by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Stephen Moore devotes a National Review Online column to a defense of flat-tax plans that have generated criticism from the Cato Institute.
Rand Paul has proposed a $2 trillion tax cut over years — arguably the biggest tax reduction in American history. He wants to shave tax rates down to 14.5 percent, the lowest rate since the income tax was introduced a century ago. Ted Cruz has proposed a tax cut nearly as large; his rate is 16 percent. This compares with tax rates that are as high as 42 percent under the current tax code.
Both plans would eliminate the corporate income tax AND the payroll tax. They would also eliminate almost all loopholes in the tax system.
The Tax Foundation estimates that the plans would add about 12 percent to GDP within a decade, which amounts to an extra $2.5 trillion over that period — like adding another California to the economy. …
… Cato calls it a VAT.
Here’s how it is different from a VAT. First, Europe’s VAT expanded governments because it was an add-on to the existing income- and payroll-tax system. That is what financed the Euro-welfare-state time bomb.
By contrast, the Rand Paul and the Ted Cruz plans — let me shout this again — ELIMINATE the payroll tax and corporate taxes — entirely. The corporate tax is the worst tax ever. It is costly, it is riddled with loopholes that make some companies pay a lot and some pay almost nothing, and it destroys American jobs. The complete flat tax creates millions of jobs.