September 9, 2015


Jeb Bush: My Tax Overhaul to Unleash 4% Growth : Three income-tax rates: 10%, 25% and 28%, plus a 20% corporate rate and immediate expensing on new investment. (JEB BUSH, Sept. 8, 2015, WSJ)

First, I want to lower taxes and make the tax code simple, fair and clear. It should be easy to understand and make it easy for people to fill out their own tax forms.

We will cut individual rates from seven brackets to three: 28%, 25% and 10%. At 28%, the highest tax bracket would return to where it was when President Ronald Reagan signed into law his monumental and successful 1986 tax reform.

With this reform in place, roughly 15 million Americans will no longer bear any income-tax liability. The plan nearly doubles the standard deduction now taken by roughly two-thirds of all filers. It eliminates the marriage penalty, expands the Earned Income Tax Credit, ends the death tax, retires the Alternative Minimum Tax and ends the employee's share of the Social Security tax on earnings for workers older than 67.

Second, I want to eliminate the convoluted, lobbyist-created loopholes in the code. For years, wealthy individuals have deducted a much greater share of their income than everyone else. We will retain the deductibility of charitable contributions but cap the deductions used by the wealthy and Washington special interests, enabling tax-rate cuts across the board for everyone. And while we're doing that, we will treat all noninvestment income the same, so unless you stake capital in an investment, you won't be able to claim the capital-gains tax rate on your market gains.

Third, I believe that the tax code should no longer be an impediment to the nation's competitiveness with China, Europe and the rest of the world. Liberals will tell you that we need walls and tariffs to protect U.S. businesses from international competitors. The liberals are wrong; we need tax reform. To stop American companies from moving out of the country, I will cut the corporate tax rate from 35%--the highest in the industrial world--to 20%, which is five percentage points below China's.

We will end the practice of world-wide taxation on U.S. businesses, which fosters the insidious tactic called corporate "inversions." This is when small overseas companies buy big U.S. companies so that both can enjoy the lowest tax rate possible, costing American jobs and revenue. And we will assess a one-time tax of 8.75%, payable over 10 years, on the more than $2 trillion in corporate profits sitting overseas.

We will also allow businesses to fully and immediately deduct new capital investments--a critical step to increase worker productivity and wages. To pay for this, we will eliminate most corporate tax deductions--which is where favor-seeking and lobbying are most common--and remove the deduction for borrowing costs. That deduction encourages business models dependent on heavy debt.

When we accomplish these big reforms, the result will be a much simpler, leaner and fairer tax code.

Twelve reasons to like Jeb's tax plan (Greg Mankiw, 9/09/15)

It lowers the top rate on personal income to 28 percent, the same rate as the bipartisan 1986 tax reform.
 It broadens the base by capping the use of itemized deductions.
 It eliminates the deductibility of state and local taxes, so low-tax states and towns no longer subsidize high-tax ones. [...]

 It eliminates the estate tax, so the tax system no longer penalizes those who want to help their children and grandchildren.
 It lowers the corporate tax rate to be close to international norms.
 It moves from a global to a territorial tax system, like most other nations have.
 It eliminates the deductibility of interest expenses, putting debt finance and equity finance on a more level planning field.
 It includes full expensing of investment expenditure, moving the system toward a consumption-based tax.

Sure, it's better than the current tax regime and moves us towards our final destination (consumption taxes), but it fails to address the fundamental question : why should we tax what we want, like income, at all?

Posted by at September 9, 2015 7:39 PM

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