the health care act, increase military spending and focus on tax reform. Ryan gets points for his emphasis on tax reform, which needs to be a part of any long term budget, but he does lose points in my book for latching onto yet another goofy phrase that I am hereafter banning on the blog: tax cliff, which sounds either like a bad stage name or a place that you don’t want to go on vacation. (Psst: in case you’re wondering, the other two banned phrases are a certain tax cut moniker and a word that rhymes with “Saxmaggedon.”)

The plans for tax reform focus on a few key areas. He proposes consolidating tax rates for all taxpayers into just two brackets: 10% and 25%; reducing the corporate rate to 25 percent; repealing the Alternative Minimum Tax (AMT) and keeping capital gains rates low. The plan also calls for a shift from a “worldwide” system of taxation to a “territorial” tax system. If you’re wondering where you’ve heard that before, think of Michael Phelps: this has been the key to ongoing discussions about our athletes paying taxes on their winnings associated with the London Olympics.

You can tell from the proposal – and the way that it’s written – that Ryan is my generation-ish (he is a bit older *clears throat*). The biggest clue? All of the allusions to President Reagan. Children of the 80s are fascinated with Reagan – sometimes for the right reasons and other times, for the wrong reasons. But we do understand that summoning the ghost of Reagan is a powerful tool. And that’s what Ryan does – pointing out Reagan’s tax reforms (though he didn’t paint the whole picture) and touting them as having “inaugurated an era of great prosperity.” He uses the 2013 budget proposal as a time to “build upon Reagan’s [sic] leadership and advance a fundamental reform of the broken tax code as a critical step in rebuilding the foundations for economic growth.”

Ignore the coincidence (insert dramatic, fun music here) that Romney, Ryan and Reagan are an alliterative dream team. But expect lots of Reagan throwbacks during the campaign from here on out. I’m not expecting Ryan to don a Miami Vice jacket and some Tom Cruise Ray Bans (though that would be very, very cool) but I do think that part of his strategy will be to remind voters of the good ol’ days. And no matter what my mom thinks, that’s not the 50s and 60s. And no one will claim that it’s the 70s (come on, the bell bottoms alone are disturbing). But I do expect more than one nod to the 80s with speeches that echo this one.

I still don’t believe that this will be an election with a great deal of voter turn-out. Sadly, I don’t think we’re enthused, as a nation, about any particular candidate. But I think, with Ryan’s addition to the GOP ticket, we’re at a turning point in the campaign. Ryan may make Romney cool and relevant – okay, maybe I meant to say “not uncool and not irrelevant” – to younger voters. He even launched the “Young Guns” progam to attract new blood to the party (Young Guns also being a movie from the 80s – just saying). But unlike past candidates – Sarah Palin comes to mind – Ryan has a history of being in the trenches, specifically, working on the budget. And in an election that’s all about dollars, that will make a difference.

(**And yes, the head is a reference to a Reagan movie co-starring Doris Day: extra points to my mom, who I am sure noticed.)

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