Presidential Candidates Begin Unveiling Plans for Comprehensive Tax Reform
30 April, 2015
The following statistics, cited in a recent blog post on GOP.com, give insight into a growing concern among Americans:
1) The length of the American tax code numbers over 70,000 pages.
2) it takes Americans 6.1 billion hours to comply with the tax code every year.
3) Americans spend over $27.7 billion preparing their taxes each year.
In a recent Pew Research Center survey, 59% of Americans agree that Congress should completely overhaul the tax system. While this is a common point-of-view among Republicans, the same survey showed that half of self-identified Democrats are also in favor comprehensive tax reform. Since tax code reform is overwhelmingly popular across the political spectrum, presidential candidates from both parties should include detailed tax policy proposals in their campaign platforms. But, will they?
Republican candidates have traditionally been champions of tax reform, and the 2016 presidential candidates are no exception. Most notably, the libertarian leaning Senator Rand Paul (R-KY) told Americans on Tax Day, "As president, I will get the IRS out of your life and out of the way of every job creator in America." While changes are still being made to his tax policy platform, Senator Paul has proposed a "Fair and Flat Tax Plan" which contains the following "flat tax" plan elements:
- Largest tax cut in American history ($700 billion/year)
- 17% flat tax for individuals and corporations
- Exemption from the payroll tax for lower income workers
- Elimination of the estate tax and the alternative minimum tax (AMT)
- Downsizing or eliminating the IRS
Similarly, Senator Ted Cruz (R-TX) has also proposed abolishing the IRS, in the form of a "fair tax" plan. As this article details, such a proposal is not as radical or farfetched as it may seem. A fair tax plan would simply eliminate income tax for individuals and corporations and impose a sales taxthe latest proposal calls for 30%--which would be collected by state revenue departments. However, while Senator Cruz describes a fair tax plan as "ideal," he also supports a "more realistic" flat tax plan, which would consist of a single income tax rate with deductions limited to charitable contributions and home mortgage interest. Either way, the fair tax and flat tax proposals of Senator Paul and Senator Cruz are by far the most ambitious, because they are truly focused on comprehensive tax reform.
Another recent entry into the race, Senator Marco Rubio (R-FL), has touted the tax plan which he and Senator Mike Lee (R-UT) proposed in the Senate. The plan is considered the least radical of the plans offered by the current Republican candidates, and is also somewhat more controversial within the party, mostly due to the lack of across-the-board tax cuts. The specifics of Senator Rubio's plan are:
- Two tax brackets: 15% and 35% (higher rate for individuals making at least $75,000/year and couples making at least $150,000/year)
- New child tax credit of $2,500
- Elimination of the estate tax
- Top corporate tax rate of 25% (less than the current 35%)
- Territorial tax system (U.S. tax rates would not be applied to foreign income earned abroad)
- Elimination of business tax credits and many deductions
On the opposite side of the aisle, the only declared Democrat Party candidate, Senator Hillary Clinton (D-NY), has made vague statements about reforming tax rates, mostly targeted at the wealthy. For example, she has stated that she would be open to reexamining the capital gains tax. While she has not yet released any tax policy proposals for this campaign, Senator Clinton addressed tax policy in her 2008 campaign as follows:
- Individuals making more than $250,000/year would return to 1990's tax rates
- No middle class tax increases
- No capital gains tax hike above 20%
- Freeze the estate tax at $3.5 million per individual ($7 million per couple)
- Cut the alternative minimum tax (AMT)
- Expand the child credit
While the passage of eight years might make some significant difference in Senator Clinton's tax proposals, these ideas are far more moderate than those instituted by President Obama, and are surprisingly similar to those of Senator Rubio in some respects, such as the expanded child credit. However, if her 2008 plans are any indication, Senator Clinton's notion of tax reform is quite limited and would do far less to address voters' concerns than the plans of her Republican opponents.
While the interest of left-of-center politicians in comprehensive tax reform proposals is not unheard of, it is rare. Indeed, a group of Democrats in the House of Representatives, calling themselves "The New Democrat Coalition," are calling on Congress to "summon the political courage that only comes once in a quarter century and fix the tax code for once and for all." This statement refers to 1986the last time that Congress attempted to reform the tax code. This group proposes various tax credits for individuals and businesses that they claim will promote economic growth, but first and foremost, they support simplifying the procedure for tax filing.
While the New Democrat Coalition is admittedly small in number, it gives rise to hope that reforming the tax code could someday become a bipartisan issue. The startlingly high percentage of Americans who support an overhaul of the tax system should prompt all presidential candidates to respond to this issue that is clearly important to the voters and make comprehensive tax reform a major part of the campaign.
Carrie A. Lowery, Esq., has worked as a legal professional for over a decade. She recently founded Authority Legal Research & Writing Service, which provides legal research and writing support to practicing attorneys. She is a regular contributor to The Capital Press.
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