2012 Tuesday: Out of many, one tax reform plan will emerge — and set the stage vs. Obama

To those who worry that the rough-and-tumble Republican primary will produce a nominee who’s damaged goods by the time he* faces President Obama, allow me to point to the plethora of tax-reform plans coming from the candidates.

Concurrent with the daily superficial dramas that come with a presidential campaign is a real, substantive, intellectual debate about how to repair a fundamental — and fundamentally broken — function of government: the way it funds all its other functions. And it all but ensures that the eventual nominee will come equipped with a thoroughly vetted, central policy proposal that will compare very well with Obama’s embrace of the current tax code with just a few “tax the rich” tweaks.

Consider the range of proposals:

  • Newt Gingrich was first on the board, back in May, with a plan that ends the capital gains and death taxes, lowers the corporate rate to 12.5 percent (the same as Ireland) while allowing full expensing of new equipment, and “moves toward an optional flat tax of 15 percent” for individuals.
  • Jon Huntsman took up the banner of the Bowles-Simpson commission’s recommendation: eliminating deductions and credits, along with the Alternative Minimum Tax and the double taxation of capital gains and dividends, in exchange for three rates: 8 percent, 14 percent and 23 percent. It’s not a flat tax, but it’s a reform that flattens rates, offers broad-based pro-growth incentives rather than a maze of rent-seeking opportunities, and simplifies tax calculations. It also reforms corporate taxes and lowers the rate to 25 percent.
  • Herman Cain made the biggest splash — and sparked much of the present debate — with his 9-9-9 plan: a 9 percent tax on individuals and corporations, plus a 9 percent sales tax. All other taxes would be eliminated. Cain has been revising the plan during the past several days to damp criticisms of it, and we might not have seen the final version yet.
  • Rick Perry today revealed his tax plan: an optional (like Gingrich’s) flat tax of 20 percent that increases the standard deduction and maintains exemptions for mortgage interest, charitable donations and state and local taxes for those earning less than $500,000 a year. Perry would also eliminate the death tax and lower the corporate tax rate to 20 percent — with a super-low, temporary 5.25 percent rate for repatriated income from overseas.
  • Of all the contenders, Mitt Romney has sketched out the fuzziest tax plan. He would keep individual rates at the Bush-era rates for now, with a promise to lower them to unspecified levels in the “long run,” and eliminate the taxes on capital gains and dividends — but only for those who earn less than $200,000 a year. He would lower the corporate rate to 25 percent. Like most of the other candidates, he would switch to a “territorial” tax system for companies.
  • Well, Romney’s plan may be the fuzziest except for Ron Paul’s, which calls for getting income taxes down to zero percent eventually but doesn’t explain how to get there.

While there are some broad areas of agreement among these plans — flatter, simpler and broader are carrying the day in this primary — there’s a great deal of debate among them as to how to achieve those broad aims. Should such a basic reform as tax reform provide options for people to continue as they are now or change, as Gingrich and Perry argue? Should consumption be taxed by the federal government — either directly, as with Cain’s plan, or indirectly, as with the plans that keep the income tax but eliminate taxes on investments and savings? How much progressivity in the code is enough — or too much? Should Republicans play along with Obama’s game by treating higher earners differently when it comes to exemptions (Perry) or investment income (Romney)?

GOP primary voters have a chance to hash out these questions for themselves as they evaluate the candidates. And the analyses of these plans by independent and even left-leaning think tanks, as long as they’re intellectually honest, give the candidates a chance to weather criticism and make changes (a la Cain’s recent tinkering) before one of them wins the nomination and faces Obama.

And it must be said that any of these plans will contrast quite brightly with Obama’s plan to keep most of the current tax code, with higher rates — and fewer/no exemptions! — for higher earners. It is the difference between keeping a broken system mostly intact and starting mostly, or in some cases totally, over. It is the difference between using the tax code to reward/punish one’s allies/enemies, and simplifying it so that it doesn’t stand in the way of growth and investment that don’t develop the way government planners think, or hope, they will.

* – Yes, I am discounting the possibility that Michele Bachmann wins the nomination. And, while we’re talking candidates with zero chance of winning, Rick Santorum. And Gary Johnson. And any other candidates who have never gotten a mention on this blog.

– By Kyle Wingfield

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168 comments Add your comment

Jefferson

October 25th, 2011
12:20 pm

Cain has ZERO chances, while you are at it.

ragnar danneskjold

October 25th, 2011
12:25 pm

There are many paths toward paradise; seemingly the only way to avoid it is a “stimulus.”

hsn

October 25th, 2011
12:26 pm

Your pathetic Con candidates have released “tax” plans that can’t withstand practicality, so your only hope now is some phantom “hybrid” tax plan that will bail out whichever Conman wins your nomination?
This election will not even be close, and to top it off, I really hope the American people boot out the likes of Boehner, McConnell, Cantor, Ryan, and their moronic ilk, who were willing to see our country’s credit rating go down the tubes in hopes of political gains.

