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There is some very good news to share. The income tax will disappear in April.

But there’s also some bad news. The income tax is only being abolished in the Caribbean nation of Antigua and Barbuda, and there’s little reason to think that America’s awful internal revenue code will disappear anytime soon.

Nonetheless, we should celebrate this development because it shows that fiscal mistakes can be reversed.

A report from Caribbean News Now has some of the highlights.

The people of Antigua and Barbuda will from April receive tax relief when the government plans to abolish personal income tax (PIT).  PIT, introduced by the now opposition United Progressive Party upon coming into office in 2004, imposes a tax of 8% on residents earning an income above $3,500 and 15% on those earning an income above $25,000. …Prime Minister Gaston Browne…noted that previous Antigua and Barbuda Labour Party administrations governed Antigua and Barbuda successfully for 27 years without personal income tax. He said that the cost of collecting PIT, the difficulty of enforcement, and its unfairness, make it sensible to remove the PIT from the books.

Wow, the Antigua and Barbuda version of the Labour Party obviously is much better than the crazed British version.

But let’s not get sidetracked. Here are some additional details from a story in the Jamaica Observer.

Prime Minister Gaston Browne yesterday announced that, effective April, personal income tax will be abolished in its entirety. …”Abolishing personal income tax is an important reform. Not only will it put more money in the pockets of the people, so that they can save or spend more for the benefit of the economy as whole, it will help to re-establish our country as one of the most competitive in the Caribbean and beyond.” …He noted that with this move, Antigua and Barbuda will be a location that is competitive and also the choice of retirees.  “Antigua and Barbuda will become a competitive location to attract the headquarters of companies and for professionals to relocate, thereby creating more jobs. Retirees will choose Antigua and Barbuda as their retirement home; Citizenship by Investment Programme (CIP) investors will invest and choose Antigua and Barbuda over our competitors,” said the prime minister. …”taxing income is destructive to investment, savings and consumption. Also, it penalises entrepreneurship.”

For a politician, Mr. Browne has a good understanding of economics. I don’t like the “money in the pockets” rhetoric because it implies a bit of Keynesianism, but everything else he said is based on solid, microeconomic observations about incentives. Very reminiscent of JFK.

And I also like his point about wanting to be a “competitive location.” Yet another example of why tax competition is such a wonderful force for good policy. It encourages governments to do the right thing even when they don’t want to.

I bet, for instance, that the good reform in Antigua and Barbuda will put an end to the suicidal talk of an income tax in the Cayman Islands.

But what about the United States? Is there any chance that good policy in the Caribbean will encourage tax reform in the United States?

Unfortunately, most politicians couldn’t find Antigua and Barbuda on a map, much less care about that nation’s fiscal policy. So I’m not holding my breath that we’ll reverse the horrid mistake that was made in 1913.

But maybe, just maybe, we can at least figure out a less corrupt and less destructive way for the politicians to grab our money.

P.S. Antigua and Barbuda is a beautiful place, but I’ve noted before that government always has the ability to turn Heaven into Hell.

P.P.S. By the way, because of our awful worldwide tax system, American citizens can’t move to Antigua and Barbuda and benefit from that nation’s good tax policy. But there is a Caribbean island where you can legally slash your tax burden.

P.P.P.S. For those who follow Caribbean tax policy, we also enjoyed a fiscal victory a few years ago when a value-added tax was rejected in the Turks and Caicos Islands.

P.P.P.P.S. On an unrelated topic, I want to augment my observations on the water crisis in Flint, Michigan, by citing some very important analysis by Reason‘s Shikha Dalmia. While a wasteful and incompetent local government caused the mess, she explains that state officials deserve some blame because they wanted to “create jobs” with an infrastructure project instead of accepting a good water deal from Detroit.

…the debacle is the result of Snyder’s efforts to stimulate the local economy—the exact opposite of the liberal line. …the then DWSD Director Susan McCormick presented two alternatives to Emergency Manager Ed Kurtz that slashed rates for Flint by nearly 50 percent, something that made Detroit far more competitive compared to the KWA deal. …Genesee County and Flint authorities saw the new water treatment as a public infrastructure project to create jobs… And neither Snyder nor his Emergency Manager Ed Kurtz nor the state treasurer Andy Dillon had the heart to say “no,” especially since to hand Flint to DWSD would have made the whole project less viable. …the Flint water crisis is the result of a Keynesian stimulus project gone wrong.

