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Thursday, June 18, 2015

Blow Up the Tax Code and Start Over???

Here we go again with the flat tax proposals. This time it's Rand Paul:

Blow Up the Tax Code and Start Over, by Rand Paul: Some of my fellow Republican candidates for the presidency have proposed plans to fix the tax system. These proposals are a step in the right direction, but the tax code has grown so corrupt, complicated, intrusive and antigrowth that I’ve concluded the system isn’t fixable.
So on Thursday I am announcing an over $2 trillion tax cut that would 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.” ...

He might call it that, but even he admits the rich will pay a lower rate:

The left will argue that the plan is a tax cut for the wealthy. But most of the loopholes in the tax code were designed by the rich and politically connected. Though the rich will pay a lower rate along with everyone else, they won’t have special provisions to avoid paying lower than 14.5%.

Why not just get rid of the special provisions? Why is a flat tax more equitable than taxes based upon ability to pay (i.e. a progressive structure)?

And, of course, this won't provide enough revenue to fund government. How does he solve this? With two pieces of magic. First, magic budget cuts that he leaves unspecified (because proposing what it would actually take to close the budget gap would require severe cuts to social programs that people want to retain), and second, magic economic growth.

On the budget cuts, we get: 

my plan would actually reduce the national debt by trillions of dollars over time when combined with my package of spending cuts.

That's it. Somehow, the spending cuts will magically occur (and since we are imagining, guess who they would fall on?). But the biggest magic is the effect on the economy. It's an "economic steroid injection"!!!:

As a senator, I have proposed balanced budgets and I pledge to balance the budget as president.
Here’s why this plan would balance the budget: We asked the experts at the nonpartisan Tax Foundation to estimate what this plan would mean for jobs, and whether we are raising enough money to fund the government. The analysis is positive news: The plan is an economic steroid injection. Because the Fair and Flat Tax rewards work, saving, investment and small business creation, the Tax Foundation estimates that in 10 years it will increase gross domestic product by about 10%, and create at least 1.4 million new jobs.
And because the best way to balance the budget and pay down government debt is to put Americans back to work, my plan would actually reduce the national debt by trillions of dollars over time when combined with my package of spending cuts.

I bet it would almost be as good for the economy as the Bush tax cuts. Oh wait...

    Posted by on Thursday, June 18, 2015 at 09:12 AM in Budget Deficit, Economics, Social Insurance, Taxes | Permalink  Comments (45)


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