RUSH: We have the Speaker of the House, Paul Ryan, with us, ladies and gentlemen, to discuss the status, the future of tax reform and a number of other things. Speaker Ryan, thanks for making time for us today. How are you doing?
SPEAKER RYAN: I’m doing great! Good to see you. Longtime listener, third-time caller.
SPEAKER RYAN: (laughing)
RUSH: Okay, what is the most confusing thing about this that you have discovered people don’t understand about what you’re trying to do with tax reform here?
SPEAKER RYAN: It’s a tax cut for everybody. There’s a lot of misinformation out there, a lot of confusion — and more or less, a lot of hits from the left. But it’s a tax cut for everybody.
SPEAKER RYAN: Yeah. Actually, what we do is we raise the income threshold at which that bracket applies so it goes from $477,000 up to $1 million.
RUSH: Oh, that’s true.
SPEAKER RYAN: So, the president made it pretty clear he didn’t want that rate to go down. But if you look underneath the rate, more of your income is taxed at a lower rate, and so according to the Joint Committee on Taxation — which is the official scorekeeper of these things — every single person, every rate payer, every bracket person gets a rate cut. On average, for the average family in America, it’s 11… It’s 100… It’s a $1,182 tax cut, an $1,182 tax cut for the average household in America. It takes the child credit from $1000 to $1600. So $600 more per child of a tax credit, and for everybody but the people above the million dollars, it lowers your tax rates across the board, and it doubles the standard exemption. Which means for a couple, instead of the first $12,000 being tax-free, your first $24,000 of income will be tax-free.
RUSH: Now, that’s a huge cut.
SPEAKER RYAN: That’s a huge cut — and, by the way, by doing that, doubling the standard deduction, 90% of Americans will be able to file their taxes on a form the size of a postcard. So it’s a radical simplification of the IRS itself but radical simplification of the tax code. And the whole theory here is that instead of doing all these things that the IRS tells you to do, we’re just gonna cut your taxes and let you keep more of your money in the first place, and you decide what you want to do with your money. That’s our philosophy driving this.
RUSH: So one other thing before we get into specific details that I want to ask you about. One of the other big areas, it seems to me, that is a potentially huge cut — and, by the way, I don’t mean cut. “Rate reduction,” I don’t really mean “cut.” I’m talking when I say “rate reduction,” a great benefit for people here in terms of keeping their own money. The pass-through change here. Would you explain the pass-through? Is this the sub-S pass-through? Is that what it is?
SPEAKER RYAN: Yes.
RUSH: Explain how that works.
SPEAKER RYAN: Yeah. So eight-out-of-10 businesses… Eight-out-of-10 businesses in America are not corporations. They’re what we call “pass-through businesses,” like Subchapter S corporations or LLCs or sole proprieties. So that’s 80% of all American businesses. They pay the top individual tax rate, which goes above 40% these days. We’re dropping the tax rate for these businesses, small businesses, to 25%. And for smaller businesses — you know, businesses making, you know, less than $100,000 — they’re gonna have a much, much lower tax rate than that.
RUSH: Let me use myself in this example. Let’s say that I’m right now in the 39.6% bracket and I want to change the way I’m organized to a sub-S.
SPEAKER RYAN: That means that business gets taxed at 25% instead of 39.6%.
RUSH: That’s what that means?
SPEAKER RYAN: That’s what that means.
RUSH: Now, what happens to the Medicare and the payroll? The Medicare is separate. Does that change?
RUSH: Okay. So if you’re a sub-S and you… Let’s say your gross income… I’ll just use an easy-to-work-with number here: Your gross income per year is $100,000, and you’re an independent contractor. You’re not a sub-S. So you’re paying whatever the rate is on that. In fact, let’s make it $1 million to get to the highest rate. So you earn $1 million and you’re paying 39.6% on that and you decide to reorganize as a sub-S. As a single small business owner, you can reduce your rate from 39.6% to 25%?
SPEAKER RYAN: Yeah, for your business income. Now, just so you know, Rush —
RUSH: Well, I know. Let me explain. So your gross is a million, and you decide to pay yourself $200,000 a year. The other $800,000 —
SPEAKER RYAN: Your $200,000 is your ordinary income tax, and then the rest of it — which comes from your business — is taxed at 25%.