Hmmm…, statists make silly claims about terrorism being caused by climate change or inequality. Maybe I can be equally silly and now argue that stimulus schemes cause poisonous water!

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When I compared the tax reform proposals of various 2016 presidential candidates last month, Ben Carson got the best grade by a slight margin.

But I’ve now decided to boost his overall grade from a B+ to A-, or perhaps even A, because he’s finally released details and that means his grade for “specificity” jumps from a C to A-.

Here’s some of what’s been reported in the Wall Street Journal.

Republican presidential candidate Ben Carson on Monday called for imposing a 14.9% flat tax rate on income, ending taxes on capital gains and dividends and abolishing the charitable deduction and all tax credits.

By the way, the reporter goofed. Carson is proposing to end double taxation of dividends and capital gains, but all income would be taxed. What the reporter should have explained is that capital and business income would be taxed only one time.

But I’m digressing. Let’s review some additional details.

Mr. Carson’s flat tax would apply only to income above 150% of the poverty level… In some respects, Mr. Carson’s plan is similar to those of the other candidates, all of whom want to lower tax rates… But he goes farther, particularly with his willingness to rip up parts of the tax system that have been in place for a century. …In addition to eliminating the charitable deduction and investment taxation, Mr. Carson would also repeal the estate tax, the mortgage-interest deduction, the state and local tax deduction,  depreciation rules and the alternative minimum tax.

Wow, no distorting preferences for charity or housing. And no double taxation of any form, along with expensing instead of depreciation. Very impressive.

Carson has basically put forth a pure version of the plan first proposed by economists at Stanford University’s Hoover Institution.

Perhaps most important of all, Carson’s plan is a flat tax and just a flat tax. He doesn’t create any new taxes that could backfire in the future.

Here’s what the Carson campaign wrote about his flat tax compared to the plans put forth by Rand Paul and Ted Cruz.

Unlike proposals advanced by other candidates, my tax plan does not compromise with special interests on deductions or waffle on tax shelters and loopholes. Nor does it falsely claim to be a flat tax while still deriving the bulk of its revenues through higher business flat taxes that amount to a European-style value-added tax (VAT). Adding a VAT on top of the income tax would not only impose an immense tax increase on the American people, but also become a burdensome drag on the U.S. economy.

I would have used different language, warning about the danger of a much-higher future fiscal burden because Washington would have both an income tax and a VAT, but the bottom line is that I like Carson’s plan because the worst outcome is that future politicians might eventually recreate the current income tax.

What I don’t like about the Paul and Cruz plans, by contrast, is that future politicians could much more easily turn America into France or Greece.

Here’s my video that explains why the flat tax is the best system (at least until we shrink the federal government to such a degree that we no longer need any form of broad-based taxation).

P.S. If you want to get hyper-technical, Carson’s plan may not be a pure flat tax because he would require a very small payment from everybody (akin to what Governor Bobby Jindal proposed). Though if the “de minimis” payment is a fixed amount (say $50 per adult) rather than a second rate (say 1% on the poor), then I certainly would argue it qualifies as being pure.

P.P.S. Carson still has a chance to move his overall grade to A or A+ if he makes the plan viable by proposing an equally detailed plan (presumably consisting of genuine entitlement reform and meaningful spending caps) to deal with the problem of excessive government spending.

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The Organization for Economic Cooperation and Development is a Paris-based international bureaucracy. It used to engage in relatively benign activities such as data collection, but now focuses on promoting policies to expand the size and scope of government.

That’s troubling, particularly since the biggest share of the OECD’s budget comes from American taxpayers. So we’re subsidizing a bureaucracy that uses our money to advocate policies that will result in even more of our money being redistributed by governments.

Adding insult to injury, the OECD’s shift to left-wing advocacy has been accompanied by a lowering of intellectual standards. Here are some recent examples of the bureaucracy’s sloppy and/or dishonest output.

Deceptively manipulating data to make preposterous claims that differing income levels somehow dampen economic growth.

Falsely asserting that there is more poverty in the United States than in poor nations such as Greece, Portugal, Turkey, and Hungary.

Cooperating with leftist ideologues from the AFL-CIO and Occupy movement to advance Obama’s ideologically driven fiscal policies.

Peddling dishonest gender wage data, numbers so misleading that they’ve been disavowed by a member of Obama’s Council of Economic Advisers.

Given this list of embarrassing errors, you probably won’t be surprised by the OECD’s latest foray into ideology-over-accuracy analysis.

