Posted on 02/06/2016 10:36:59 AM PST by conservativejoy
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.
In short, wealth redistribution is not an economic growth or jobs program.
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.
Fair isn’t the question.
Anyone, such as Sanders, who states that our nation was founded on principals of “fairness” is mistaken.
The founding principal of the American Republic is Liberty.
I think this is a play on words.
How do we define “fair”?
This is a play on words. The article actually explains in detail which tax plan is best for the economy and job creation. No surprise, it is Cruz’s Tax Plan.
I think the $18 trillion plus national debt needs to be reduced.
It has gotten so large that the government needs to cheat ordinary savers by Federal Reserve low interest rates.
The people making the highest incomes could be charged above average tax rates and all the proceeds above the middle class rate used to reduce the existing debt and that refinanced.
the Cruz plan,,, a plan any good CONSERVATIVE would support! I also like how he describes Carson’s”heroic” elimination of all special interest deductions and carve-outs. No doubt it would be heroic considering the withering attack that would be brought on by the GOPe, DNC and the media, but that would eliminate so much of the corruption in DC,,, or at least give them on less place to hide it.
That’s easy! The Veterans Party of America has a plan to go to a Consumption Tax & allow ALL American’s to keep their whole paycheck & do away with the irs & some other gov.’t agencies at the same time, in a phased out manner.
I tend to favor a three tax rate system:
1. a basic rate to finance retirement, disability and welfare systems of no more than 12% paid on most income and
2. a top-up rate of maybe 15% (marginal 27%) paid on $25,000+ income used to finance the running of government and defense and
3. a debt pay-off rate of maybe 25% (marginal 47%) paid on $100,000+ income used to pay off the existing national debt and that refinanced.
Ok, Cruz has enough problems tonight. I’m not going to pile on today. My point is that “Fainess” like “beauty” is in the eye of the beholder. I cringe when anyone speaks a conclusion like “fair” without the facts to support that conclusion because 9 out of 10 times they are wrong in their conclusion when you actually review the underlying facts and data.
I want to have a tax plan that takes away as much regulatory power from gov’t bureaucracies as possible.
The tax code has been used throughout American history to regulate in areas where direct regulation would be unconstitutional. The courts have generally allowed tax regulation, the latest example being Roberts finding for Obamacare as a permisssible taxing function. There are plenty of other examples in history as well.
Freedom has to take precedence over tax plans that are designed to further social engineering goals, however praiseworthy (e.g., “stimulating investment”). Anyway, freedom is the best stimulus.
So I’d go for Huckabee’s national sales tax as the least regulatory as long as it’s kept simple.
I’m a retired person. A consumption tax based system would be taxing me twice.
Taxes should be aligned with benefits as much as possible.
However, there is no avoiding having the higher income people paying more. There is an $18 trillion plus national debt. We conservatives tried to limit the national debt, but Wall Street fatcats sabotaged our efforts. It’s time for them to pay for their Barack Obama-backing perfidy.
Well, the dems have successfully changed the definition of the word, “fair”, such that this becomes a difficult conversation to have. IMO, the Fair Tax is the most fair because the consumer can largely control how much tax they pay.
How would it be taxing you twice. There would be NO income tax period. All monies earned would be kept in your pocket, NO reporting to the gov.’t on any level of what you earn/make. It would encourage younger wage earners to save. And I too am retired [med. retired living on SS & va disability]. This is the fairest way across the board for everyone. There is no one single way to fix everything for everyone. But this is one of the best, that we have been able to figure out. Corporate taxes would be cut back to about 10% & this would encourage any monies kept overseas to be brought back for reinvestment in facilities, goods & services here on the homeland.
anything that requires the gov.’t to have any extra say in how the economy is to run defeats the recovery. And any company or corporation that can not make it, then fails according to the laws already on the books.
I would like to see EVERYBODY pay the same percentage. Stop punishing those that work harder with higher taxes.
Oh, and get rid of every IRS employee on the planet and bulldoze all of their buildings. Preferably with the employees inside. Nothing but parasites anyway.
. . . and that, to me, has always been the dirty little secret embedded in “Fair Tax” proposals. It is a second tax on all savings of after-income-tax money. Only your IRA/401(k) savings, and unrealized capital gains, have not been taxed already.
I paid tax on the income before I retired.
When I spend that income which was saved (I’m a real cheap guy) [plus my Social Security payments already taxed in the past, which I hope to get back] I would be paying again.
~27% income, ~22% consumption = ~49% total
A person born in say 1999 would just be paying the 22% consumption tax.
It’s not easy to switch taxing systems radically.
In my opinion, the existing income tax should be made as flat and simple as practical by eliminating most deductions and refundable tax credits.
We should rely more on consumption taxes (on say telecom services and unhealthy food), but you just can’t change radically and be anywhere near fair.
If you ask the average person on the street they will tell you we have always had the income tax. Most people don’t know that the income tax was devised to supposedly pay for w
WWI and it was supposed to sunset in 5 years. Before that the US ran very well on a sales tax.
Your idea still requires people to report to the gov.’t on how much you earn, thus giving the gov.’t the power to control you via their regulation/s, by manipulation of the tax code. And ss is going to be phased out. First of all the kids born say in 2017 would not have to pay fica when they start working & would be responsible for their own retirement. All this would occur over a period of a few years & not over night, thus giving everyone a chance to adapt to the new way of thinking.
This would be a shift from the socialists way of dealing with the gov.’t back to allowing the citizens be to in control of their lives. And yes there would be some that would not plan for the future, but the states would be required to take care of that, instead of the federal gov.’t. The states know what their citizens need better than the fed. [they are closer to the citizens then the fed is] The retirement funds that are in place now via work places or unions would be left in place, just untouched by the gov.’t [on any level]
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