Republican Budget Would Slash Taxes, Establish Two-Bracket Tax System And Scrap AMT

Tyler Durden's picture

While it has no chance of passage, the GOP 2013 budget, details of which have been leaked by the WSJ, proposes slashing corporate and individual tax rates, collapsing the current six tax bracket system into just two tiers (10% and 25%), lowering top corporate tax rate to 25% and scrapping the anachronism that is the AMT, or Alternative Minimum Tax. Finally, the proposed plan would nearly eliminate U.S. taxes on American corporations' earnings from overseas operations: something which companies with foreign cash would be rather happy to hear. Needless to say, Democrats will promptly dead end this budget in the Senate: "The proposal, to be offered by Rep. Paul Ryan (R., Wis.), who has become the Republicans' leading figure on budget issues, has little chance of becoming law soon. While likely to be welcomed by House GOP rank-and-file members, it would be rejected by the Democratic-controlled Senate."

Among the more contentious issues is the elimination of some top individual tax brackets...

The current tax system has six individual tax brackets, with a top marginal rate of 35%. The proposal to replace it with just two brackets, with rates of 10% and 25%, echoes proposals by some GOP presidential contenders. Former Pennsylvania Sen. Rick Santorum would reduce rates to 10% and 28%; former Massachusetts Gov. Mitt Romney would cut current rates by one-fifth; and former House Speaker Newt Gingrich and Texas Rep. Ron Paul support some form of flat tax.

...As well as the elimination of repatriation taxation, allowing companies like Apple to bring back their foreign cash horde tax free:

The new budget also would lower the top corporate tax rate to 25% from 35% and plunge into a fierce debate about how to tax companies' overseas operations. Currently, U.S. companies pay the tax rate of the country where the outpost is located and then, if they bring those profits home, often pay some U.S. taxes as well. Under the Ryan-Camp proposal, companies essentially would pay just the tax rate of the country where the profits are earned.

So why is the GOP proposing this?

"We don't expect to make law this year, but we expect to give the country an alternative choice for the future," Mr. Ryan, who chairs the House Budget Committee, said in an interview. "We're going into this election with a specific plan and showing how we could realize it and get it done."


The document was drafted with input from Rep. David Camp (R., Mich.), who heads the tax-writing Ways and Means Committee and has long pushed for a tax overhaul. "We think it's very important to have a clear message on jobs and the economy," Mr. Camp said. "The code is too costly, too burdensome, and it's hurting job creation, so we think we should take action."

Democrats see the tax issue as a smokescreen:

Democrats see the tax proposal as an attempt to deflect attention from the more controversial parts of Mr. Ryan's budget, such as a Medicare overhaul and a decision to set 2013 spending levels at a lower figure than that agreed to in the debt-limit deal last August.


"Republicans are on a maddening push once again to end Medicare and raise health-care costs for seniors, while giving more special tax breaks to big oil companies and millionaires," said Rep. Steve Israel (D., N.Y.), who coordinates the House Democrats' campaigns.


Mr. Ryan caused a furor last year by proposing to change Medicare from a program in which the government pays directly for health care into a "premium support" program for those currently 55 or younger. Medicare would subsidize beneficiaries' premiums as they bought private insurance.

In other words, it is a given that none of the proposed by the GOP will happen.

Instead, the Democrats favor the Buffett rule, which seeks to further widen the class divide by making the wealthy pay progressively more, in the process funding even greater bailouts of TBTF financial institutions, and the even greater encroachment of the insolvent welfare state.

So while the political theatrics continue, the US still has to decide what expenditures it will cut as part of last summer's debt ceiling deal. That this will not happen is also a given.

Which makes us wonder: why even pretend with taxation? As we have shown, the US is progressively more reliant on debt issuance as a funding source for all deficit. At last check debt issuance served to fund 54% of all government expenditures, as tax revenues net of refunds now account for less than half. In fact as of today, in Fiscal 2012 the US has issued $115 billion more in debt ($776 billion) than it has collected in net tax revenues ($661 billion).

So why pretend America will ever repay its debt? Why engage in meaningless political theatrics and senseless optics, and collect taxes at all, as sooner or later virtually all US deficits will be funded through debt issuance, and thus Fed monetization? Why not just cut all marginal tax rates to 0%, and get consumers to truly enjoy a few months of unbridled spending euphoria before the hyperinflation hits?

