Ev­ery ma­jor Repub­li­can can­di­date has en­dorsed lower tax rates

The Washington Times Weekly - - Commentary - By Stephen Moore

Over­shad­owed by this week’s CNBC ver­sus the Repub­li­can pres­i­den­tial nom­i­nees brawl, was the re­lease of Sen. Ted Cruz’s flat tax plan. The Texas sen­a­tor would im­pose a 10 per­cent tax rate on wage earn­ers and a 16 per­cent busi­ness tax and no de­duc­tions. “Flat­ter rates, says Mr. Cruz, “will make for a more rapid-growth econ­omy.” He’s right: in vir­tu­ally all the cases of the last 100 years, lower tax penal­ties on work­ing and in­vest­ing have led to more jobs and higher in­comes.

It comes on the heels of a plan from Sen. Rand Paul to adopt a 14.5 per­cent flat tax. For full dis­clo­sure, I’m bi­ased be­cause Messrs. Paul and Cruz bor­rowed their flat tax plans with a few of their own unique twists, largely from my book with Arthur Laffer ti­tled “Re­turn to Pros­per­ity.”

The big­ger story here is that it’s now of­fi­cial: ev­ery ma­jor Repub­li­can can­di­date has en­dorsed lower tax rates and fewer loop­holes as a way to make our fed­eral tax code fairer and more com­pet­i­tive for Amer­i­can busi­nesses.

The spirit of tax re­form is alive and well on one side of the aisle.

Too bad tax re­form fever isn’t bi­par­ti­san as it was in 1986 when by 97-3 the Sen­ate passed the Rea­gan Tax Re­form Act which closed myr­iad loop­holes and low­ered tax rates to 15 per­cent for the mid­dle class and 10 per­cent for the rich.

In the mod­ern-day “pro­gres­sive” Demo­cratic party, there is no room for a Bill Bradley or Dick Gephardt — two lead­ing spon­sors of tax re­form in the 1980s. Even talk­ing of low­er­ing tax rates gets you ex­com­mu­ni­cated from the party of envy and re­dis­tri­bu­tion. Very sad.

Sen. Bernie San­ders, the so­cial­ist Ver­mont sen­a­tor who is draw­ing throngs of fans every­where he goes as if he were Justin Bieber, wants tax rates back up to 70 per­cent or more. This sock-it-to-therich line is a crowd pleaser, es­pe­cially with young vot­ers, and draws thun­der­ous ap­plause.

Hil­lary is right be­hind him with her pro­posed 44 per­cent tax on cap­i­tal gains in­vest­ment in­come. The chart above shows the di­vide in the left can­di­dates and the right can­di­dates on tax rates.

So to shrink the gap be­tween rich and poor, why not fol­low the Clin­ton-San­ders tax model? Be­cause soak-the-rich tax schemes rarely work.

Here’s an amaz­ing statis­tic: the last time tax rates were 70 per­cent, back in the 1970s, the gov­ern­ment got 19 per­cent of its rev­enues from the rich. Now with a lower top rate of about 40 per­cent the gov­ern­ment gets about twice as much, about 36 per­cent of all in­come taxes, from the rich.

Mean­while, the U.S. cor­po­rate tax of 35 per­cent is now so much higher than the rate in the rest of the world that a Tax Foundation study has re­cently con­cluded that we could raise as much money with a rate of 20 to 25 per­cent. That’s be­cause more busi­nesses would come here and start pay­ing U.S. taxes in­stead of Ir­ish, Chi­nese or Cana­dian taxes. If you can get the same rev­enue at a lower tax rate and cre­ate more jobs at the same time, why wouldn’t we take that deal? The only an­swer is that the left gets some kind of weird psy­chic in­come from knock­ing down the rich even if it ben­e­fits no one.

Lib­er­als who have a faith-based con­vic­tion that tax rates don’t mat­ter much in terms of de­ci­sions about where busi­nesses or jobs lo­cate should lis­ten to Repub­li­can Gov. Rick Scott of Florida, where there is no state in­come tax at all. “My fa­vorite gov­er­nors, are Cuomo (of New York), Brown (of Cal­i­for­nia) and Mal­loy of Con­necti­cut,” he says grin­ning. “The more they raise taxes, the more jobs we get in Florida. Ev­ery week new busi­nesses are com­ing here to es­cape New York and Con­necti­cut.”

My con­ver­sa­tion with Mr. Scott got me to think­ing. Imag­ine an ex­per­i­ment where we di­vided Amer­ica in to two tax zones. Those states east of the Mis­sis­sippi River got to keep the cur­rent “pro­gres­sive” tax sys­tem — or could even go for the Clin­tonSan­ders utopia of higher rates. The states west of the Mis­sis­sippi could adopt a flat tax mod­eled af­ter what Messrs. Cruz and Paul have en­dorsed. Where would you choose to live? Where would the growth of en­ter­prise, wages and jobs hap­pen?

The an­swer is, of course, self-ev­i­dent. So let’s hope vot­ers in 2016 choose tax re­form for all 50 states. Stephen Moore is an eco­nomic con­sul­tant to Free­dom Works and a Fox News con­trib­u­tor.

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