As some of you may have noticed, we are in the midst of a Presidential election. Luckily for us, every four years brings about an intense focus on our political life and exactly what is wrong with it. Any national politician worth his or her salt will make a list of immediate solutions for problems that existed long before election season. There are five candidates currently vying for the most powerful office in the world. I am quite sure that you already have a favorite and it is not my intention to dissuade you. However, again in keeping the theme of this particular website I believe it is vitally important to look at the plans for each candidate regarding the tax code. The future of which is of keen interest to myself and other FairTax advocates. A quick note as to my method of research, I neglected to obsessively scribble down notes while re-watching all of the numerous Republican debates because statements are in a constant state of “reclarification”. Any and all statements made by a candidate in an off the cuff manner are easily swiped away by the campaign as “out of context” or opposing the original intent. So I focused on the candidates websites. While easily updated, most are true and accurate reflections of a candidate’s stated wishes and are, most importantly, written down. A written message on an official website meant to inform a questioning voter is something, I believe, closer to the promise of a campaign.
Governor Mitt Romney speaks to the need for simplifying the tax system. He believes it is in need of a fundamental redesign that lowers rates and broadens the base. He also says that it should be used as an instrument for economic growth and should be stable to counter the constantly shifting set of rules for investors and entrepreneurs. That phrasing sounds as if it were taken from the FairTax handbook however, unsurprisingly, the problem is approached in a different manner. Many of you remember that Governor Romney was less than satisfied with the FairTax plan in a debate. His plan maintains the current rate for income, interest, dividends, and capital gains taxes. He plans on eliminating the death tax and also the capital gains, dividends, and interest taxes on Adjusted Gross Incomes under $200,000. His plan also calls for a reduction of the corporate tax rate to 25%. After all of this is done he pledges a rather nebulous sounding “conservative overhaul” of the tax code in the long term without many real specifics on what that would include. In summation, it is much better than our current code but does not meet one of his own key criteria, expanding the tax base. Some rates are certainly lowered which eases the tax burden on virtually every citizen despite keeping the existing income tax rates but the only mention of a broader tax base falls under the conservative overhaul language. It would be nice to have a little clarification of what that would entail. He does cite the Bowles-Simpson Commission as a good discussion starting point but that is all.
Speaker Newt Gingrich has a significantly bolder plan outlined. His first step is to stop the 2013 tax increases hanging over the heads of every tax payer embedded in our current code. He also calls for the elimination of the capital gains and death tax. His corporate tax rate would be cut down to 12.5% and would include the 100% expensing of new equipment. He calls for an optional 15% flat tax preserving the charitable giving and home ownership deductions, along with the addition of a $12,000 personal deduction. The FairTax seems to have an easier audience within this campaign considering the placement of Herman Cain to a co-chair position on his tax reform and economic growth advisory council. Herman Cain has been a longtime friend to the FairTax, even including it as phase two of his economic policy in his presidential campaign. Many of the Speaker’s ideas can be found within the FairTax and are not a large jump from our cause.
Senator Rick Santorum has a laundry list of tax objectives that seek to reset the focus of our current tax system. Although considered comparably timid by some the Senator has a number of ideas. He would create two tax brackets set at 10% and 28%. He would eliminate the potentially disastrous Alternative Minimum tax, death tax, marriage penalty, and the cap on deductions for losses incurred in the sale of a personal residence. He would seek to reduce the capital gains and dividend tax to 12%. He would also seek to half the current corporate tax rate to 17.5%. He would retain the charitable giving, home mortgage interest, healthcare, retirement savings deductions while tripling the personal deduction for each child. He would increase and make permanent the research and development tax credit from 14% to 20%. He would remove the corporate tax rate on manufacturers and also not tax any money repatriated in that industry. All other corporate repatriated money would be taxed at 5.25%. Along with Speaker Gingrich he would provide for 100% expensing on new business equipment. The only issue seen with the Senator’s plans is that they still view the tax code as a means to engineer a society. Granted, incentivizing manufacturing and larger families is better than disincentivizing them but, it still puts the government in a role that decides who wins and loses that game. That is a key element the FairTax removes from the equation.
Congressman Ron Paul’s plans revolve completely around his massive cuts to spending. If his trillion dollar cuts are not met then his tax plan will have a disastrous impact on the debt and deficit. Most important to his plans is the Liberty Amendment, which abolishes the income and death taxes. He also calls for the immediate repeal and abolishment of the capital gains tax, taxes on tips and social security benefits and an ideal income tax rate of 0%. The issue of a Flat tax or a FairTax should only be decided on the repeal of the 16th Amendment according to Congressman Paul. While all of those goals sound great there are a number of inconsistencies, such as the existence of a flat tax without the power to directly tax incomes or the existence of a flat tax and an income tax rate of 0%. And the priority any of these items are given is not discussed. As stated above any of these plans taken in advance of the required spending cuts would greatly add to the crushing debt problem. These policies are wonderful sounding but are in very strict danger of adding to the problem if not passed in a correct order. That may sound persnickety but I do not want my tax reform to rest upon the shoulders of a congress that needs to cut spending by $1.2 trillion much less pass a budget. If the money cannot be cut over ten years than it is even less believable that it could happen in a single election cycle.
President Obama’s tax proposal is one we have heard before. It is mired in the class warfare rhetoric that has defined the class system structure of the current tax code. In fact our first income tax was a flat tax passed in 1861. It was a flat 3% rate on those making above $800 annually. Our first progressive income tax was passed in 1862. One year was how long the flat tax remained so. The progressive tax was a 3-5% rate on annual income above $600. The definition of “rich” was rapidly changing even back then. We have heard the “Buffett” argument before in this country. That is the essence of the President’s plan moving forward. Continuing the mindless mantra of class warfare the millionaires and billionaires are called to “pay their fair share.” Since the top 10% pay 70% of the taxes and the bottom 49% pay nothing than I agree that the rich should start paying their fair share. The way to do that is not raise their taxes, not to increase the burden that is already disproportionately theirs, it is to start cutting. The Buffett Rule argument and the targeting of “hedge fund managers, private jet owners, and oil companies” has not led to a robust economy over the past four years and shows no signs of doing so if continued for four more. No matter what deity the President uses to convince Americans to support his confiscatory and redistributive tax model I doubt Jesus would seek to decimate the labor force participation rate. This tax plan has proven to be disastrous for the economy and the American people. If the President wants the rich to pay a “fair share” than I suggest he take a look at the FairTax.
There are five competing tax theories espoused by the current Presidential candidates. Some share elements of the FairTax, others stand in direct opposition. It is up to us to endeavor over the coming months to elect those to national and state office that share our views and convince them that our way truly is the way to put Americans back to work and ensure their liberty in the future. One plan enshrines liberty at its heart and urges equality in its practice. Those two principles created a nation, and by following the lead given to us by our forefathers we can kick start an economic revival never seen before in the history of this earth. There is no force more powerful than the will of a free people. It is time our tax code and candidates understood that. This election has the potential to truly be historic; it is up to you to see us break from a cycle of government restriction and control to a path of prosperity without end. It is up to you to see an Amendment repealed, and a tax code forsaken. You see, this election is not for us to sit and watch; it is not our duty to be promised to by a speaker on a podium. It is our God given and patriot protected right as American citizens to alter the course of our own destiny. We should not be sated with reduced rates and temporary deduction increases; this country is not accustomed to taking half steps toward liberty. If we are to guarantee our prosperous future, it is up to us to get involved. Get out and support the FairTax. Demand it. We deserve nothing less.