The Wonk Room

ANALYSIS: Republican ‘April Fools’ Budget Is A $1.5 Million Tax Windfall For CEOs

Rep. Paul Ryan (R-WI) and Republicans in Congress finally unveiled their final alternative to President Barack Obama’s budget today, and we certainly hope it’s an April Fools Joke.

Unsurprisingly, it contains an extension of the Bush tax cuts and a massively expensive set of tax cuts for wealthy Americans and corporations.

These tax cuts would cut the top three tax brackets to 25% and cut capital gains taxes to zero through 2010. As we showed previously, this would cut an average CEO’s taxes by $1.5 million in 2009 and 2010. After 2010, capital gains taxes would return to 15%, but the average CEO would continue to save over $550,000 every year in taxes from lower taxes on earned income.

This temporary reduction in the capital gains tax rate is particularly pernicious as it would likely have exactly the opposite effect Ryan claims it would have. Ryan says it would “create an incentive for risk-taking and investment.” Actually, it would do just the opposite: encourage wealthy people to cash out of their holdings, discouraging new long-term investing (right at a time when we need it most) but providing a sweet windfall for the wealthy investor class.

As John Fout of The Street explained when Sen. John McCain (R-AZ) proposed a similar temporary capital gains rate cut during the presidential campaign, it would “encourage investors to make one-time sales to capture lower capital gains and increased tax write-offs. Such equities sales would facilitate capital flight.”

The conservative budget would enact a severe anti-stimulus, and block much-needed public investments in order to fund tax cuts for wealthy people in a way that would hurt the economy. Sounds like more of the same to us.