Rand Paul threads the needle on flat tax

Steve Forbes was all about 17. Herman Cain had 9-9-9. Rand Paul has 14.5.

The Kentucky senator laid out his new flat-tax proposal on Thursday in a bid to differentiate himself from a crowded Republican field, taking to the friendly confines of The Wall Street Journal op-ed page to declare his intention to “blow up the tax code and start over.”


Paul, calling his plan for a 14.5 percent flat-rate tax an “an economic steroid injection,” argued that the U.S. tax code had “grown so corrupt, complicated, intrusive and antigrowth” that it was no longer “fixable.”

Paul’s new “Fair and Flat Tax,” crafted with the help of the Heritage Foundation’s Stephen Moore and Arthur Laffer, the famous father of “supply-side” economics, would cover capital gains, rents, salaries, and individual wages. It would also preserve charity and mortgage deductions. Paul claimed it would amount to a $2 trillion tax cut and spur a GDP boost of 10 percent over 10 years while creating “at least 1.4 million new jobs.”

The read among Republican operatives is that Paul’s move was similar to what New Jersey Gov. Chris Christie did in unveiling his Social Security reform proposal: Lay down a marker that forces others to respond.

“I think we’re going to see more of this as the campaign goes on,” Bruce Haynes, a GOP consultant and a founding partner of Purple Strategies, said Thursday.

Tax plans “are the worst” Haynes continued, because they’re complicated and it’s “easy to shoot holes in them.”

Other GOP candidates have called for lower tax rates. Texas Sen. Ted Cruz speaks often of “a simple flat tax that allows every American to fill out his or her taxes on a postcard.” Florida Sen. Marco Rubio would reduce the number of tax brackets to just two, taxed at either 15 percent and 35 percent. Former Texas governor Rick Perry campaigned on a 20 percent flat tax in 2012, and is working on a new flat-tax proposal. Dr. Ben Carson, though it would be generous to say he has a “plan,” has called for a single tax rate of just 10 percent.

What makes Paul’s plan different, Republicans said, is its unusual level of specificity.

“It’s interesting because traditionally, especially when it comes to tax plans, the fewer the details the better” early in the cycle, Haynes said.

“You want to go low, and particularly if you’re Rand Paul, you don’t want to risk your credibility,” Haynes said. “He can’t allow somebody to say ‘this tax plan won’t generate enough revenue to meet our national security needs,’ so he’s got to be careful about that.”

Others noted that Paul, whose libertarian-tinged positions on foreign policy and prison reform have put him at odds with the GOP base, may be seeking to show that he’s still a Republican in good standing.

“I think it’s kind of an easy issue within Republican primary politics because everyone is for tax reform,” GOP operative Matt Mackowiak said. “But this is a reminder that he’s probably a fairly mainstream Republican on the broader issues.”

Douglas Holtz-Eakin, the former Congressional Budget Office director who advised John McCain’s 2008 presidential campaign, called it a “dramatic and interesting pro-growth policy.” He noted Paul’s decision to retain the earned income tax credit, popular among lower-income Americans, while eliminating the payroll tax, which most Republicans view as regressive.

“The EITC and payroll decisions make it more pro-work than some other flat taxes,” Holtz-Eakin said. (Paul’s plan would also exempt from taxation the first $50,000 of income for a family of four.)

Democrats, however, scoffed at what they see as yet another slash-and-burn Republican tax-cut proposal that would harden America’s economic divisions and blow a hole in the federal budget.

“I view the flat tax, including Paul’s latest bid, as highly regressive and a serious revenue loser,” Jared Bernstein, a former economic adviser to Vice President Joe Biden, said. “In a climate of heightened inequality and insufficient revenues to achieve sustainable budgets, it’s precisely the wrong way to go.”

Bruce Bartlett, a former Ronald Reagan adviser who often criticized former President George W. Bush on economic issues, shrugged off the proposal as a play for Republican primary votes.

“Republicans are obsessed with cutting taxes for the ultra-wealthy and the flat tax is simply a way of packaging it so it looks fair and even-handed,’ Bartlett said.

Bartlett said that Paul’s advisers, Moore and Laffer, had “zero credibility.”

“Laffer, recall, said the Kansas plan would immediately raise growth so much that revenue would not fall,” Barlett said. “And Moore is widely known for making factual errors in almost everything he writes. Among Republicans, having the lowest flat-tax rate is like having the biggest dick in the locker room.”

Correction: The original version of this article said that Paul’s plan would eliminate charity and mortgage deductions. It would preserve them.

CORRECTION: Corrected by: Terry Mulcahy @ 06/18/2015 04:59 PM Correction: The original version of this article said that Paul’s plan would eliminate charity and mortgage deductions. It would preserve them.