Where do the 2016 candidates stand on tax reform?
A timely topic, given that yesterday was the last day to file your federal income taxes. There are several tax reform plans which have been pushed by candidates over the years, but they rarely catch on as the overhaul would mean someone, somewhere, would lose out on some tax benefit so the status quo always seems to remain.
So far, only Marco Rubio has offered an actual detailed plan in the form of legislation he introduced with Senator Mike Lee of Utah. I’ll stick with declared major candidates, which is four at this point, and examine their positions on taxation.
Marco Rubio – Details from the Tax Foundation on Rubio’s recently introduced tax plan:
His tax plan would make quite a few changes to the current code, but it’s easy to think of it as having two pieces: business-side reforms and individual-side reforms.
On the business side, the tax plan fixes a lot of problems with the current code.
- It reduces the corporate income tax rate (and the tax rate for pass-through businesses) to 25 percent.
- Allows all businesses to fully deduct the cost of investments the year in which they incurred the expense.
- Fully integrates the individual and corporate tax code to eliminate the double-taxation of corporate income.
- Moves to a territorial tax system that would exempt active foreign income of U.S. corporations from domestic taxation
- Eliminates most business tax credits and many special deductions
On the individual side, the plan would cut taxes for just about everyone
- Reduces the number of tax brackets to two (15 percent and 35 percent)
- Eliminates nearly all itemized deductions
- Creates a new $2,500 child tax credit
- Replaces the standard deduction and personal exemption with a fully refundable personal credit
Rand Paul – Summary of Paul’s plan from the Chicago Tribune:
On the campaign trail, he’s [Rand Paul] advocating for a flat tax that, without exemptions, would tax an individual at the rate of about 17 percent. [Emphasis added] If implemented, economists suggest his plan would force government to spend less; government currently spends at a flat-tax rate of about 25 percent per individual.
Paul would eliminate most tax breaks and make investment income tax-free.
He’s also trying to sell a constitutional amendment for a balanced budget. As an Illinoisan, I’m not buying that sucker proposal. We have a balanced budget clause in our state Constitution. All it does is force the General Assembly to work harder at disguising unbalanced budgets with accounting gimmickry. The legislature is quite good at it. Practice makes perfect.
But overall, Paul is true to his rhetoric. No area of the budget would be off limits. Tax reform is a key plank of his platform.
Ted Cruz – A broad outline of his tax policy from Breitbart, but so far, I don’t believe he’s offered actual numbers about what his preferred flat tax rate would be:
Sen. Ted Cruz (R-TX) believes the IRS should be abolished after the institution of a simpler flat tax.
He said the tax code invites agents to abuse and use the machinery of government to target political enemies and said doing so was wrong whether the president was Barack Obama or Richard Nixon.
“I think we ought to abolish the IRS and instead move to a simple flat tax,” Cruz said on Fox News over the weekend.
He said the tax code should be simple enough for the average American to fill out on a postcard.
Cruz said such a system would take much of the bureaucracy out of Washington and should get bipartisan support because it is about “empowering the people,” and that “ought to be a bipartisan” value.
Hillary Clinton – Hillary has not offered much in the way of campaign positions in the short few days she’s been running. Here are a few details from her plan she pushed in 2007, courtesy of the New York Sun. Some of this is now outdated, especially regarding the Bush tax cuts.
Under a nine-point plan, Mrs. Clinton proposed to let President Bush’s tax cuts for top earners expire, scrap subsidies for oil and gas companies, and require large oil companies to invest in alternative energy or pay into a national research fund. She also called for greater scrutiny of the salaries of chief executives. In a bid to keep jobs in America, she is pushing to eliminate an element of the tax code that allows companies to defer taxes on profits they earn overseas.
In ending what she called Mr. Bush’s “irresponsible” tax cuts, the former first lady said she would revert to the tax rates for “upper-income Americans” during the 1990s. She did not specify an income cutoff, but a campaign spokesman said later that it would be $200,000.
So there are some discussion points. Rubio has provided the most details so far, and I expect the rest will follow suit over the coming months as they bounce ideas off voters and determine where they can differentiate themselves.