The GOP presidential hopefuls disagree on many issues, but there is one thing they all believe in: lower taxes to promote economic growth.
James Freeman writes about this in today's Wall Street Journal. Freeman notes that in his final State of the Union address President Obama promised more of the policies that have given us a stagnant economy:
But a trend in the Republican Party signals an end to years of stagnation in jobs and wages: Every serious GOP candidate is proposing significant reforms to increase the incentives to work, save and invest. The major contenders are all calling for lower tax rates with fewer deductions—and less of the complexity that feeds the lobbying and accounting industries but costs Americans billions of hours and hundreds of billions of dollars in annual compliance costs. If the eventual GOP nominee prevails in November, the U.S. will likely see the most dramatic change in income taxes since the 1980s.
Freeman recalls that, when Steve Forbes ran for president in 1996 on the idea of a flat tax, the idea was treated as laughable. The media and the left still treat it this way, but the idea has gained credibility. Two GOP candidates, Ted Cruz and Dr. Ben Carson, put forth a flat tax plan, and all offer a simplified system.
John McCain's ideas about taxes didn't inspire tax cutters in 2008 and Mitt Romney in 2012 was, Freeman says, too embarrassed about his wealth to push tax reform as hard as he should have. But this has changed:
Now look at the establishment candidates of 2016. Jeb Bush was a dedicated tax cutter as governor of Florida. Gov. Chris Christie has set some kind of world record in vetoing the myriad tax hikes emanating from the Garden State’s liberal legislature. Sen. Marco Rubio’s plan is to eliminate most deductions and end taxes on capital gains, dividends, interest and death.
And then you have the outsiders. Donald Trump’s plan would result in the biggest income tax cut of all—more than $10 trillion, according to the Tax Foundation. Mr. Carson would deliver the most economic growth by not only eliminating all the savings, investment and death taxes targeted by Mr. Rubio but also by ending all deductions and applying just a 14.9% rate to both personal and corporate income. Sens. Cruz and Paul also offer simplified systems with very low flat rates.
Are there caveats? Yes. Big ones. For example, even if Mr. Trump could enact his income-tax cuts, he has threatened a 45% tax on American consumers buying goods from China and a 35% tax on goods that he believes should have been made in the U.S. instead of Mexico. This would mean violating or withdrawing from trade agreements and would wreak havoc on the U.S. economy. He said this week at Liberty University, “We’re going to get Apple to start building their damn computers and things in this country instead of in other countries.”
Once it’s clear that Washington will be setting a new policy course that rewards success, business investment will start to rebound. Combined with cheap energy and consumers who are cautiously growing more optimistic, you have the makings of old-fashioned American growth. The war on business could be over very soon.
The GOP candidates may be heading in the right direction on taxes, but to turn their plans into law, the GOP has to win a presidential race and hold onto enough votes in Congress.
Let's hope Freeman's optimism is justified.