Rand Paul calls for 14.5 percent flat tax

Francis Rivera

Sen. Rand Paul (R-Ky.) wants to gut the U.S. tax code and instead install a flat tax, insisting such a plan would “turbocharge” the economy and be more fair for average taxpayers.

Paul, who’s running for president in 2016, would put into place a 14.5 percent rate for individual, business and investment income, and remove all but a couple of the tax breaks currently on the books. The current top rate for individuals and many small businesses is near 40 percent, while the corporate rate tops out at 35 percent.

{mosads}Taxpayers would get to keep deductions for home mortgage interest and charitable deductions under Paul’s plan, and would also not have to pay any payroll taxes. Plus, the gift and estate taxes would be scrapped, and the first $50,000 of a family of four’s income would be exempt from taxes.

All in all, Paul says it adds up to the biggest tax cut in U.S. history — reducing revenues by some $2 trillion over the first decade. The Kentucky Republican, who once proposed a budget that would balance in five years, says that his broader fiscal plan would actually reduce the federal debt, given the amount of spending cuts he proposes.

And he maintains that his tax plan alone would increase the size of the economy by 10 percent over a decade and create 1.4 million jobs, citing analysis by the free market Tax Foundation.

Paul, who laid out his plan in The Wall Street Journal, cast the tax proposal in populist terms, saying that President Obama’s policies had only led to a rise in income inequality.

“Today, the American people see the rot in the system that is degrading our economy day after day and want it to end,” Paul said. “That is exactly what the Fair and Flat Tax will do through a plan that’s the boldest restoration of fairness to American taxpayers in over a century.”

Other GOP contenders, like Sen. Ted Cruz (R-Texas), are also floating flat tax plans, though Paul is the first to lay out such a specific proposal. Flat tax advocates believe the idea can appeal to both traditional conservatives who want broad tax cuts and grassroots activists who have railed against government and IRS intrusion.

“The left will argue that the plan is a tax cut for the wealthy,” Paul wrote. “But most of the loopholes in the tax code were designed by the rich and politically connected. Though the rich will pay a lower rate along with everyone else, they won’t have special provisions to avoid paying lower than 14.5%.”

Tax analysts have said that flat tax plans would almost certainly result in higher-income taxpayers paying less, with the tax burden shifting to the middle  and working classes, and have questioned the economic benefits. Liberals have long blasted the idea, popularized by Steve Forbes in his 1996 campaign, and even some conservatives believe the proposal just cements the GOP’s image as the party of the wealthy.

Democrats have advocated in the past for temporary payroll tax cuts, saying that gives workers more money in their pockets and boosts the economy.

But Republicans have largely been skeptical that payroll tax cuts work, and Paul would have to find new funding sources for Medicare and Social Security if he got rid of them for good. In an interview with the Journal, Paul said he would make sure that revenues from business taxes fully fund entitlement programs. 

Tags Flat tax Income tax Rand Paul Social Security Tax cut Tax reform Taxation

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