Who of the Candidates Has the Fairest Tax Plan of Them All?

With the first real votes being cast in the presidential race Monday, this is an opportune moment to do some last-minute comparison shopping on the candidates' tax reform plans. On this issue there's a lot to cheer about. All the Republican candidates have crafted plans that would slash tax rates for everyone and most would vastly simplify the thousands of pages of IRS tax code.

Ted Cruz and Rand Paul have endorsed flat-tax plans that, for full disclosure, were designed by Arthur Laffer and myself. These plans have drawn some criticism from the Right of late, though these attacks are mostly baseless.

Ben Carson wants a low-rate flat tax, too, and he would heroically eliminate all special interest deductions and carve-outs. Mike Huckabee is pushing a national sales tax to entirely replace the income tax. Jeb Bush, Chris Christie, John Kasich and Donald Trump want to cut personal income tax rates 20 percent to 25 percent while eliminating indefensible loopholes.

One common goal of nearly all these plans is to turbocharge growth by dramatically lowering the business tax rate (now the highest in the world) and reducing the punitive double taxation of investment income. Most GOP plans would cut the corporate/business tax to 15 percent to 25 percent.

All of this contrasts sharply with the two Democratic candidate plans. Hillary Clinton and Bernie Sanders seem to be in a weekly bidding war to see who can raise tax rates the most. Clinton favors hiking maximum capital gains and personal income tax rates to the mid 40s or higher. Sanders said last week that he wouldn't go to a 90 percent tax rate, but anything below that seems to be fine by him.

The Tax Foundation has recently ripped both these plans, finding that they would lower business investment and cut middle-income pay by about 10 percent over a decade. Somehow, making the middle class poorer is supposed to strike a blow for equality. Since most of the rich who would be plucked are business owners and investors, wage and salary workers will suffer the collateral damage from the class warfare potshots.

The sparks are flying on the Republican side over which tax plan works best for American workers. Marco Rubio is running attack ads slamming Cruz's flat tax as something Ronald Reagan would have opposed. He says that the Cruz plan is a European-style "value-added tax."

This is a bit of a scurrilous jab because almost all flat-tax plans have this type of business net income tax - dating back to the Steve Forbes plan 20 years ago.

But it is hard to see why conservatives wouldn't be excited about what Cruz and Paul have put forward. It's what tax filers have been waiting decades for:

First, the Cruz/Paul plans would give America the lowest tax rates since the income tax was devised 100 years ago. For this reason, these plans are estimated by the Tax Foundation to grow the economy by a gigantic $2 trillion extra GDP per year after 10 years. That's exactly the opposite effect of the Clinton and Sanders plans.

Second, both the Cruz and Paul plans eliminate almost all deductions and credits - which is how they get the rate so low. The IRS could be dramatically shrunk in size. Don't forget, when there are fewer deductions, there are fewer ways to cheat on your taxes. The lower the tax rate, the less incentive to cheat, which means greater voluntary compliance.

Third, because the Cruz and Paul plans are "border adjustable": Imports are taxed at the flat rate when they are brought into the U.S., but American products sold abroad are not taxed at all. This would level the global playing field for American manufacturers, tech firms and drug companies and bring these jobs scampering back home. Trump's tariff ideas could be put back on the shelf, and those who want "fair trade" should celebrate.

Rubio and his allies are charging that the flat tax that imposes a low tax rate on the broadest possible business tax base, which includes wages and salaries and benefits, will quickly rise from the teens to the twenties or even 30 percent.

What is ironic about these attacks is that those rates that Rubio imagines would still be lower than his own plan's income tax rate of 35 percent.

It's hard to imagine that the two most relentless anti-big-government crusaders in Congress, Rand Paul and Ted Cruz, have a secret tax plan to supersize the government.

Finally, here is why this is not a value-added tax like the ones in Europe. In Europe, the VAT has been an add-on tax to existing income and payroll taxes. The flat tax is a replacement for the corporate and payroll taxes.

Some conservatives complain that the tax is too efficient and will raise too much money. Liberals will try to raise the tax rates to finance even more spending. But no matter what the tax system, liberals always want to raise tax rates. Any new pro-growth tax system is subject to the same criticism. In other words, this is the argument to do nothing with our tax system and retain the mess of a tax code we have right now.

Rubio is right to advise that, with any flat-tax, Republicans should press for a supermajority-vote requirement in the House and Senate to raise the rate.

I'd take any of the GOP plans over the current tax laws. But it's hard to see how cutting individual tax rates from 40 percent and business taxes from 35 percent down to 17 percent or less isn't a big winner for the economy. The flat tax won't make America look like Europe; it will make America race past Europe and the rest of our competitors. That's conservative and pro-growth --and fair.

NO! It is not factual because the income tax was instituted in 1862 and was collected DURING WWI! You didn't bother to read the article at the link did you?