Alas, we won't find many answers here or anywhere.

For the interested, here is the personal message from Paul Ryan in the form of a rhetorical question. It too will not be answered: after all America (and everyone else, everywhere) has proven beyond a shadow of a doubt that taking pain in the short-term, in order to avoid a complete catastrophe in the longer-term, is not only unacceptable, it is inconceivable. Especially when there are iTrinkets to be distracted with.

The Path to Prosperity Budget: Your Country. Your Future. Your Choice.


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Cdad's picture

Good grief.  Nice Hail Mary, thrown from their own one yardline on 4th down with zero time on the clock, thrown by The Other Democrats in the House of Representatives. 

BKbroiler's picture

In the 50's the tax rate for the wealthiest was 90%.  And what a nightmare those years were, right?  One working parent to a home, lifetime employment, social mobility for the poor and middle class, american manufacturing and auto supremacy.  What a bunch of socialists we were. 

LetThemEatRand's picture

Lower taxes for the largest corporations, lower taxes for the wealthiest individuals, and propose no real spending cuts and certainly no cuts in military spending.  Because it's worked so well for the last 40 years and left the country stronger and healthier financially, right?  What could go wrong?

Grover Norquist called it "starve the beast."  The idea was to run up huge deficits while cutting taxes.  The end-game is the complete end of all social programs once the public figures out we "cant' afford them," and the ushering in of a grand new era of serfdom for most of the population who are left without pensions, social security, health care, etc.  Work until you die and buy at the company store and like it.  You've gotta hand it to Grover -- it's working brilliantly and lots of seemingly intelligent people are begging for more.

Buckaroo Banzai's picture

Any income tax on natural humans above 0% is the functional equivalent of slavery. This is an inarguable fact. Republicans just want the chains of slavery to ride a little lighter-- you're still a slave under their system.

Corporations, on the other hand, are legitimate targets for an income tax. Since they are creatures of the State, they are beholden to the state.

The federal government was funded solely by excise taxes for the first 120 years of its existence, and the country was much better off as a result. Ever since the citizenry was enslaved in 1913, the entire economy has been deteriorating-- gradually at first, and now, suddenly.

Recalling, of course, the old joke, "how did you go bankrupt, sir?" " two ways-- gradually, and then suddenly."

Vampyroteuthis infernalis's picture

I am all about reducing the taxes on individuals. Are they going to reduce spending? Hell no! Let the ponzi march on till insolvency.

caconhma's picture

Welcome to the Martial Law in the USA. Please see below:


The White House

Office of the Press Secretary

For Immediate Release March 16, 2012 Executive Order -- National Defense Resources Preparedness



By the authority vested in me as President by the Constitution and the laws of the United States of America, including the Defense Production Act of 1950, as amended (50 U.S.C. App. 2061 et seq.), and section 301 of title 3, United States Code, and as Commander in Chief of the Armed Forces of the United States, it is hereby ordered as follows:

MobBarley's picture

Seems ZeroHedge isn't covering this topic due to the hi volume of ell leveraged HISC (head in sand) Index Spider PDA.

superflyguy's picture

this was covered earlier when it was hot of the presses, have you been watching dancing with the stars? :)

FEDbuster's picture

I would still rather have Ron Paul's elimination of the income tax and trillion dollar in budget cuts.

oldman's picture



We've been under martial law since Capt. John Smith-----indentured servants, slavery, witches burned at the stake, genocide of native americans, back to slavery under the auspices of the "State Labor Codes', war, war,war, death and destruction where ever we choose. Now, the bill comes due and all the 'haves' leave the table to 'go to the bathroom'----can't you see the irony, humor, poetry in all of this?

And, now, you want us to rise up and overthrow the tyranny? Get real, please----come to your senses

we have a history as shit-eaters and we are happy eating shit---we always have from newegland to florida, atlantic to pacific, canada to mexico, and all along the west coast------we're good people and we do what we are told.

Suck it up, brother---take a deep breath-----it is just you and I left at the table and-----oh, excuse me please, buty I have to go to the bathroom.

Wish it were other         om


smlbizman's picture

the pretty golden tassles on our flag indicate martial law...ask every politician what they mean and only 2 will know the answer the rest may know but will never answer...

