Presidential candidate Rand Paul plans to 'blow up' tax code
Jun. 19, 2015
WASHINGTON (AP) — Republican presidential candidate Rand Paul called Thursday for a "fair and flat tax" that would "blow up" the nation's tax code, offering a proposal his campaign said would cut taxes by $2 trillion over the next decade.
The first-term senator from Kentucky released the outline of a plan to institute a 14.5 percent income tax rate on all individuals, as well as a tax of the same rate on all business revenue. It was among the first major policy proposals released by Paul's presidential campaign, although he did not make the full plan available for review.
"Basically my conclusion is the tax code can't be fixed and should be scrapped," he said in an interview with The Associated Press. "We should start over."
Many of the dozen major Republican candidates for president list tax reform among their priorities. Texas Sen. Ted Cruz, for example, is among the GOP contenders calling for the wholesale abolition of the Internal Revenue Service — a position many experts say is unrealistic.
But few have offered detailed proposals, and while Paul said his plan would benefit American both rich and poor, he cited an independent analysis that his campaign did not make available to reporters.
In a column describing highlights of his plan published Thursday in The Wall Street Journal, Paul called for the outright elimination of payroll taxes on workers and of several other federal taxes, including those on gifts and estates, telephone service and all duties and tariffs. He also proposed eliminating all corporate tax subsidies and personal tax deductions, except those for mortgage interest and charitable donations.
Paul says the first $50,000 of income for a family of four would not be taxed and the earned-income tax credit would be preserved.
The plan would also replace the corporate tax with a 14.5 percent tax on businesses' capital income — including profits, rents, and royalties — and labor expenses such as wages and salaries, according to an analysis by the conservative Tax Foundation. Nonprofits and governments would also pay a 14.5 percent tax on wages for their employees.
While his campaign disputes the value-added tax label, the proposed changes would essentially cycle through the economy as a sales tax on businesses. For example, an auto dealer would pay a tax on its profits from selling a car, as would the automaker that provided the vehicle to the dealer, the parts makers on their profits from selling to the carmaker, and the steel mill that sold metal to the parts makers.
"In Washington, most Republicans are very tepid and very uninspiring on tax policy," Paul said in the interview.
It was not clear how Paul would ensure cutting taxes so deeply would not at the same time explode the nation's debt. He wrote in the column that his plan would "reduce the national debt by trillions of dollars over time when combined with my package of spending cuts," but he did not detail those cuts.
In the interview, Paul referred to his previous budget proposals, which include sweeping cuts in foreign and domestic spending. In particular, he has previously called to eliminate all aid to foreign governments, including Israel. He has also proposed eliminating the federal departments of education, energy and housing and urban affairs.
He noted, however, he's also called for increased national security spending in his most recent spending plans. "I think that the priority for spending is national defense and national security so we don't have significant cuts in our preparedness," he said.
Florida Sen. Marco Rubio stands out among his Republican colleagues for offering the most detailed economic agenda of the GOP candidates for president, anchored by a massive tax cut that the conservative Tax Foundation said could add as much as $4 trillion to the nation's debt in its first decade.
That approach keeps with conservative economic thinking that the best way to spark growth and increase wages is to reduce the tax burden on businesses, the wealthy and investors. Rubio would also eliminate all taxes on investment income, a change that largely favors the most wealthy Americans.
Like Paul's emphasis on tax cuts, however, it is an approach that exposed Republicans to Democratic criticism that they favor the rich.
While Paul offers just one tax rate, Rubio's plan would set two: 15 percent for those making less than $75,000 (or families earning under $150,000), and 35 percent for all making more.
"Our outdated policies from yesterday are not going to fix this," Rubio said Thursday while calling for new tax policies in a speech to religious conservatives.
"The more your employer pays you, the less they will owe in taxes to the IRS," he said of his plan. "We will help working families by helping them to keep more of what they earn."
Cruz, meanwhile, has repeatedly promised to scrap the tax-collecting agency as he runs for the GOP presidential nomination.
He did not address taxes while speaking to evangelical Christians on Thursday, but Cruz advisers said the senator would soon release more details on his proposal, which he has said would allow most Americans to file their taxes on the back of a postcard-size form.
Associated Press writer Josh Boak contributed to this report.
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