The Fascinating Truth Versus The Comforting Myth

“The great enemy of the truth is very often not the lie— deliberate, contrived and dishonest— but the myth, persistent, persuasive and unrealistic. Belief in myths allows the comfort of opinion without the discomfort of thought.” -John F. Kennedy

“All governments are run by liars and nothing they say should be believed.” -I. F. Stone

MY FRIEND, ALL YOUR LIFE YOU'VE BEEN TOLD THAT THE 16TH AMENDMENT was a transformational event in the history of the United States Constitution by which an unapportioned direct federal tax on “all that comes in” was authorized. You've been told that the amendment reversed the preceding 137-year-old Constitutional tax structure prohibiting such taxes— under which the American people had grown to be the freest, most prosperous, and most optimistic people in the history of the world— in favor of a radically-different structure under which the scandal-ridden and deeply-distrusted denizens of Washington, DC were granted carte blanche to reach directly into every wallet, be it that of a Wall Street tycoon or that of the average working stiff.

Explanations as to why the rich and happy Americans of the early 20th Century would do such a thing to themselves have always been vague— they typically amount to something about a populist or progressive impulse that swept the country in favor of sticking it to the 'Robber Barons'. Missing is any reason why such an impulse would embrace a universal tax reaching not just the robber barons, but their alleged victims in the working class, as well (along with every little shopkeeper, every mid-level success-story working out the American dream, and everyone else, too).

Also missing from these stories is any explanation of why the several states would ratify such a tax, under which they would inevitably lose power and significance in favor of their federal competitor. Further, these stories leave out the fact that there already WAS an income tax on the books and still in force at the time of the 16th Amendment, which had been successfully deployed over the preceding 52 years without Constitutional problem, save for a single instance in which the US Supreme Court had taken issue with its application to merely two single varieties of realized income.

These stories donâ€™t mention that, in fact, huge portions of our modern body of income tax law pre-date the 16th Amendment, even though this is plainly stated in the preamble to the 1939 Internal Revenue Code, and even though Congress publishes a comprehensive derivation table explicitly identifying the pre-16th-origins of these still-current statutes. (See a little video presentation on this subject here.)

The fact is, an awful lot is left out of these stories purporting to explain the seemingly inexplicable decision of the prosperous American people of the early 20th Century to chuck a system that had served them so well for so long— because they're just stories. They're fiction, so they don't have to make sense. Those telling these stories want you to believe otherwise for reasons of their own, but the truth is, the 16th Amendment did nothing these story-tellers want you to imagine it did. Instead, the amendment merely overruled a Supreme Court decision that had briefly interrupted the application of the already-long-standing tax (the twice-heard case of Pollock v. Farmer's Loan & Trust, 157 U.S. 429, and 158 U.S. 601, (both 1895)), while making no changes to its pre-amendment nature.

The Income Tax Was Established As An Excise On Privilege

From its inception the 'income tax' has been an excise that applies only to gains from the profitable exercise of federal privileges (and therefore needn't be apportioned), as the Pollock court itself noted (here in Justice Field's separate concurring opinion):

“...in Springer v. U. S., 102 U.S. 586 , it was held that a tax upon gains, profits, and income was an excise or duty, and not a direct tax, within the meaning of the constitution, and that its imposition was not, therefore, unconstitutional.” .... (cont. at link)

http://losthorizons.com/Documents/The16th.htm

See the graph about half way through the article, it shows how there was a bump in revenue collect DURING WWI & WWII, then the bump went down, however, after WWII the graph plummets and then for no reason, it skyrockets again? What happened?

During the Civil war, WWI & WWII many private businesses set aside their private manufacturing to make items for the government for the wars. In essence, they became, for a time, corporations of the US government. after the wars, the vast majority returned to private business as usual so why didn't revenues collected after WWII level off as they had after the Civil war & the years just prior to FDR's 'New Deal'?

There is NOTHING wrong with the 16th Amendment, THAT is the problem, you do not even know what the 16th Amendment is, you only know the myths about it, myths that you apply to your earnings, thinking that all that you make is taxable, when nothing could be further from the truth.

I on the other hand, apply the 16th Amendment and the tax code as it is written and the IRS happily leaves me alone without me paying them a penny other than the excise taxes, such as the heavy highway use tax we pay annually due to the nature of our business. We pay NO income tax because our business is NOT SUBJECT to it! Capiche?

And that is the problem, those who do not know the law, yet want to abolish it, not having actually applied ti as it is written to see that it is basically a benign excise tax that is very limited in its scope. read and learn ... http://losthorizons.com/Documents/The16th.htm

I prefer applying the tax code as it is written and not having to pay a penny to the IRS in ‘income tax’ each year. Yes, we apply out heavy highway use taxes, we pay our annual Uniform Carrier Registration fee to the IRS every year, and we pay our fuel taxes every quarter, however, the nature of our business being such that it does not partake in federally connected privileged activities, the money we make from our business is not subject to the 16th Amendment income excise tax. So I prefer all these ignorant politicians leave things alone and learn the truth of the 16th Amendment ‘income excise tax’ and then apply it to any legislation they may propose, because after all, even the Obamacare penalty pertains only to those subject to the income excise tax, and that is why it will fail under its own weight as the American citizenry awakens and begins to restore the 16th Amendment by applying the 16th Amendment as it had been done before the American citizenry got so caught up in themselves, they forgot that ignorance of the law is no excuse and more often than not, that ignorance comes at a very high price.

http://losthorizons.com/Documents/The16th.htm

-John F. Kennedy

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.