Goner's picture

I cant find any credible source for this, would you mind sharing if you have one. There are dozens of sites that parrot this but they dont provide any evidence. I am not saying our courts and goverment have not been hi-jacked, just that that I dont think a flag with gold tassles is the best indication.

Gold fringe can be found on ceremonial flags used indoors and for outdoor ceremonies. The fringe is considered completely within the guidelines of proper flag etiquette. There is nothing in the Flag Code about the fringe being for federal government flags only. The Internet contains many sites that claim that the fringe indicates martial law or that the Constitution does not apply in that area. These are entirely unfounded (usually citing Executive Order 10834 and inventing text that is not part of the order) and should be dismissed as urban legends. Others ascribe meanings of spiritual authority. Gold fringes on flags goes back long before the United States. Flags in ancient India had gold fringe, as did those in France, England, and throughout Europe.

smlbizman's picture

look at admirality court...see if that helps

BKbroiler's picture

Any income tax on natural humans above 0% is the functional equivalent of slavery.

Congrats on the Ron Paul fanboy award.  It was a close one.  The problem is, you rely on government mandated clean water to come from your sink, government mandated police department to keep bad people away, USDA approved meat, and thousands of other little protections offered to you. 

Ever since the citizenry was enslaved in 1913

I agree 100% that the FED is an abomination.  And the fact that our income taxes go to pay for the interest on that debt is even worse.  But we live in the real world, which hasn't changed much since Roman times.  Pay the military from the public coffers or other countries take your shit.  Provide for the public or they revolt.  Tax is as old as civiliation and there's a good reason for that.  It's the lifeblood of it.

redpill's picture

At the very least the form of taxation should be on consumption, not earnings.  That change alone would revolutionize the way our economy operates.

SystemsGuy's picture

Red Pill,

Yup. A consumption tax would be inflationary, but it would also simplify the tax code dramatically. It would be harder to game. It places the burden of accounting on the business, which is already managing that anyway, rather than on the employer or the employee. It's reasonably progressive, especially if businesses end up paying this tax as well as individuals, and it would eliminate the constant fairness argument. It would reward savings and thrift, and would encourage the shift to a more efficient economy. Similarly tax financial transactions - it would reduce speculation in the market and perhaps make the market more honest in the process.

Unfortunately, all of these reasons are why it won't happen. The wealthy may argue about the burden of taxes, but they know that they have the best of all possible worlds right now, and so long as it is advantageous to those people, they will fight tooth and nail to keep the existing tax system in place, only make it even more regressive.

Cursive's picture


A consumption tax would be inflationary, but it would also simplify the tax code dramatically.

Not really.  A revenue neutral switch, albeit extremely difficult to execute, to a national sales tax would not create any new money.  Inflation is only created by money printing and/or fractional reserve banking, not increased or decreased demand.  A consumption or national sales tax would make the final price for goods more, but it would only discourage consumption and envigorate black markets.  That can actually be very deflationary.

cranky-old-geezer's picture



A consumption tax would be inflationary, but it would also simplify the tax code dramatically.

No, a consumption tax (sales tax) wouldn't be inflationary.   Inflation comes from money printing, not sales tax.

Inflation itself is a tax by the way.  A hidden tax.   A large hidden tax now.  Since 2007 40% MORE of your purchasing power is being taxed away by inflation on top of all other taxes. If you're in a 25% tax bracket, add 40% to that.

Now you know why the economy is collapsing.  So much of people's purchasing power is being taxed away by regular taxes plus inflation there's just not much left to pay bills and have any spending money.

And the inflation tax is "collected" by the Fed, not by the government.  Whatever portion of your purhasing power is taxed away by inflation, that wealth goes right to the Fed.

Orly's picture

There can be no sustainable systemic inflation without wage pressures from below.  Single monetary or fiscal policies by themselves do nothing to inflation.


Yen Cross's picture

  Sustainable Systemic Inflation? The ultimate oxymoron!

Sathington Willougby's picture


Inflation comes when a bangin babe walks up and I look her in the eye and smile and she smiles back.

Deflation is when she says do you have money for gas and to go shopping.

cranky-old-geezer's picture



There can be no sustainable systemic inflation without wage pressures from below.


Inflation happens when the money supply expands faster than GDP.   That's the textbook definition of inflation.