As part of its project to impose higher taxes on companies, here’s what the OECD is claiming in a recent release.

Corporate tax revenues have been falling across OECD countries since the global economic crisis, putting greater pressure on individual taxpayers… “Corporate taxpayers continue finding ways to pay less, while individuals end up footing the bill,” said Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration. “The great majority of all tax rises seen since the crisis have fallen on individuals through higher social security contributions, value added taxes and income taxes. This underlines the urgency of  efforts to ensure that corporations pay their fair share.” These efforts are focused on the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project.

And what evidence does the OECD have to justify this assertion?

Here’s what the bureaucracy wrote.

Average revenues from corporate incomes and gains fell from 3.6% to 2.8% of gross domestic product (GDP) over the 2007-14 period. Revenues from individual income tax grew from 8.8% to 8.9% and VAT revenues grew from 6.5% to 6.8% over the same period.

Those are relatively small shifts in tax receipts as a share of GDP, so one certainly could say that the OECD bureaucrats are trying to make a mountain out of a molehill.

But that would mean that they’re merely guilty of exaggeration.

The much bigger problem is that the OECD is disingenuously cherry-picking data, the kind of methodological mendacity you might expect from an intern in the basement of the White House, but not from supposed professionals.

If you go to the OECD’s website and click on the page where the corporate tax data is found, you’ll actually discover that corporate tax receipts have been slowly climbing as a share of GDP.

Yes, receipts are slightly lower than they were at the peak of the financial bubble.

However, honest analysts would never claim that those numbers were either sustainable or appropriate to use as a bennchmark.

Sadly, “honest” and “OECD” are words that don’t really belong together any more.

The bureaucrats in Paris also are being mendacious in their portrayal of what’s happening with individual income tax revenues.

Monsieur Saint-Amans wants us to think that falling corporate tax receipts are being offset by a rising burden on individuals, but check out this table from the OECD’s Revenue Statistics. As you can see, he wants us to look at one tree (what’s happened in the past few years) and ignore the forest (the fact that the burden of the personal income tax today is lower than it was in 1980, 1990, or 2000).

By the way, the real story is that the OECD wants higher tax burdens, period. Anytime, anywhere, and on everybody.

It’s attack on low-tax jurisdictions is designed to enable higher income tax burdens on individuals.

Its “base erosion and profit shifting” project is designed to facilitate higher income tax burdens on companies.

And the bureaucrats reflexively advocate higher value-added tax burdens.

All of what you might expect from an organization filled with overpaid officials who realize their cosseted lifestyle is dependent on producing output that will generate continuing subsidies from statist politicians such as Obama and Hollande.

P.S. If you want an amazing example of the OECD’s ideology-over-analysis approach, here’s what the bureaucrats recently wrote about achieving more growth in Asia.

Increasing tax revenues and ensuring sustainable domestic resource mobilisation will be critical as emerging Asian economies seek to boost the provision of public goods and services and improve economic growth and living standards. …Comparable and consistent tax statistics facilitate transparent policy dialogue and provide policy makers with an important tool to assess alternative tax reforms. …Continued reforms will be necessary to help these tax administrations raise additional tax revenues in the future.

Yup, you read correctly (at least if you understand that “domestic resource mobilisation” is OECD-speak for higher taxes). The bureaucrats think generating more tax revenue to finance bigger government actually is a recipe for more prosperity.

For all intents and purposes, they’re advising nations in the region to copy France and Italy instead of seeking to be more like Hong Kong and Singapore.

Though, to be fair, the OECD isn’t just trying to impose bad policy on Asia. The bureaucrats in Paris have an equal-opportunity mindset when advocating statism since that’s the exact same prescription the OECD gave for Latin America.

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During last night’s Democratic debate, Senator Bernie Sanders said he would not raise tax rates as high as they were in the 1950s. And if Twitter data is accurate, his comment about being “not that much of a socialist compared to [President] Eisenhower” was one of the evening’s most memorable moments.

But a clever line is not the same as smart policy. Promising not to raise top tax rates to 90 percent or above is hardly a sign of moderation from the Vermont politician.

Fortunately, not all Democrats are infatuated with punitive tax rates.

Or at least they didn’t used to be. When President John F. Kennedy took office, he understood that the Eisenhower tax rates (in fairness to Ike, he’s merely guilty of not trying to reduce confiscatory tax rates imposed by FDR) were harming the economy and JFK argued for across-the-board tax rate reductions.

