Posted on 11/03/2015 7:42:03 AM PST by Kaslin
Overshadowed by this week's CNBC-versus-the-Republican-presidential-nominees brawl was the release of Ted Cruz's flat tax plan. The Texas senator would impose a 10 percent tax rate on wage earners and a 16 percent tax on businesses, with no deductions. "Flatter rates," says Cruz, "will make for a more rapid-growth economy." He's right: in virtually all the cases of the last 100 years, lower tax penalties on working and investing have led to more jobs and higher incomes.
It comes on the heels of a plan from Sen. Rand Paul to adopt a 14.5 percent flat tax. For full disclosure, I'm biased -- Sens. Paul and Cruz borrowed their flat tax plans (adding a few of their own unique twists) largely from my book with Arthur Laffer, entitled "Return to Prosperity."
The bigger story here is that it's now official: every major Republican candidate has endorsed lower tax rates and fewer loopholes as a way to make our federal tax code fairer and more competitive for American businesses.
The spirit of tax reform is alive and well on one side of the aisle.
Too bad tax-reform fever isn't as bipartisan as it was in 1986 when by 97-3 the Senate passed the Reagan Tax Reform Act, which closed myriad loopholes and lowered tax rates.
In the modern-day "progressive" Democratic Party, there is no room for a Bill Bradley or Dick Gephardt -- two leading sponsors of tax reform in the 1980s. Even talking of lowering tax rates gets you excommunicated from the party of envy and redistribution. Very sad.
Bernie Sanders, the socialist Vermont senator who is drawing throngs of fans everywhere he goes as if he were Justin Bieber, wants tax rates back up to 70 percent or more. This sock-it-to-the-rich line is a crowd pleaser, especially with young voters, and draws thunderous applause. Hillary Clinton is right behind him with her proposed 44 percent tax on capital gains investment income.
So, to shrink the gap between rich and poor, why not follow the Clinton-Sanders tax model?
Because soak-the-rich tax schemes rarely work.
The last time tax rates were 70 percent, back in the 1970s, the government got 19 percent of its revenues from the rich. Now with a lower top rate of about 40 percent the government gets about twice as much -- about 36 percent of all income taxes -- from the rich.
Meanwhile, the U.S. corporate tax of 35 percent is now so much higher than the rates in the rest of the world that a Tax Foundation study has recently concluded that we could raise as much money with a rate of 20 to 25 percent. That's because more businesses would come here and start paying U.S. taxes instead of Irish, Chinese or Canadian taxes. If we can get the same revenue at a lower tax rate and create more jobs at the same time, why wouldn't we take that deal? The only answer is that the left gets some kind of weird psychic income from knocking down the rich even if it benefits no one.
Liberals who have a faith-based conviction that tax rates don't matter much in terms of decisions about where businesses or jobs locate should listen to Rick Scott, the governor of Florida, where there is no state income tax at all. "My favorite governors are Cuomo (of New York), Brown (of California) and Malloy of Connecticut," he says, grinning. "The more they raise taxes, the more jobs we get in Florida. Every week new businesses are coming here to escape New York and Connecticut."
Imagine an experiment where we divided America into two tax zones. Those states east of the Mississippi River got to keep the current "progressive" tax system -- or could even go for the Clinton-Sanders utopia of higher rates. The states west of the Mississippi could adopt a flat tax modeled after what Sens. Cruz and Paul have endorsed.
Where would you choose to live?
Where would the growth of enterprise, wages and jobs happen?
I’ll believe it when I see it. Every few elections we see this but nothing comes of it. And I definitely don’t like Cruz’s desire for a VAT. That would be horrible.
I have been for a flat tax for years. When everyone has ‘skin in the game’ the game will change drastically.
Agree. The VAT is just the way the Government can keep claiming more and more. In the 80’s, the VAT in Britain was 15%. Foreigners could claim it back when exiting the country as the citizens were the only ones required to pay it. Now the VAT there is 20%. But I like the Flat Income Tax idea. One observation on that: there would be a boatload of tax accountants out of work!
But where will all the IRS agents go when they lose their jobs ?
Don’t care, don’t care, don’t care.
Neither do I!!!
Not only IRS agents but CPA’s and tax attorneys. Firms like H&R Block, Turbo Tax, etc. would see a huge decrease in profits. Wouldn’t hurt my feelings a bit, even though one of the services we offer includes financial management and payroll preparation.
I’m glad that people are talking about tax reform again but its not going to help if we don’t have SPENDING reform too. If spending is at 24% of GDP, tax reform will just be an excuse to bump taxes to 24% of GDP.
Who cares ?
They can be hired to guard the border.
Flat tax on...? If ‘income’, then you already broke your cardinal rule: “everyone w/ skin in the game”.
Consumption tax...I’m all for.
As proposed by many flat tax supporters ,it seems to me that a low wage earner could still be paying for a low income no tax welfare recipient. There is no fairness unless everyone has to pay some amount for services provided to/for them.
That’s funny !!!
Should be the pocket response when the media begins to trumpet the loss of jobs
One of the other upsides to this is the additional time and freedom it will allow entrepreneurs to focus
on more productive ways to spend their time.
If you take a hit w your company it will allow you to spend more time on FR
Good luck
it will allow you to spend more time on FR...”
This has become something of a problem. Would really be better off if I would spend less time! LOL
Agree. I love this site
Need to get my donation on soon.
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