SPEAKER RYAN: Now, you have to have certain rules to make sure not everybody and their brother can all of a sudden become an LLC. I’m a big Packer fan, as you know, and, you know, obviously we have our issues with the NFL these days. But Aaron Rodgers shouldn’t be able to come up with a new system where it’s Aaron Rodgers, LLC, and get that the check from the Packers at small business tax rates. He’s gonna still pay it as a wage and salary income tax rate. So you have to have rules that guard against fraud and tax sheltering. But the purpose of this is to drop the rate on that business income down to 25%.
RUSH: Right. Now, the corporate rate, 35% down to 20%.
SPEAKER RYAN: Twenty.
RUSH: You’re getting creamed because that’s considered… You know, the left has demonized corporations as not even people for so many years. They demonize corporations for wanting to kill their customers, make their customers sick, what have you. So you’re getting beat up over that as another sop to the rich. Why are you doing it? Why you cutting corporate rate that much?
What happens as a result of that? We’re losing jobs. We have a huge incentive to offshore jobs. We have American companies that are becoming foreign companies, and then we have foreign companies buying American companies at an alarming rate. So by getting our rates down on our businesses, our corporations, we level the playing field so we make it… We create an incentive to stay in America and make things in America, and we tell companies, “If you invest in your factory, if you invest in buying more equipment and hiring more people, you can write off that investment immediately.”
By doing that, by giving companies a 20% rate — which gets us ahead of the pack in the rest of the world instead of being dead last — and giving companies an incentive to invest in this country, in their factories, you create economic growth. And then a third thing we do is for all those companies that have money overseas who basically can’t return that money into our country because of our goofy tax laws, we say, “Those days are done.” We’re the only country that does this. So there’s about $3 trillion of trapped capital cash overseas that does not come back into our economy to be reinvested because of our tax laws. We remove that penalty so these companies bring that money back into our economy, and that also will help create jobs.
RUSH: Okay, I have three hard balls for you here. The first one I read over the weekend, maybe Monday. I can’t remember which. This is the way it was reported: That the Republicans secretly raise tax rates not long after tax rates are cut. Supposedly in four or five years, some of these new rates you have automatically increase. But that is not being discussed or admitted to or reported on under the guise that the whole thing has to be “paid for”? What is that?
SPEAKER RYAN: Yeah. It’s just a sunset in five years of some provisions that we never, ever intend to be removed. It’s some of the business expensing provisions. It’s the personal credit for nonchildren, like taking care of your parents. The reason we did that is to conform with the budget rules so that we can make sure that this thing cannot be filibustered in the Senate. In the House, unfortunately we have to work with the rules that Senate has so that this thing cannot be filibustered. That’s why that’s there. It’s a sunset that will never occur and that we never intend to occur and this is something that, you know, Congress actually does on a regular basis. The point being it’s just to conform with the budget rules where this thing cannot be filibustered in the Senate.
SPEAKER RYAN: Well, obviously I’m in favor of getting rid of it. We’re in favor of — we passed our repeal and replace of Obamacare in the House back in May. So the House is clearly on record for getting rid of this mandate and repealing the whole thing and replacing it with patient-centered health care. It’s what you just said, the question is whether or not we have the support to do it in tax reform or not. And that’s something that a lot of members are talking about with themselves and so it’s something that people are suggesting. Right now the Ways and Means Committee, which is doing the tax law is focused on the tax policy, is not focused on anything else at this time.
RUSH: It would be so great to get rid — you get rid-of-that and you’ve taken the guts and the heart and the soul out of Obamacare.
SPEAKER RYAN: You have no argument with me.
RUSH: I gotta take a break. Can you hang on through the break for a couple more minutes?
SPEAKER RYAN: Sure.
RUSH: All right. Speaker Paul Ryan is with us. We’re discussing tax reform. We’ll be back after this.
RUSH: Welcome back, folks. We have with us the Speaker of the House, Congressman Paul Ryan from Wisconsin, and we’re talking tax reform. I want to get into a political aspect of this, and I’m gonna admit that it’s personal for me in the sense that it infuriates me. The Democrats, all of my life, starting with the Reagan tax reform early in his first term, the Democrats use one premise to define their position on taxes and try to kill every pro-growth tax cut that comes along, and that claim that they make is that the rich don’t pay their fair share.