…an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget just as it will never produce enough jobs or enough profits. Surely the lesson of the last decade is that budget deficits are not caused by wild-eyed spenders but by slow economic growth and periodic recessions and any new recession would break all deficit records. In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.

Here’s a video featuring some of President Kennedy’s wisdom on lower tax rates.

If that wasn’t enough, here’s another video featuring JFK’s wisdom on taxation.

By the way, if Senator Sanders really wants the rich to pay more, one of the lessons reasonable people learned from the Kennedy tax cuts is that upper-income taxpayers respond to lower tax rates by earning and reporting more income. Here’s a chart from a study I wrote almost 20 years ago.

Last but not least, let’s preemptively address a likely argument from Senator Sanders. He might be tempted to say that he doesn’t want the 90-percent tax rate of the Eisenhower years, but that he’s perfectly content with the 70-percent top tax rate that existed after the Kennedy tax cuts.

But if that’s the case, instead of teaching Sanders a lesson from JFK, then he needs to learn a lesson from Ronald Reagan.

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I’m happy that many of the presidential candidates are proposing big tax cuts.

Bobby Jindal and Donald Trump have large tax cuts, and Jeb Bush, Rand Paul, and Marco Rubio are proposing smaller – but still significant – reductions in the federal tax burden.

All of these plans, to be credible, should be accompanied by proposals for a sustained reduction in the burden of government spending (with real enforcement mechanisms).

But there’s something else that needs to be part of the discussion. Yes, we need tax cuts and smaller government, but we also need radical tax simplification.

Consider this depressing chart showing the number of pages in the instruction manual for the IRS’s 1040 tax form.

Or the number of sections in the tax law, which has skyrocketed in the past four decades.

I think it’s fair to say that complexity is a proxy for corruption (and even the World Bank agrees with me). Our tax code is a Byzantine mess because interest groups and lobbyists conspire with politicians to swap loopholes for campaign cash.

Some say that this problem could be solved by restricting the First Amendment and limiting people’s ability to participate in the political process. But that’s naive. So long as we have a convoluted tax code, insiders will figure out how to curry favor with the political elite and manipulate the system to their advantage.

Rather than trashing the Constitution, we should be trashing the internal revenue code.

I have lots of economic arguments for fundamental tax reform and I can wax poetic about the harm of high tax rates and double taxation of saving and investment.

But this new chart from the Tax Foundation, showing the ever-growing number of words in the tax code, is probably the single most compelling argument for a simple and fair flat tax.

Wow. It doesn’t seem to matter which party is in power. It doesn’t seem to matter who controls the White House or who controls Congress. Just as the number of pages in the tax code keeps expanding, so does the number of words.

And I think all of us know that this relentless growth in complexity is not good for ordinary taxpayers.

The only winners are the cronyists, politicians, and other insiders who get rich by using the coercive power of government.

And don’t forget that a complicated tax code means a very powerful IRS, and we’ve seen how that leads to venal corruption.

Now let’s circle back to where we started. I mentioned that many presidential candidates have proposed big tax plans that reduce the amount of money flowing to Washington. Many of those plans also include partial reforms of the tax code.

All of these components are desirable in that they both reduce the tax burden and simplify the tax system. And I could list other attractive partial reforms that are in the various tax plans.

But I can’t help but wonder why no candidate has explicitly embraced the gold standard of tax reform.

By the way, I’m ecumenical on a replacement system. There are other plans that satisfy the goals of real reform.

My only caveat, for those who advocate a national sales tax or value-added tax, is that we first need to repeal the 16th Amendment and replace it with something so ironclad that politicians could never do a bait and switch and saddle the American people with both an income tax and a consumption tax.

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Every so often, I get asked why I’m so rigidly opposed to tax hikes in general and so vociferously against the imposition of new taxes in particular.

In part, my hostility is an ideological reflex When pressed, though, I’ll confess that there are situations – in theory – where more taxes might be acceptable.

But there’s a giant gap between theory and reality. In the real world, I can’t think of a single instance in which higher taxes led to a fiscally responsible outcome.

That’s true on the national level. And it’s also true at the state level.

Speaking of which, the Wall Street Journal is – to put it mildly – not very happy at the tax-aholic behavior of Connecticut politicians. Here’s some of what was in a recent editorial.