And…now, Jim Perry is re-awakening the dead birther issue. When Americans are getting out of Jurasic Park, he is about to check in. This guy is a clown in capital letters.

Obamamatic for the people — 2012!

ragnar danneskjold

October 25th, 2011
12:26 pm

Off-topic, Rush just announced that Herman Cain will be advertising on the Rush Limbaugh show. Mark of private-industry genius.

ragnar danneskjold

October 25th, 2011
12:29 pm

Dear hsn, good afternoon, “And…now, Jim Perry is re-awakening the dead birther issue.” Think Jim Perry will be pitching the second game in the double-header. In contrast, Rick was a victim of a crazed birther at Parade Magazine, funny analysis @ online.wsj.com/article/SB10001424052970204777904576649993085008396.html?mod=WSJ_Opinion_MIDDLETopOpinion

Iva

October 25th, 2011
12:31 pm

Ron Paul’s Restore America’s Plan cuts 1 trillion from the budget and raises no taxes. Go to RonPaul2012 to find the details. No other candidate is cutting spending, only raising taxes to feed the Federal government beast. He will conduct an audit of the Fed. Don’t let pundits decide the election. Do your own research.

LH

October 25th, 2011
12:32 pm

Oh, come on. Ron Paul philosophically wants income tax at 0 because he considers it slavery. Did you know that historical ‘indentured servants’ only had to pay 20% of their income to their master?

However, Ron Paul has a very detailed plan to balance the budget in 3 years, cut one trillion in his first year, while preserving social security and senior entitlements (which he considers to be an issue of contract) and student loans until that system can be fixed. It is the Restore America Now plan and it is on his website.

Jimmy62

October 25th, 2011
12:50 pm

hsn: Because the current tax system, which wastes 1/3 of every tax dollar just on the cost of collecting it, is working so well that a bunch of ignorant people are protesting about it all over the country!

saywhat?

October 25th, 2011
12:59 pm

When will Republicans learn that just because you call it “reform” does not mean its better. Based on historical precedent, in all cases above, until I see independent proof otherwise, I will assume these so called reforms will do variations of the same thing- raise taxes on the poor and middle class, while lowering taxes on the rich and the investment class. They will also lower the overall tax revenue and increase deficits.
Yet somehow, the fact that ten years of this crap did absolutely nothing to fuel the economy or create jobs is completely overlooked.Once again the right is more interested in pursuing ideology than what is best for the country.

DW

October 25th, 2011
1:12 pm

@SAYWHAT

My thoughts exactly

DW

October 25th, 2011
1:13 pm

Simpler tax code – GREAT!

Screwing over the poor and middle class to get it – NOT SO GREAT

CJ

October 25th, 2011
1:13 pm

It is the difference between using the tax code to reward/punish one’s allies/enemies, and simplifying it so that it doesn’t stand in the way of growth and investment that don’t develop the way government planners think, or hope, they will.

It’s true that the current tax code is used to reward/punish one’s allies/enemies. For example, look at Republicans’ defense of subsidies for oil and nuclear while opposing similar subsidies for clean energy. Unfortunately, replacing one tax structure with another would do nothing to eliminate the influence of big money in Washington. Politicians will still find ways, inside and outside of any tax code to reward/punish one’s allies/enemies. The notion that this potential would disappear under any of these tax proposals is–with respect to Kyle–naive.

All of the candidate’s tax proposals are just variations of what the Ryan budget plan would accomplish:

1. Cut taxes on the wealthy by eliminating taxes on their primary sources of income, inheritances and investments.

2. Raise taxes on the poor and middle class with regressive forms of taxation.

3. Decimate the safety net for the poor and middle class, including but not limited to, Medicaid, Medicare, and Social Security (see Jay Bookman’s current column about Rick Perry’s flat tax proposal).

4. Decimate our physical and economic infrastructure, including roads, bridges, ports, damns, levies,…

5. Decimate our ability to mount a strong national defense, all while…

6. Exploding the deficits.

On the other hand, with the elimination of taxes on inheritances and investments plus lower top tax rates on earned income, the wealthiest among us would do quite well. That is, after all, what really matters.

Jefferson

October 25th, 2011
1:29 pm

When will one of your parrots start offering coupons ?

Billy Bane

October 25th, 2011
1:34 pm

Can’t wait to see the left go insane when Obama loses next year.

