Our nation very much needs fundamental tax reform, so it’s welcome news that major public figures - including presidential candidates - are proposing to gut the internal revenue code and replace it with plans that collect revenue in less-destructive ways.
A few months ago, I wrote about a sweeping proposal by Senator Marco Rubio of Florida.
Today, let’s look at the plan that Senator Rand Paul has put forward in a Wall Street Journal column.
He has some great info on why the current tax system is a corrupt mess.
From 2001 until 2010, there were at least 4,430 changes to tax laws—an average of one “fix” a day—always promising more fairness, more simplicity or more growth stimulants. And every year the Internal Revenue Code grows absurdly more incomprehensible, as if it were designed as a jobs program for accountants, IRS agents and tax attorneys.
And he explains that punitive tax policy helps explain why our economy has been under-performing.
…redistribution policies have led to rising income inequality and negative income gains for families. …We are already at least $2 trillion behind where we should be with a normal recovery; the growth gap widens every month.
So what’s his proposal?
…repeal the entire IRS tax code—more than 70,000 pages—and replace it with a low, broad-based tax of 14.5% on individuals and businesses. I would eliminate nearly every special-interest loophole. The plan also eliminates the payroll tax on workers and several federal taxes outright, including gift and estate taxes, telephone taxes, and all duties and tariffs. I call this “The Fair and Flat Tax.” …establish a 14.5% flat-rate tax applied equally to all personal income, including wages, salaries, dividends, capital gains, rents and interest. All deductions except for a mortgage and charities would be eliminated. The first $50,000 of income for a family of four would not be taxed. For low-income working families, the plan would retain the earned-income tax credit.
Kudos to Senator Paul. This type of tax system would be far less destructive than the current system.