United States Senators Marco Rubio (R-FL) and Mike Lee (R-UT) unveiled a comprehensive tax plan on March 4th that has been lauded by some of America’s most influential and respected conservatives. The two senators made the case for the “Economic Growth and Family Fairness Tax Reform Plan” in the Wall Street Journal.
- The proposal slashes corporate taxes for most businesses from 35 percent to 25 percent, which would end America’s dubious distinction of having the developed world’s highest corporate tax rate as defined by the 34 countries in the Organization for Economic Co-operation and Development (OECD).
- Small businesses would pay an even lower rate of 15 percent by filing under Schedule C of the 1040 tax return.
- It helps investors by completely eliminating the tax on capital gains and dividends. These taxes are not indexed for inflation and they are a double tax on shareholders. It is very difficult to earn money on investment, and these taxes discourage such risk-taking because the taxes take a substantial amount of money out of your earnings.
- The plan effectively ends the so-called “death tax,” also known as the inheritance tax, once and for all. It destroys family businesses and farms that already rarely have enough liquid assets to pay for other taxes, which may force liquidation. It also a double tax and discourages investment.
- The territorial double tax, which taxes companies for foreign investment, is also eliminated.
- As far as the personal income tax, the seven existing tax brackets are merged into two, 15 percent and 35 percent. A lot of conservatives are worried about the fact that married filers earning $150,000 to $405,100 and individuals making $75,000 to $405,100 would see a tax hike.
- The child tax credit increases from $1,000 to $2,500 per-child. Raising a family is extremely expensive, so this will help make raising children more affordable.
- The so-called marriage penalty tax is abolished. The silly penalty discourages both parents from working.
- All itemized deductions and personal exemptions, except those for mortgage and charities, are eliminated.
- The standard tax deduction is reduced for singles from $6,300 to $2,000 and married joint filers from $12,000 to $4,000. Fewer deductions will reduce the size of the tax code and discourage cronyism.
Positive Reviews from Conservatives
The National Review’s Ramesh Ponnuru called it “the most pro-growth tax reform since Calvin Coolidge’s presidency.”
Harvard economist and former economic adviser to Mitt Romney Greg Mankiw welcomed the “desire to eliminate the current tax code’s bias for debt over equity finance.”
Ryan Ellis of Americans for Tax Reform explained that the plan “aims to be simultaneously pro-growth, pro-family, and much more simple than the current tax mess.”
The Heritage Foundation’s Curtis Dubay and David Burton argued that the “business tax reforms are so positive that, taken as a whole, the plan would dramatically improve the economy and the incomes of American families.”
The American Enterprise Institute’s James Pethokoukis lauded it as “a pro-growth, pro-family, pro-innovation plan rooted in economic and political reality that deserves serious consideration as a key element in any agenda for reenergizing the American economy.”
The Cato Institute’s Daniel J. Mitchell said that overall “the proposal would – if enacted – generate big benefits. The economy would grow faster, more jobs would be created, workers would enjoy higher wages, and American companies would be far more competitive.”
While each of these conservatives and libertarians praised the plan, they all had reservations for the personal income tax consolidation. It was not perfect, but it came pretty close.
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