Presidential candidate’s plan would also eliminate payroll tax and cut back on many deductions
By John D. McKinnon and Janet Hook
Sen. Rand Paul is pledging to “blow up the tax code and start over” with a federal flat tax of 14.5%, as he seeks to boost his support among conservatives in the Republican presidential field.
Tax plans increasingly have become a defining issue for Republicans in the 2016 nomination fight, and Mr. Paul’s proposal represents one of the more detailed—and aggressive—so far.
Mr. Paul said his plan, laid out on The Wall Street Journal’s opinion pages, would reduce the government’s tax take by over $2 trillion over 10 years, or at least 5%, based on congressional revenue estimates for 2016 to 2025. It would require substantial spending cuts to avoid adding to deficits—an amount roughly equal to all deficit reduction the federal government has done since 2010.
He predicted his plan would boost economic growth by nearly a percentage point a year.
The plan would eliminate payroll taxes on workers, as well as gift and estate taxes and all duties and tariffs. His flat tax would apply to all personal income, including wages, salaries, dividends, capital gains, rents and interest. It would exempt the first $50,000 of income for a family of four.
The plan would eliminate many deductions but preserve two widely used ones, for mortgage interest and charitable contributions. One of the few targeted tax breaks it would retain is the earned-income tax credit, a wage supplement for lower-income working families.
For businesses, Mr. Paul would adopt the same 14.5% rate. Corporations currently pay at rates up to 35%, while small-business owners’ profits are taxed at rates as high as 39.6%.
To further accelerate economic growth, Mr. Paul called for allowing the expensing of all capital purchases—deducting the cost from income immediately—and eliminating the current complicated system of depreciation.
The main aim of his plan would be to “turbocharge the economy and pull America out of [its] slow-growth rut of the last decade,” Mr. Paul wrote.
Photo credit: Charlie Neibergall / AP