Junior Samples

October 25th, 2011
1:34 pm

You might be thinking of someone else’s blog.
Might I suggest,
http://blogs.ajc.com/atlanta-bargain-hunter

Billy Bane

October 25th, 2011
1:35 pm

“When will one of your parrots start offering coupons ?”

Why do left wingers always want things for free?

Steve

October 25th, 2011
1:35 pm

Perry outlined his re-hashed “flat tax” plan in the Wall Street Journal, and here are some of its key elements:

An optional flat tax of 20 percent. (This would be a tax cut for anyone with more than about $70,000 in ordinary income.)

Reducing the corporate tax rate to 20 percent. (This fails to address the key problem with corporate the corporate tax code which is that loopholes mean different companies pay different effective tax rates thanks to their lobbying prowess.)

Completely eliminate taxes on long-term capital gains. (This is nothing more than a giveaway to wealthy investors and reduces their incentive to innovate and find productive investments.)

Cap federal spending at 18 percent of GDP. The last time federal spending was below 18 percent of GDP, the year was 1966. Under Reagan, it never fell below 21.3 percent.

Allow younger workers to opt-out of Social Security. (Virtually guaranteeing the system’s swift collapse by starving it of revenue.)

This is a cornucopia of crazy, but, unlike Herman Cain, Perry wasn’t bright enough to get his flat tax into single digits. (There’s a reason marketers price products at $9.99 instead of $10.)

Billy Bane

October 25th, 2011
1:35 pm

“Screwing over the poor and middle class to get it”

Make better life choices.

Billy Bane

October 25th, 2011
1:36 pm

Steve is parroting Jay Bookman.

Billy Bane

October 25th, 2011
1:38 pm

So what’s Obama gonna do to get unemployment lowered? I keep reading “Perry is an idiot” blah blah blah yet NO ONE on the left can offer a solution.

Demonizing opponents is all the left has.

emo

October 25th, 2011
1:50 pm

‘Can’t wait to see the left go insane when Obama loses next year.’

And you have the nerve to say the left demonizes? Without insults, you could never respond to well-reasoned arguments at all.

DW

October 25th, 2011
1:51 pm

@BILLY

“Make better life choices.”

Soooo.. EVERYONE should be rich and successful? Nice fantasy world you live in there d-bag.

Billy Bane

October 25th, 2011
1:53 pm

“EVERYONE should be rich and successful? Nice fantasy world you live in there d-bag.”

Cue the name calling.

#occupy my desk...

October 25th, 2011
1:56 pm

I am happy to have my taxes raised as long as there are checkboxes so I can indicate where the money goes – sound fair?

Obozonomics

October 25th, 2011
1:59 pm

What a bunch of loser liberals here, the party of NO. No to anything the GOP says or does. What is it; do you liberals like our tax code? If so you are dumber than you sound, by the way what is the DNC plan, oh that is correct, no plan, just raise taxes. But then again I have never met a liberal that knows how to balance a checkbook, but boy can they spend… YOUR money…

Junior Samples

October 25th, 2011
2:01 pm

“Demonizing opponents is all the left has” ???

Let’s see…
Birth Certificate
Death Panels
Socialist
Muslim
Bill Ayers
The NRA (he’ll take our guns…)
Dosen’t salute the flag

Nice try Billy.

#occupy my desk...

October 25th, 2011
2:02 pm

You know what would cause a rapid turn around of our economy? Obama not being reelected. I know everyone will start screaming and banging their foreheads ala Rain Man but lemme splain. Consumer and investor confidence has never been lower yet businesses have more cash on hand than ever. Individuals are not spending and business is not investing/expanding right now. We can argue the specific causes but the bottom line is that there is serious mistrust of this administration from the business sector, which is where everything else gets set in motion. I honestly don’t think that most business owners think the POTUS has their best interest in mind and it is hard for me to disagree with that. What is it going to cost me to hire people this time next year? What are my taxes and regulations going to look like? It is hard to gamble right now when you don’t have any confidence in the system.

Hillbilly D

October 25th, 2011
2:03 pm

DW @ 1:13 pretty well sums up my view.

While all of us need to be responsible and make good choices, and suffer the consequences when we don’t, not everything in life comes down to a choice. I didn’t choose to be born in the United States, I didn’t choose to be born into a good family, nor did I choose any of the talents that I have. That all came from a higher power.

UGA 1999

October 25th, 2011
2:08 pm

It is ok, any of them will work.

