TO-BE-DETERMINED RESHUFFLING …
|| By FITSNEWS || Months ago, former Florida governor Jeb Bush boasted that if elected – economic growth in America would eclipse four percent annually under his administration. That’s a pretty aggressive claim considering the U.S. gross domestic product (GDP) hasn’t grown by four percent since 2000 – and hasn’t even hit the three percent threshold since 2005.
Bush repeated this claim this week in rolling out his tax plan … which he claims is a “complete overhaul” of the existing system.
In an opinion piece published by The Wall Street Journal, Bush described the current code as “a labyrinth littered with thousands of special-interest giveaways, subsidies and other breaks written to favor Washington insiders.”
“The code is rigged with multiple carve-outs for favored industries,” Bush wrote. “It penalizes people for moving up the economic ladder. It gives tax deductions for borrowing costs, thereby encouraging companies to take on too much debt and raising concerns about financial fragility, rather than having them focus on real investment and hiring.”
“Low growth, crony capitalism and easy debt – that’s President (Barack) Obama’s economic agenda in a nutshell, and the tax code has helped make it possible,” Bush added. “It’s past time for a change.”
His alternative? A three-tiered system in which federal tax rates would be set at 28 percent, 25 percent and 15 percent. The current seven-tiered system has a top rate of 39.7 percent and a low-end rate of 10 percent.
Of critical importance? Bush has yet to specify the income levels at which his three-tiered system would kick in.
Kind of an important detail to leave out, huh?
For those of you keeping score at home, here are the current rates (as noted via the Tax Foundation website) …
(Table via Tax Foundation)
How would Bush’s plan change those brackets? We don’t know … because he hasn’t told us. All he’s told us is his plan will have three brackets. That’s it.
In addition to reshuffling individual income tax rates, Bush proposes lowering corporate tax rates from 35 percent to 20 percent – while eliminating the death tax and revoking the marriage penalty (a.k.a. the tax imposed on joint filers whose individual incomes would have been taxed at a lower rate if they were single).
Meanwhile Bush would impose a one-time 8.75 percent tax hike on an estimated $2 trillion in overseas corporate profits – giving companies ten years to pay that tax.
At the other end of the spectrum, Bush wants to double the standard deduction and dramatically expand the Earned Income Tax Credit (EITC) – two moves which would benefit low-income earners.
Our view? Bush’s plan – at least what he’s released of it so far – appears to be a boon for those making $200,000 or more. It would also be a boon for 15 million Americans at the low-end of the totem poll … who would pay no federal income taxes.
The rest of us? Eh …
Here’s what we don’t get: Bush’s GDP boast requires a resurgence of America’s consumer economy. There’s simply no way around it. And that is never going to happen unless the U.S. middle class (or what’s left of it) is empowered.
In contrast to Bush’s plan, U.S. Senator Rand Paul of Kentucky has proposed a flat 14.5 percent income tax on all income earners. Meanwhile U.S. Senator Marco Rubio of Florida has proposed a two-tiered system which would tax all single filers who make below $70,000 (and all joint filers who make below $150,000) at 15 percent – while those who make above those benchmarks would be taxed at 35 percent.
GOP frontrunner Donald Trump has yet to release his tax plan, but early indications are that he’s planning to cut taxes for the middle class (and possibly raise them for wealthier Americans).
Our view? Taxes should be flat – and fair – for individuals and businesses alike. Meanwhile deductions, exemptions and other carveouts should be completely eliminated – along with all market-distorting, crony capitalist “economic development” subsidies.
Aside from a limited social safety net, all citizens – individual and corporate – should compete in the marketplace on a level playing field.
Most importantly? This flat, fair tax system cannot be geared toward subsidizing government’s current unsustainable spending orgy. Instead, America’s tax reinvention must be accompanied by a similar reinvention on the spending side – one which undertakes a long overdue reorientation, reprioritization and reduction in the size and scope of government itself.