The Census Bureau says Connecticut was one of six states that lost population in fiscal 2013-2014, and a Gallup poll in the second half of 2013 found that about half of Nutmeg Staters would migrate if they could. Now the Democrats who run the state want to drive the other half out too. That’s the best way to explain the frenzy by Governor Dannel Malloy and the legislature to raise taxes again… Mr. Malloy promised last year during his re-election campaign that he wouldn’t raise taxes, but that’s what he also said in 2010. In 2011 he signed a $2.6 billion tax hike promising that it would eliminate a budget deficit. Having won re-election he’s now back seeking another $650 million in tax hikes. But that’s not enough for the legislature, which has floated $1.5 billion in tax increases. Add a state-wide municipal sales tax that some lawmakers want, and the total could hit $2.1 billion over two years.

In other words, higher taxes in recent years have been used to fund more spending.

And now the politicians are hoping to play the same trick another time.

Apparently they don’t care that they’ve turned the Nutmeg State into a New England version of Illinois.

…the state grew a scant 0.9% in 2013, the last year state data are available. That was tied for tenth worst in the U.S. The state’s average compounded annual growth for the last four years is 0.42%. Slow growth means less tax revenue but spending never slows down. Some “40% of the state budget goes to government employee compensation and benefits, including payroll, state pensions, teacher pensions and current and retiree health care,” says Carol Platt Liebau, president of the Hartford-based Yankee Institute. …The Tax Foundation ranks Connecticut as one of the 10 worst states to do business. The state finished last in Gallup’s Job Creation Index in 2014 and now ties with Rhode Island for the worst job creation in the index since 2008.

What’s particularly discouraging is that Connecticut didn’t even have an income tax twenty-five years ago. But once the politicians got a new source of revenue, it’s been one tax hike after another.

Not too many years ago Connecticut was a tax refuge for New York City workers, but since it imposed an income tax in 1991 the rate has kept climbing, as it always does.

There are a couple of lessons from the disaster in Connecticut.

First and foremost, never give politicians a new source of revenue, which has very important implications for the debate in Washington, DC, about a value-added tax.

Unless, of course, you want to enable a bigger burden of government.

And for the states that don’t already have an income tax, the lesson is very clear. Under no circumstances should you allow your politicians to follow Connecticut on the path to fiscal perfidy.

Yet that’s exactly what may be happening in America’s northwest corner. As reported by the Seattle Times, there’s a plan percolating to create an income tax in the state of Washington. It’s being sold as a revenue swap.

State Treasurer Jim McIntire has a “grand bargain” in mind on tax reform and he wants to bend your ear. …the McIntire plan would institute a 5 percent personal-income tax with some exemptions, eliminate the state property tax and reduce business taxes. The plan would raise billions of dollars… The proposal also would lower the state sales tax to 5.5 percent from 6.5 percent.

But taxpayers should be very suspicious, particularly since politicians are talking about the need for more “investment,” which is a common rhetorical trick used by politicians who want to squander more money.

“It is mathematically impossible for us to sustain an adequate investment in education on a shrinking tax base,” he said.

And when you read the fine print, it turns out that the politicians (and the interest groups in the government bureaucracy) want a lot more additional money from taxpayers.

…the plan would raise $7 billion in state revenue but would lower local levies by $3 billion, for an overall increase of about $4 billion.

Advocates of the new tax would prefer to avoid any discussion of big-picture principles.

“We need to have less of an ideological conversation about this,” he said in a news conference.

And their desire to avoid a philosophical discussion is understandable. After all, the big spenders didn’t fare so well the last time voters had a chance to vote on whether the state should impose an income tax.

Voters may not welcome McIntire’s argument, either. In 2010, a proposed income tax on high earners failed by a nearly 30-point margin.

The voters in Washington were very wise back in 2010, so let’s hope they haven’t lost their skepticism about the revenue plans of politicians over the past few years.

There’s every reason to suspect, after all, that the adoption of an income tax would be just as disastrous for the Evergreen State as it was for the Nutmeg State.

To close, I want to share some great advice that was presented by the always sound Professor Richard Vedder. I was at a conference a few years ago where he was also one of the speakers. Asked to comment on whether the Lone Star State should have an income tax, he threw his hands in the air and cried out with passion that, “Texas should give the Alamo to Osama bin Laden before allowing an income tax.”

So if I’m ever asked to speak in Seattle on fiscal policy, I’m going to steal Richard’s approach and and warn that “The state of Washington should give the Space Needle to North Korea before allowing an income tax.”

