GOP Candidates’ Tax Proposals: For Dummies

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By Claire Brunner

If there were an award for the most boring, complex political issue out there, tax reform might top the list. For this reason, politicians often leave it alone and instead pick issues that are more exciting to their constituents. Unfortunately, tax reform is also one of the most important issues that politicians encounter. Once politics leave the realm of issues that can be simplistically presented (abortion, gun control, etc.) and enter the world of tax brackets, itemized deductions, and corporate jargon, candidates’ rhetoric change to broad statements about economic objectives. Most of us prefer to leave the calculations to accountants and accept whatever our preferred candidate says regarding his or her tax plan merely because we trust them on the issues that we do understand. Effective tax policy plays a critical role in promoting economic growth and incentivizing economic players to act in ways beneficial to the economy and therefore must play a role in how we vote.

In October, Jeb Bush and Donald Trump both unveiled specific tax plans.  In September 2014, Marco Rubio, Senator from Florida, and Mike Lee, Senator from Utah, unveiled a joint tax plan that Rubio has asserted will remain part of his presidential platform. While all three candidates highlight their commitment to conservative economic principles, each add a unique flavor to his tax plan. Republican voters must study these differences.

The Rubio Plan

Marco Rubio, in conjunction with Senator Mike Lee, was one of the first candidates to release a comprehensive tax plan. Rubio proposes two tax brackets with rates of 15 and 35 percent. Other proposals include the elimination or reform of deductions, ending double taxation on investment, and cutting corporate tax rates. A central tenet of the Rubio-Lee plan focuses on the family. It calls for the elimination of the parent tax penalty, which refers to the idea that parents are double-charged when they contribute to entitlement programs through payroll taxes and also have the burden of raising future taxpayers. Keeping with the family focus, Rubio and Lee propose a higher child tax credit on income and payroll taxes, the burden of these taxes typically falling disproportionately on lower and middle-income families. This pro-family emphasis is the defining element of Rubio’s plan.

Though Rubio’s tax plan reflects conservative values, it differs strikingly from past Republican plans. While simplifying the tax code to incorporate fewer tax brackets is generally popular among Republicans, a tax rate of 35 percent, even though it only applies to the highest income level, is unlikely to sit well with many conservative voters. Though it would be lower than the current top rate of 39.6 percent, most Republicans would likely prefer larger tax cuts, such as those presented by Bush and Trump. This relatively higher rate further differentiates Rubio from his competitor in the moderate GOP wing, Jeb Bush. Though many traditional Republican voters would be displeased, Rubio’s plan would appeal to younger Republicans concerned with increased income inequality. A problem highlighted by many critics of the plan is that the top rate of 35 percent would apply to individual incomes as low as $75,000. This would result in a tax hike, rather than a cut, for many middle-income individuals. Furthermore, The Tax Foundation estimates that the Rubio plan would result in a $1.7 trillion loss of revenue over a 10-year period. While there are problems highlighted by critics on both sides of the aisle, Rubio’s plan is thought to be strongly pro-business and pro-family.

The Bush Plan

Jeb Bush, former governor of Florida, revealed his tax plan early last month. Economic growth has been a key talking point for Bush’s campaign; earlier in the year, he asserted, “There is not a reason in the world why we cannot grow at a rate of four percent a year.” This talk of economic growth is heavily emphasized in his tax plan as well. Bush proposes three tax rates of 10, 25, and 28 percent, with a 20 percent corporate rate. His major goals are consistent with conservative objectives: lower taxes (cutting individual rates from seven brackets to three and leaving 15 million Americans paying zero income tax), eliminating loopholes (treating all non-investment income the same), and cutting corporate tax rates from their current 35 percent rate to 20 percent. He criticizes exemptions for certain favored industries and seeks to eliminate tax deductions for borrowing, which typically encourage debt.

While Bush incorporates traditional conservative ideas, he also includes the unexpected. For example, he emphasizes closing loopholes that allow large fund managers to pay lower taxes through eliminating carried interest. He would increase the number of Americans exempt from income tax from the current 40 percent of filers to about 50 percent of filers. His plan targets lower and middle class Americans who would respond well to lower taxes and the elimination of loopholes used mainly by the wealthy. Businesses would also likely respond well to Bush’s plan because it would cut corporate taxes and switch to a territorial tax system. The Tax Foundation estimates that Mr. Bush’s plan will reduce revenue by $1.6 trillion over a 10-year period. Overall, the Bush plan is very growth-oriented, appealing to businesses as well as lower and middle-income Americans.

The Trump Plan

Donald Trump, the most recent in the line of GOP candidates to reveal a tax plan, revealed a plan of a much bigger scale than those of Rubio and Bush. His proposals include four tax brackets of zero, 10, 20, and 25 percent, as well as eliminating the estate tax (like Bush) and the Alternative Minimum Tax (generally affecting the wealthy). Additionally, he proposes to cap corporate taxes at 15 percent. Trump’s plan, like Bush’s, would eliminate income tax for millions of Americans; 73 million households would no longer have to pay income tax under the plan, a larger number than those affected under Bush. While Trump claims these cuts would pay for themselves through revenue generated by reduced deductions and eliminated loopholes, many are skeptical. The Tax Foundation estimates that the plan would reduce tax revenues by more than $10 trillion over a 10-year period.

Trump’s plan, like those of Bush and Rubio, sticks to the conservative values of simplifying tax brackets, lowering taxes, and making up for losses with cutting deductions and eliminating loopholes. However, as seen in the estimate above, his plan would likely reduce revenue by more in the long run than both Rubio’s and Bush’s plans. While Bush’s plan includes a large tax cut aimed at high-income individuals, Trump is proposing an even larger cut. Trump’s plan is far more likely to increase the deficit, but it will probably benefit some lower-income Americans who will no longer have to pay income tax and businesses that will see their taxes dramatically reduced.

While each candidate’s tax plan sticks to principles that are dear to the conservative base, each plan is distinct. These differences can be seen most concretely in the estimated loss of revenue resulting from each plan, but other differences are based on each candidate’s demographic target. While Rubio focuses on families in order to appeal to the middle class American, Bush and Trump both propose increasing the income tax exemption in an effort to appeal to younger Republican voters concerned with inequality.

It is best that these plans are not ignored in favor of more “glamorous” issues usually discussed by the wider public. Tax plans contain not-so-subtle hints to the direction of a candidate’s campaign, and, potentially, his presidency. Though it is much easier to vote for a candidate based on issues that are less complex, voters must not ignore plans for tax reform, as these goals are likely to affect most, if not all, Americans.

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