The one thing to remember when economic dunces start telling you that tax cuts bring in less tax revenue is to remind them that they are not living in a static world. If the tax cuts or tax reforms spur economic growth, then there are more jobs AND MORE TAXPAYERS. More taxpayers paying higher taxes means more tax revenues. Same for corporate taxes. So while you could cut taxes in half you could double tax revenues at the same time. Ask Ronald Reagan.
Rand’s proposal is monumental. It’s the only one that eliminates the employment or payroll tax. It is a stroke of genius that would spur economic growth, something the Democrats do not understand. They want to hand out government “freebies” instead. A good, decent paying job is so much better than food stamps and welfare. It’s better for the pride of the individual and also it’s better because it will at least double the take home usable income of the individual.
That’s why you hear Donald Trumps saying, “Jobs, jobs, jobs. I will be the best jobs President God Ever Created.”
Here are some of the things we need to do to jump start our economy and spur massive economic growth:
1) Enact Rand Paul’s tax reform
2) Institute Donald Trumps’s reform of lopsided trade agreements with Mexico and China
3) Repatriate American corporate money that is being held over seas because of American punitive taxes
4) CLOSE OUR SOUTHERN BORDER
5) Let the Keystone Pipeline through
6) Cut federal spending 10% across the board
7) Repeal Obamacare and Dodd-Frank
8) Decrease regulations on business, especially small business
9) Repeal any and all Global Warming statutes
10) Reign in the EPA and take away its power to issue regulations without the approval of Congress
11) Repeal every one of Obama’s Executive Orders as it applies to the economy and business
12) Stop the printing presses printing fiat money
Most news media dismissed Rand Paul’s tax plan, like his candidacy for president, as a nonstarter. But many of those reports failed to grasp a gigantic part of the plan. They also wrongly concluded that the flat tax was a big break for high-income people but not so good for middle-income people.
Let’s take a closer look at the plan the Republican senator from Kentucky proposes.
It would abolish the employment tax. The plan would end the most regressive tax in the lifetime of every living American. This is a big, big deal. All workers pay this tax on the first dollar of wages. But the tax stops at $118,500. Wages over that amount pay taxes for Medicare but not for Social Security. This tax has been rising since 1937.
In 1937, the tax was 2 percent of the first $2,000. Today, including the Medicare tax, the rate is 15.3 percent on the first $118,500 in earnings. It’s a big tax.
How big? Most Americans pay more employment taxes than income taxes. A recent report shows that the income tax burden was lower than the employment tax for most households with incomes under $200,000. Internal Revenue Service data tells us that 96 percent of households have incomes under that amount.
So take a look at your next pay stub. Think about what you could do with the largest “raise” most people have gotten in years. Then think about the trivial tinkering that most of the other candidates are offering.
The money to support Social Security and Medicare would come from a new 14.5 percent tax on corporate payrolls. Note that the tax is on the entire payroll, not just wages up to $118,500. So the tax could sustain our nation’s most important social programs. And it wouldn’t be regressive. The other benefit is that a later increase in the tax could bolster Social Security. The next generation wouldn’t be short-changed on benefits.
Most proposals to improve Social Security focus on shrinking the benefits of future retirees while collecting the same regressive taxes. Young workers would be most affected. For years, public and media reaction to the idea of a flat tax has been that it would be tough on poor people but great for rich people. The reality is different.
The Rand Paul proposal calls for a flat tax rate of 14.5 percent on all taxable income. But first, some hefty deductions and exemptions come off the top.
How hefty? Under current tax law, a family of four that didn’t itemize would have deductions of $28,600. That’s four personal exemptions of $4,000 and a standard deduction of $12,600. Under Paul’s tax plan, the same family would have $50,000 in exemptions and deductions. That means no taxes on an extra $21,400.
A family with $50,000 in income would pay no income taxes under Paul’s plan. The same family would pay $2,287.50 under current law. That’s a 100 percent tax cut.
Double income to $100,000, and the family would pay $7,250 under the Paul plan and $9,787.50 under current law. That’s a 26 percent tax cut.
Double income again to $200,000, and the family would pay $21,750 under the Paul plan and $35,043.50 under current law. That’s a 38 percent tax cut.
What about the big dogs? Yes, they’d get a big tax cut, too. The top 1 percent pays income taxes at an average tax rate of 22.8 percent according to IRS figures. So the drop to 14.5 percent would be about a 36 percent cut.
The Paul plan cuts the corporate tax rate to 14.5 percent. Right now the top rate is 35 percent. Armies of corporate finaglers, lobbyists and tax code whisperers work to avoid that rate. They do their best to cut the burden.
So reduce the rate. Then watch Apple and dozens of other companies repatriate billions in overseas earnings. Watch companies that have become corporate expatriates renew their love for Delaware. Watch companies decide to build factories and hire workers in America, not Asia or Mexico.
This is a new deal for America. If Republicans can’t find the nerve to back it, pray that a smart Democrat does.