What happens to wages is a downstream effect of inflation.   What happens to prices is a downstream effect of inflation.

An no, wages aren't rising like you presume.   Since 2007 USD has lost 40% of it's value (purchasing power). Wages would have to rise 67% to make up for it.

But wages haven't risen at all hardly.  In fact wages are stagnant or even dropping in some cases as more people compete for fewer jobs, allowing employers to reduce wages.

People must stop viewing inflation as a price event.  It has nothing to do with prices. 

It's a money supply event causing the currency to devalue (devalue, debase, depreciate, lose purchasing power, buy less, whatever). 

How prices and wages respond to inflation is a separate matter.   But it's not inflation.

Bobbyrib's picture

A consumption tax would also be Regressive, not Progressive.


I would make it a point to buy less to not pay more than I currently do in taxes. Also buying a small farm wouldn't be the worst idea if a consumption tax came about. When people like myself buy less and less, the government would be forced to raise the consumption tax rate to make up for the shortfall of revenue.

thefedisscam's picture

For that to happen, at least it needs to exempt the first 10K or 15K from taxing. otherwise, poor people will pay much higher percent of their income as tax, than the rich people

Convervative Connection's picture

No, you just need to not tax "necessities"... which is the same thing we do now at the state level.

So, unprepared food and basic clothing: no tax.

iPads, big screen TVs, cell phones: tax

See how that works? Things that a person NEEDS are untaxed. Things that a person WANTS are.

Sathington Willougby's picture


You mean a system of voluntary contracts and property rights?  It would never work.  

How would you fleece the muppets and make riskless profits without pointing a gun at someone?

Dr. Engali's picture

I didn't see where you mentioned the fact that he asked to work extra hard to provide for not only his family but also for the slug next store in the wife beaters t shirt living off of welfare sitting on the front porch drinking pabst blue ribbon or for the woman who can't keep her legs apart.

LetThemEatRand's picture

Lloyd Blankfein does not live next door and I'm pretty sure he doesn't like PBR.  

tmosley's picture

His cousin, Cletus Blankfein does though.

Just because a parasite is small doesn't change the fact that he is a parasite.  The proper remedy removes them all at once.  Or you can be an idiot and try to get rid of them by scratching where they want you to scratch while continuing to miss the fact that the irritation you create to get rid of them only draws more and more of their brothers to the feast.

BKbroiler's picture

offer him a job and see if he says no

Dr. Engali's picture

You are so out of touch it isn't funny. If you think the system isn't loaded with people who don't enjoy the free ride then you need to get out more and associate with some of them. I can tell you personally that they don't want a job and if they do want something it has to pay under the table so it doesn't mess with their "benefits".

BKbroiler's picture

I think it's you who is out of touch.  There are many freeloaders but most people want to work and succeed, it's human nature. I have hired plenty of people who were very happy to get off the public teet, but you don't let go of one rope without a firm grip on another.

weinerdog43's picture

It's really pointless to argue with 9th graders.  They have no experience in the real world, so their fantasies seem very real to them.

Dr. Engali's picture

Do yu ever have anything intelligent to say? No? I didn't think so.

weinerdog43's picture

Yes, I simply point out that YOU never have anything intelligent to say.  Jeez, what a maroon.

Dr. Engali's picture

I have news for you pal. I have employed hundreds of people in my life. I've had some very hard workers and I have had a large share of people like I described. I treated them all well and made sure compensation was above what the current market was paying. My belief has always been that its best in the long run to compensate well and to keep turnover low. So I have a pretty good idea what I'm talking about.

LetThemEatRand's picture

Sociopaths always think they are generous to the help.    It's in their nature.

Dr. Engali's picture

Sociopath, curious term for a person who advocates digging in another persons pockets to pay for programs and wars that person doesn't agree with. I'll bet you look for every tax loop hole you can find rand. Hypocrite like all the rest of the takers.

Buckaroo Banzai's picture

Let them Eat Rand is a notorious socialist troll, unfortunately he won't go back to HuffPuff or whatever communist hellhole he emerged from.

A Nanny Moose's picture

Probably got banned. Perhaps ignoring them, will cause them to lose interest, and they will simply go away.

tmosley's picture

Wrong again.  Sociopaths don't care at all.