Obozonomics

October 25th, 2011
2:17 pm

Junior Samples;
Wow you libs are really lost;

Birth Certificate, Obozo could have just produced the paperwork like EVERY candidate has since day one, why did he cause that issue? By the way if Obozo is so smart why did he have his school records sealed? Hmmmm

Death Panels, did you read the bill, obviously not, they are in there under “counseling to stop current treatments”

Socialist, he is a socialist haven’t you read what he studied and what clubs he joined, I guess not…

Muslim, He was raised Muslim till the age of 9, please learn to read.

Bill Ayers, this is an outright communist who made bombs to blow up government buildings, the only reason he is not in prison was a technical detail, and losers like you

The NRA, he IS for gun control, but I bet you forgot to read that also.

Doesn’t salute the flag, this is the best, you don’t even have to read, but are you blind, all you had to do was look at a picture, I guess you failed that also.

Nice try Junior Samples.

George Soros

October 25th, 2011
2:20 pm

Thank you hsn…..today you are my most useful idiot

Billy Bane

October 25th, 2011
2:33 pm

“Nice try Billy.”

You want a fainting couch, cupcake?

carlosgvv

October 25th, 2011
2:35 pm

There are only two things you can be certain of here:

1. Every Republican candidate’s tax plan will favor the rich at the expense of the middle class and poor.
2. Loyal Republican voters, most of them middle class, won’t care and will gladly allow themselves to be thrown under the bus rather than vote Democratic.

UGA 1999

October 25th, 2011
2:38 pm

Carlos….please tell me how the 9-9-9 favors the rich. Please tell me how the flat tax favors the rich? They are all flat tax rates. Equal equal equal.

Billy Bane

October 25th, 2011
2:42 pm

carlosgvv

Stop lying.

UGA 1999

October 25th, 2011
2:44 pm

Billy Bane….he doesnt know how.

JF McNamara

October 25th, 2011
3:01 pm

UGA 1999,

It favors the rich versus our current tax structure. Rich will receive a tax break whereas the poor and middle class will see and increase. That’s how if favors them. It favors them versus the business as usual case.

DW

October 25th, 2011
3:01 pm

“please tell me how the 9-9-9 favors the rich. Please tell me how the flat tax favors the rich? ”

Really? You cant figure that one out? Even retarded Herman Cain figured it out and “revised” his plan. Your supposedly a UGA grad? Damn..

Junior Samples

October 25th, 2011
3:05 pm

OB, where can I pick up a copy of Conspiracy Theorists’ Quarterly so I can catch up on what you’re reading?

The post was pointing out the right certainly does it’s share of demonizing as well.

Southern Comfort

October 25th, 2011
3:06 pm

Instead of forming tax gimmicks, why not instead focus their energy on getting substantive jobs here on American soil? If you increase employment, some of the other financial things will begin to work themselves out and make it much easier to tackle our other problems.

Billy Bane

October 25th, 2011
3:06 pm

“You cant figure that one out? Even retarded Herman Cain figured it out and “revised” his plan. Your supposedly a UGA grad?”

DW needs a diaper change.

Billy Bane

October 25th, 2011
3:07 pm

“Instead of forming tax gimmicks, why not instead focus their energy on getting substantive jobs here on American soil?”

Ask the unions and lawyers that question.

UGA 1999

October 25th, 2011
3:08 pm

JF….that was the dumbest response I think I have ever seen on here. If i am taxed at 9% and you are taxed at 9% and Bill Gates is taxed at 9%…..how is that unfair>

UGA 1999

October 25th, 2011
3:08 pm

DW….you failed to put any thought or a point in your last post. God you guys are fools!

Southern Comfort

October 25th, 2011
3:12 pm

Ask the unions and lawyers that question.

I don’t recall any unions or lawyers running for the Republican nomination for president.

Billy Bane

October 25th, 2011
3:13 pm

“I don’t recall any unions or lawyers running for the Republican nomination for president.”

No, but they ran businesses out of business and out of country.

Southern Comfort

October 25th, 2011
3:16 pm

No, but they ran businesses out of business and out of country.

Nah, I think NAFTA and other free trade agreements did far more damage than any union or lawyer could ever do. Anytime politicians get their hands into something, they end up screwing things up. It doesn’t matter party or affiliation, they all screw things up.

DW

October 25th, 2011
3:16 pm

Yeah billy … it had NOTHING to do with the fact that people in China will work for 12 cents an hour. Nope.. it was all the unions fault. If it werent for them, maybe YOU could be working for 12 cents an hour here

DW

October 25th, 2011
3:18 pm

Oh I get it, you must have been BORN in 1999 UGA.. you seem to have the mental capacity of a 12yo

UGA 1999

October 25th, 2011
3:21 pm

DW….OMG….are you serious. Unions are responsible for continuing to fight for higher monthly wages for American workers to the failure of the company. OR they simply send the jobs over seas where there ARE NO unions!!