Factbox: Republican Ryan's earlier budget plan has clues

Sun Apr 3, 2011 2:55pm EDT

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(Reuters) - An influential House of Representatives Republican will unveil his budget plan for 2012 next week and it could have similarities to an earlier "roadmap" that called for big changes to social programs and make it harder for Congress to raise taxes.

House Budget Committee Chairman Paul Ryan is expected to release the proposal on Tuesday. It is seen as a blueprint for the ruling House Republicans' position for the coming fiscal year budget, which starts on October 1.

A bold proposal by Ryan last year, dubbed a "roadmap for reform," advocated keeping federal taxes at no more than 19 percent of gross domestic product and giving seniors an option to put Social Security savings into private retirement accounts.

Republican leaders never embraced that plan and aides expect the new proposal to be a bit less aggressive.

On Sunday, Ryan said his proposal will go further than the presidential deficit commission recommendations, which proposed cutting $4 trillion over a decade from the deficit, which is expected to hit $1.4 trillion this year, according to the Congressional Budget Office.

Ryan also said his proposal would cap spending and lower corporate tax rates.

Critics say his earlier plan would disproportionately hurt the poor, while it cuts taxes for the wealthy and big companies.

Elements of Ryan's earlier proposal include:

GENERAL SPENDING, TAXES

Creates a mechanism to slow growth in mandatory spending programs like Medicare and Social Security, with automatic across-the-board cuts if Congress fails to act.

Requires a supermajority, or three-fifths vote, in the House and Senate to debate legislation increasing taxes.

HEALTHCARE

Ryan's plan would de-link healthcare from employment, where most U.S. citizens now get their health insurance, by repealing the tax exclusion for group health insurance. It would give individuals and families a refundable tax credit to buy insurance.

MEDICARE

For those qualifying after January 2021, it requires recipients of Medicare, a government healthcare benefit for the elderly and disabled, to sign up for private health insurance. It would give recipients vouchers to pay for health coverage.

MEDICAID

Converts the current Medicaid program, which provides healthcare for the poor, into a debit card system and apply it to families who have no health insurance with gross income not exceeding 200 percent of the federal poverty level.

SOCIAL SECURITY

Creates personal savings accounts starting in 2012 where workers under 55 can deduct some of their Social Security taxes toward investment accounts. This idea was proposed by former President George W. Bush and was met with fierce resistance by Democrats and proved unpopular, never making headway in Congress.

It also gradually raises the eligibility age for the popular social program.

INDIVIDUAL TAXES

Gives an option of staying with the current individual tax system, with its slew of deductions, or moving to a program with two lower tax rates, 10 percent and 25 percent. Those choosing the latter option would not be able to enjoy most current deductions and credits.

The current top income tax rate for the highest earners is 35 percent.

CORPORATE TAX

Replaces the current corporate tax, now at 35 percent for large companies, with a "business consumption tax" of 8.5 percent on goods and services.

This proposal is similar to so-called value-added taxes adopted by nearly every major industrialized country outside the United States, where the idea has proved politically unpopular.

(Reporting by Kim Dixon; Editing by Eric Walsh and Deborah Charles)

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