One of the largest tax breaks benefiting middle-income taxpayers is the exclusion from tax of the value of employer-provided health care benefits, (which costs the government $147.8 billion, more than any other tax break). And to broaden the base by an additional $1 trillion, as Mr. Ryan suggests, means that nearly all of these breaks would have to be sharply curtailed, if not eliminated.
Although Mr. Ryan has been branded a radical, many of his tax reform proposals have bipartisan support. Two major commissions — the Debt Reduction Task Force headed by former Senator Pete Domenici, a Republican, and Alice M. Rivlin, head of the Office of Management and Budget under President Clinton, and the National Commission on Fiscal Responsibility and Reform — reached similar conclusions.
“He’s a purist when it comes to tax reform and I admire him for that,” Ms. Rivlin, now at the Brookings Institution, told me this week. “With respect to the form of what he’s proposing, I like it. He wants to broaden the base and bring the rates down and have a simplified rate structure. That general idea is embraced by many Democrats. The problem is, if you’re going to bring rates down as far as he suggests, you have to make drastic reductions in tax expenditures and dearly loved ones at that, such as the home mortgage deduction and the exclusion of employer-paid health care from income tax. To get to revenue-neutral with rates that low, you have to phase out nearly all those big tax deductions, and he doesn’t discuss the specifics of that.”