This could be a game changer for Rand Paul. He has an editorial in the Wall St. Journal today proposing a 14.5% flat tax. He would replace the current IRS tax code of 70,000 pages with about a dozen. It would also gut the IRS’ ability to regulate.
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.”
We like this a lot, even as just a starting point. We detest the “Fair Tax,” a national sales tax that proponents say will eliminate the IRS, because there is too much room to fiddle with it. This flat tax is straightforward and across the board.
My tax plan would blow up the tax code and start over. In consultation with some of the top tax experts in the country, including the Heritage Foundation’s Stephen Moore, former presidential candidate Steve Forbes and Reagan economist Arthur Laffer, I devised a 21st-century tax code that would 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.
I would also apply this uniform 14.5% business-activity tax on all companies—down from as high as nearly 40% for small businesses and 35% for corporations. This tax would be levied on revenues minus allowable expenses, such as the purchase of parts, computers and office equipment. All capital purchases would be immediately expensed, ending complicated depreciation schedules.
In addition to giving more people “skin in the game,” it will reduce the cost of tax compliance. The Mercatus Center at George Mason University estimated the cost of tax compliance.
- Individuals spend up to $378 billion and 6 billion hours complying with the tax code.
- The compliance burden results in foregone economic growth of up to $609 billion every year.
- Lobbyists spend about $28 billion annually trying to influence changes in the tax code.
- Only about 85% of Americans file taxes. A flat tax could capture some, if not most, of that lost revenue which is estimated to be $452 billion in unreported, unpaid taxes.
There are several more indirect costs of compliance with the tax code outlined in the study, but we’ll just settle for the four items above. Those four amount to almost $1.5 TRILLION dollars that could go directly into the economy or into savings.
You can read Rand’s editorial at the above link. If the WSJ paywall won’t let you access it, simply click this link and click on the WSJ link in the search, it will be the first non-paid link.
We have a laundry list of other problems with Rand Paul, but this is a real winner and could very well offset some of his kookier ideas.
This is a winner.