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.
I have studied them all and NOT one of them is Constitutional, NOT ONE. We already have a constitutional tax plan, it's called the 16th Amendment. Therefore, it should be about restoring the 16th Amendment by stopping the misapplication of it. Anyone who supports a broad sweeping tax plan that affects every household is voting for slavery.
The ‘income’ tax is an excise tax on privileged activity. It is NOT a tax on all that comes in as ruled by the SCOTUS and upheld every year when hundreds of thousands of educated Americans lawfully file & receive 100% of what was withheld back from the IRS, or those who lawfully do not file, well, the IRS has been more than happy to leave them alone. The 16th Amendment income ‘excise’ tax is limited in its scope and that is the beauty of it, is that by the choices we make we can choose to participate or choose NOT participate in it. That is why it is voluntary. Voluntary has NOTHING to do with the actual filing of the tax, it has everything to do with the source of ones receipts. Were those receipts a result of privileged activity? If yes, then those receipts are subject to taxation.
It's time Americans educate themselves, apply the tax laws as they are written. That is how we shrink the government beast, we simply do not over feed it that which it is NOT supposed to be feeding off of. It is high time Americans quit fearing the government and start standing up to the governments abuse of that which is God's.
And the fact is, from its inception in 1862, the vast majority of Americans have never been subject to the income ‘excise’ tax!
I said that the income tax was supposedly to pay for WWI. That is how it was sold to the American public and it was only to last for 5 years. ITS FACTUAL INFORMATION!
The income tax amendment went to the states for ratification in 1909. Remind me, when did we get involved in World War One?
A consumption tax is a nice idea but it would need a constitutional amendment repealing the 16th amendment to get me to support its implementation. I also sort of suspect you need an amendment to permit the federal government to impose such a tax.
I also have a moral aversion to impressing retailers in to government service as tax collectors.
It went into effect in 1913 if I remember correctly.
When did America get involved in World War One?
I heard today that: the GOP will HAVE to raise taxes until revenues are up. To do otherwise is irresponsible.
Someone supports a VAT, too.
That’s my main concern. If you do away with the Federal income tax it does not mean the states will not keep their income taxes and sales taxes.
That someone is NOT Cruz.
The 16% flat tax for businesses is nothing like the European version of VAT. For one thing it replaces the much higher corporate and payroll taxes. It also allows businesses to deduct the full cost of business expenses in one year.
Such wisdom!
You must be OLD
;)
True, but that does not make it morally right and it certainly does not make it right to impose further burden on these people.
Collecting taxes is also puts these people in legal jeopardy.
Disagree:
Rubio and Cruz Dueled Over the VAT Tax. And the Winner Was...
1/16/2016
By Richard Rubin
http://blogs.wsj.com/economics/2016/01/15/rubio-and-cruz-dueled-over-the-vat-tax-and-the-winner-was/
The mechanisms are already in place to collect such monies. You already pay sales taxes on just about all your goods & services that you use, by the state & local gov.’t’s. It is nothing much more to add an additional layer of sales tax. And as far as repealing the 16th Amend. we could use public pressure to change that. What is required is an Administration committed to staying within the Constitutional Boundaries.
Cruz.
The Cruz plan does NOT include a VAT. Marco Rubio knows that. He makes the charge anyway.
No it is not.
When did the Federal Government do anything simply? Certainly not when collecting taxes.
It will be monthly detailed reports and quarterly payments. And then yearend reports again.
Late on a payment and you will be charged penalties and interest.
Get audited and you will pay a lawyer and your accountant to get you out of it with hopefully just a fine and restitution. But maybe you will go to jail.
Don't kid yourself that just because you get rid of the income tax that you will get rid of the IRS Goon Squads.
I have known retailers that missed a couple state sales tax payments when their business was in trouble. One went to jail another committed suicide after killing his family.
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