And in any event, it isn't their place to to be "generous".  If the "help" can find greater pay or better working conditions elsewhere, they can leave.  Cruel bosses create high turnover, which is expensive and time-consuming.

The only time a sociopath gains power, beyond simple acts of assault that they could perpetrate on ANYONE who drops their guard, is when society allows them to seize that power and FORCE others to serve them.  By this I mean with literal force (gun to the head type force), or threat of force.

Bobbyrib's picture

Please re-read your nineteenth century US history. When non-business owners have to work to live, business owners can and will lower compensation and increase their workloads to increase productivity and profit margins when times are bad (like right now).

weinerdog43's picture

Oh, bullshit.  If you ever employed more that your right hand, you wouldn't be wasting time here. 

Dr. Engali's picture

Call bullshit all you want. You are nobody to me. How many homeless shelters have you volunteered in hypocrite? How many times have you worked in soup kitchens passing out food? How many nursing homes have you gone to visit ? I can tell your kind. You sit back and like to tell people how government should spend their money but you won't lift a finger yourself to make a difference.

oldman's picture

@ Dr. Engali


Sorry, Doc.

You are a little out of touch on this one

anyway. 'asi es' as we say in this part of America

And, let us say that you are in the extreme in being 'out of touch'

Why not just accept 'asi es' as the 'is' of our times

and go along with the crowd?

After all we are all in the same boat

So even if you are the only one with water

Please don'y make us take it from you

There is enough for all the bankers so

there HAS to be enough for all

Gracias, Doctorcito                             om

Dave Thomas's picture

It's the disparity in it.


If Jeff Immelt gives up 15% of his coin, I'll be happy with doing my part.


P.S. That's a lot of clean water, and paved roads.



Totentänzerlied's picture

"The problem is, you rely on government mandated clean water to come from your sink, government mandated police department to keep bad people away, USDA approved meat, and thousands of other little protections offered to you."

You suffer from a lack of imagination and/or Praise the Savior State disorder aka Hobbesianism. The above statements are not true in their assertions - the water is not clear, the police do not prevent crime, to the contrary they constantly commit it, and they punish a small fraction of all crimes committed, all at immense cost to you, the meat is disgusting, factory farming, rBGH and other hormones, antibiotics, corn and animal feed, and fillers are just some of the things the USDA has approved. Thousands of other little protections? No, thousands of other incursions, usurpations, predations, encroachments, tramplings, assaults, extortions, and so on.

The problem with your asinine assumption is that it would mean that all previous states, as the US government is the largest that has ever existed, were necessarily worse, and that the US has gotten better in direct proportion to the size of its government. If some government is good, more must be better ... How's that working out for you?

The Fed is how your beloved Savior State funds your oppression "services". Without a fiat currency, such incredibly massive wastes of money would not be possible as demonstrated by the history of central banking in this country. The world hasn't changed much since Roman times? Perhaps if you are a Bedouin sheep herder in the Jordanian deserts. How is this even relevant? Rome destroyed itself, as all states eventually do. Pay the military to keep your subjects in order, defend your rule, and assault/plunder other nations. There's a reason this country was not intended to maintain a standing army. Throughout history, the use of a military use to defend the homeland is absolutely paled by its use to make war abroad and maintain control at home. Providing for the public means redistribute, by force, the wealth of your subjects. Without the state, there is no public and there is no state-entity against which to revolt. The state is what necessitates and makes possible revolt by the polity.

Yes, tax is as old as civilization and there is a good reason, but yours isn't it. Taxation is not the lifeblood of civilization - untruer words have seldom been uttered - it is (because the state is at base) nothing but a wealth redistribution - from those who produce to those who do not - mechanism. A state can hardly function without taxation, civilization however can and, in fact, flourishes in inverse proportion to the magnitude of the state.

Hobbesians like yourself are the reason the state continues to exist - you have convinced yourselves through fear and lack of imagination that the state does more harm than good. You take credit for both. The state cannot create wealth or resources, it can only redistribute them by force, all good it does is a result of this redistribution and thus involves an opposite act of evil, but the state can also destroy, and so the good is zero-sum while the evil is nearly infinite.

You should bow down and worship the Fed every day of your life, it is after all the sine qua non of your Savior State. Your claim that the Fed is an abomination is in direct and total contradiction to your Hobbesian partialities.