The fact is that we’ve gotten to the point that 95% of all income tax revenue is paid for by the top 20% of wage earners. And yet I saw a poll out there — and I know this is what you’re up against — I saw a poll where something like 80% of the American people don’t think the rich are paying enough, and this is purely because of Democrat demagoguery. And yet this tax bill does not provide relief for the group of people that’s already paying 95% of all income tax revenue simply because: Are we afraid of Democrats, are we afraid of the media, or is it because the president’s insisting on this? What is it?
SPEAKER RYAN: Well, I would disagree with the premise that it provides no relief. The only thing that doesn’t lower is just the top rate. The top rate kicks in at a much higher income level. The death tax is repealed, the Alternative Minimum Tax is repealed, and people on the high end who are paying most the freight mostly own, you know, businesses, whether it’s a corporation or a small business like a subchapter S, they’re getting a massive 40% rate cut there. So I would dispute the premise that this does not lower taxes for people across the board. It does.
But when you see basically a 40% drop in business tax rates for jobs, for leveling the playing field, for being competitive in the global economy, the people who own those businesses enjoy those tax rate cuts. So I would say on the income tax side, yes, the middle income taxpayer is where the relief is focused, but for the business owner that is a massive, massive tax cut on top of it as well.
RUSH: Mr. Speaker, what is the likelihood that this passes in this Congress, and how much — now, seriously now, how much of a real desire for it to pass is there, or is some of this just being done for show?
SPEAKER RYAN: We see this as existential. We see this as so critical. And what I mean when I say “so critical” is, our economy has not hit anywhere close to its potential in at least a decade. We just got hit with eight years of Obama progressivism, more regulations, higher taxes, you know the story. And as a result we have not hit a 3% growth economy in like a decade. That’s trillions of dollars of wealth lost, that’s flat wages, flat living standards.
And we see this tax reform as the single greatest thing we can do to get out of the economic doldrums we are in, to get people real wage increases, bigger paychecks, fast economic growth, better and more jobs. And we’re convinced of this. And we made a promise, Rush, we made a promise that we would do this. That’s the other thing, we have a covenant with the people that supported us, we have a covenant with the people that sent us in this unified government. We have the White House, the House, and the Senate. And it doesn’t happen all that often when it happens. It’s the third time in a century.
RUSH: I know. If you guys — (crosstalk)
SPEAKER RYAN: — is we would do this, and that’s why we have a promise to keep. That’s why we’re focused on this.
RUSH: This is what’s so equally frustrating to me, just as a citizen here, not as a partisan, as a conservative, Republican, whatever. This opportunity is so rare, it’s not gonna come back in our lifetimes again. If you guys in the House and Senate could just come together with Trump’s agenda or I don’t care, he comes together with yours or what have you, but he’s the guy that won on an agenda, he won —
SPEAKER RYAN: That’s right.
SPEAKER RYAN: I agree.
RUSH: On the basis of merit, on the basis of substance.
SPEAKER RYAN: That’s why I’m talking to you right now, Rush. I 100 percent agree. Just to give you a sense of this in the House, we’re doing our job. In the House we have passed more bills in the first 10 months of the Trump presidency in fulfillment of this agenda than in the first 10 months of Obama, Clinton, and both Bushes. We passed 394 bills over the House. The frustration for us is 308 of them are still stuck in the Senate ’cause of the filibuster and all the other issues they’ve gotta deal with over there.
But we are rolling this agenda through, whether it’s the military, whether it’s passing Obamacare, repeal and replace, we’ve done these things in the House, but we see this as the signature issue. We are completely merged with the president on this one. The president, along with the House and the Senate, rolled out the framework, this bill is the completion of that framework of tax relief and tax reform, and this bill, the Tax Cut and Jobs Act is exactly what the president ran on, it’s exactly what we ran on, and that is why we are so committed to getting this done. Not just so we can win elections — and we think obviously that will help us do that because we’ll make good on our words, but because people are hurting, the country needs it, this will get us faster economic growth —
RUSH: That’s true.
SPEAKER RYAN: — higher wages. And that’s what we need, and that will help.
RUSH: But it is important that you win and the Democrats lose. That’s every bit —
SPEAKER RYAN: I agree with that, too.
RUSH: — of part of fixing the country. Look, I’m sadly out of time, but I really appreciate you giving us so much here today, and you jam-packed your answers. Nobody better at that than you, and I appreciate it.
SPEAKER RYAN: My pleasure, Rush. Thanks much.
RUSH: We’ll talk to you next time. Speaker Ryan.