When it comes to tax policy, the mainstream media too often portray Democrats as the party of the middle class and Republicans as the party of tax breaks for big corporations and the wealthiest “1 percent.”
This narrative of class warfare over-simplifies the issue and fails to adequately examine Republican proposals aimed at increasing fairness and expanding opportunity.
Americans should take note of the candidates’ different approaches to tax policy, which tell us a great deal about what we might expect from our next president.
Just this week, former Florida Governor Jeb Bush became the latest candidate to make public his tax plan. Bush’s plan would reduce the number of income tax brackets from seven to three, with rates of 10, 20 and 28 percent. (Today, the highest-earning Americans pay a tax rate of 39.6 percent, and many small businesses file under the individual tax code and face this same rate.)
Bush’s tax reform proposal would also reduce our national corporate tax rate from 35 to 20 percent, making America more competitive. Because it nearly doubles the standard deduction, Bush says his plan would mean that approximately 15 million working Americans would have no federal income tax liability.
Like Bush, Sen. Marco Rubio (R-Fla.) also proposes streamlining the number of tax brackets and lowering the corporate tax rate, although Rubio proposes two (rather than three) brackets and suggests a 25 percent corporate tax rate. Rubio’s plan also emphasizes family, with a new child tax credit of $2500.
Both the Rubio plan (which he has co-sponsored as legislation along with Sen. Mike Lee, R-UT) and the Bush plan would eliminate, or limit, some popular deductions, credits and loopholes. While Bush’s plan lowers taxes on capital gains and dividends to 20 percent, Rubio’s plan lowers these rates to zero.
Sen. Rand Paul (R-KY) has proposed a similar, but even more aggressive tax reform that scraps today’s tax code in its entirety and replaces it with one rate for every American: 14.5 percent. Ben Carson likewise supports a flat tax of 10-15 percent, and Sen. Ted Cruz (R-TX) supports a flat tax at an unspecified level. Mike Huckabee seeks to replace the income tax with a “fair tax” (a flat national sales tax).
Although the plans differ on specifics, all of these Republican plans focus on broadening the tax base while lowering tax rates with the goal of achieving greater economic growth – that is, job creation, increased productivity and higher wages.
The liberal meme that Republicans seek tax relief only for wealthy Americans and corporations is a gross mischaracterization of the Republican plans, all of which offer tax relief to Americans across the income spectrum. That translates to job creation as well as more disposable income for families and the chance to save and invest for the future.
The Republican plans recognize that the tax code is a source of frustration for most workers — whether left, right, or center. Simplifying the tax-filing process, lowering rates, and fostering economic growth isn’t about coddling the rich. It’s about helping all Americans – regardless of income level.
By contrast, Democratic frontrunners Hillary Clinton and Sen. Bernie Sanders (I-VT) see the tax code not as a means of spurring economic growth, but as a weapon for punishing the rich and feeding the government leviathan.
Clinton proposes to raise the tax rate on short-term capital gains (investments held for less than six years), and Sanders would increase the net investment income surtax to 10 percent. Furthermore, Sanders would increase the estate tax rate to 65 percent and lower the threshold to $3.5 million, limiting the ability of small business owners (including many farmers) to pass on their family businesses to their children.
Although Clinton and Sanders claim to speak for the middle class, it is this group of Americans who will be most hurt by Democratic tax policies that stunt economic growth and job creation.
Margaret Thatcher once remarked that her socialist foes would “rather the poor were poorer, provided the rich were less well off.” The same could be said of today’s progressives whose singular focus on class warfare blinds them to the benefits of pro-growth tax reform.
Hadley Heath Manning is a senior policy analyst for the Independent Women’s Forum.