STEVE MOORE: “Rand Paul overnight changed the dynamics of the Republican presidential race on Thursday when he released his Fair and Flat Tax plan.” It is a one-rated, 14.5 percent flat tax devised with help from Art Laffer, Steve Forbes, and Heritage’s Moore:
The 14.5 percent tax would apply to wages, salaries, capital gains, rents, and dividend income. The plan eliminates the estate tax, telephone taxes, Internet taxes, gift taxes and all customs and duties [while keeping the mortgage interest and charitable deductions].
This plan would take America from being one of the highest income tax rate nations in the world to the lowest. This would suck capital and jobs from the rest of the world almost immediately to these shores. America would move from a nation off-shoring jobs, to one that would start in-sourcing millions of them. It gives U.S. workers a fair advantage.
For low income and middle class families of four, the first $50,000 of income would be tax free. Moreover, because this plan eliminates the payroll tax withheld from worker paychecks, the average worker would with a $40,000 income would get a $3,000 take home pay raise. At a time of falling wages, that would be a big boost to middle class financial security.
Perhaps the strongest case for the Fair and Flat Tax is that it eliminates all of the special interest loopholes and carve-outs in the tax code. Tax lobbyists in Washington would become an endangered species — and it couldn’t happen to a nicer group of people. The richest one percent get the preponderance of the tax write-offs, so getting rid of the big deductions, would increase their taxable income while lowering the rate.
This plan is the essence of a fundamental principle of good and fair tax policy: broad base and low rates.
You make twice as much, you pay twice as much in taxes. You make three times as much, you pay three times as much in taxes. Simple, but…
CATO’S DAN MITCHELL IDENTIFIES THE CATCH: “Senator Paul’s “business-activity tax” doesn’t allow a deduction for wages and salaries. This means, for all intents and purposes, that he is turning the corporate income tax into a value-added tax (VAT).”
MORE: Rand Paul and the VAT That Dare Not Speak Its Name.
So apparently you pay a 14.5% income tax PLUS a 14.5% sales tax on all you buy with your after tax dollars. A transparent national sales/consumption tax makes sense if you repeal the Sixteenth Amendment and abolish the IRS along with any need to report one’s income and activities to the government. But then it would have to be much higher than 14.5%.
Let the tax policy debate begin!