A Real Tea Party Budget

Friday, March 9th, 2012 and is filed under Blog

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The Fiscal Year 2013 budget season is right around the corner as we await the much-anticipated Ryan budget over the next few weeks.  However, a few conservative senators decided to get a head start on the process by announcing their blueprint to balance the budget in just 5 years.  Yesterday, Rand Paul, along with Mike Lee and Jim DeMint, introduced a stellar budget proposal, which achieves a budget surplus by FY 2017.

Here are some key aspects of the budget, A Plan to Revitalize America.

  • Discretionary spending: Eliminates 4 entire departments: Commerce, Energy, Education, and HUD.  Several agencies within the USDA and the DOI would be eliminated.  It also privatizes the TSA.  Most other discretionary programs and agencies are frozen at 2008 spending levels.  But the sharp cuts of the sequester on the military are eliminated. Dodd-Frank and Davis-Bacon are completely repealed.
  • Entitlements: Medicare is transformed from an open-ended benefit to a defined-contribution premium support model, which is similar to the current health insurance options that are presented to members of Congress.  Social Security retirement age is raised and growth of benefits is slowed for higher-income.  There is no private account option (the one thing I don’t like).  Medicaid, SCHIP, food stamps, and child nutrition programs are block granted to the states.
  • Budget balance: Overall, this proposal would spend $11.1 billion less than the CBO alternative budget baseline over 10 years.  Paul envisions a $579 billion surplus by the end of the 1-year budget frame.

The conservative budget proposal also offers a bold tax reform plan.  It would establish a flat 17% rate on individuals and businesses.  Taxes on gifts, estates, capital gains, interest income, and dividends would be eliminated.  Most credits and deductions would be repealed, but they would be replaced with a generous personal exemption and standard deduction.  For example, a family filing jointly would receive $32,320 for a standard deduction and $6,530 for each dependent.  But there would be no refundable credits under this system, thereby ending the status quo of 29% making money off the tax code.

We’ll be waiting for the House budget resolution with much excitement, but it is sure hard to top this proposal.  The budget report also contains much useful historical information about budget and taxation.  You can read the full report here.