I doubt I’ll capture Professor Vedder’s rhetorical flair, but there won’t be any doubt that I’ll be 100-percent serious about the dangers of a state income tax.

And what about my home state of Connecticut?

Well, I don’t know of any big landmarks that they could have traded to avoid an income tax. About the only “good” thing to say is that New York’s tax system is probably even worse.

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In my 2012 primer on fundamental tax reform, I explained that the three biggest warts in the current system.

1. High tax rates that penalize productive behavior.

2. Pervasive double taxation that discourages saving and investment.

3. Corrupt loopholes and cronyism that bribe people to make less productive choices.

These problems all need to be addressed, but I also acknowledged additional concerns with the internal revenue code, such as worldwide taxation and erosion of constitutional freedoms an civil liberties.

In a perfect world, we would shrink government to such a small size that there was no need for any sort of broad-based tax (remember, the United States prospered greatly for most of our history when there was no income tax).

In a good world, we could at least replace the corrupt internal revenue code with a simple and fair flat tax.

In today’s Washington, the best we can hope for is incremental reform.

But some incremental reforms can be very positive, and that’s the best way of describing the “Economic Growth and Family Fairness Tax Reform Plan” unveiled today by Senator Marco Rubio of Florida and Senator Mike Lee of Utah.

The two GOP senators have a column in today’s Wall Street Journal, and you can read a more detailed description of their plan by clicking here.

But here are the relevant details.

What’s wrong with Rubio-Lee

In the interest of fairness, I’ll start with the most disappointing feature of the plan. The top tax rate will be 35 percent, only a few percentage points lower than the 39.6 percent top rate that Obama imposed as a result of the fiscal cliff.

Even more troubling, that 35 percent top tax rate will be imposed on any taxable income above $75,000 for single taxpayers and $150,000 for married taxpayers.

Since the 35 percent and 39.6 percent tax rates currently apply only when income climbs above $400,000, that means a significant number of taxpayers will face higher marginal tax rates.

That’s a very disappointing feature in any tax plan, but it’s especially unfortunate in a proposal put forth my lawmakers who wrote in their WSJ column that they want to “lower rates for families and individuals.”

What’s right with Rubio-Lee

This will be a much longer section because there are several very attractive features of the Rubio-Lee plan.

Some households, for instance, will enjoy lower marginal tax rates under the new bracket structure, particularly if those households have lots of children (there’s a very big child tax credit).

But the really attractive features of the Rubio-Lee plan are those that deal with business taxation, double taxation, and international competitiveness.

Here’s a list of the most pro-growth elements of the plan.

A 25 percent tax rate on all business income – This means that the corporate tax rate is being reduced from 35 percent (the highest in the world), but also that there will be a 25 percent maximum rate on all small businesses that file using Schedule C as part of a 1040 tax return.

Sweeping reductions in double taxation – The Rubio-Lee plans eliminates the capital gains tax, the double tax on dividends, and the second layer of tax on interest.

Full expensing of business investment – The proposal gets rid of punitive “depreciation” rules that force businesses to overstate their income in ways that discourage new business investment.

Territorial taxation – Businesses no longer will have to pay a second layer of tax on income that is earned – and already subject to tax – in other nations.

No death tax – Income should not be subject to yet another layer of tax simply because someone dies. The Rubio-Lee plan eliminates this morally offensive form of double taxation.

In addition, it’s worth noting that the Rubio-Lee plan eliminate the state and local tax deduction, which is a perverse part of the tax code that enables higher taxes in states like New York and California.

Many years ago, while working at the Heritage Foundation, I created a matrix to grade competing tax reform plans. I updated that matrix last year to assess the proposal put forth by Congressman Dave Camp, the former Chairman of the House Ways & Means Committee.

Here’s another version of that matrix, this time including the Rubio-Lee plan.

As you can see, the Rubio-Lee plan gets top scores for “saving and investment” and “international competitiveness.”

And since these components have big implications for growth, the proposal would – if enacted – generate big benefits. The economy would grow faster, more jobs would be created, workers would enjoy higher wages, and American companies would be far more competitive.

By the way, if there was (and there probably should be) a “tax burden” grade in my matrix, the Rubio-Lee plan almost surely would get an “A+” score because the overall proposal is a substantial tax cut based on static scoring.

And even with dynamic scoring, this plan will reduce the amount of money going to Washington in the near future.

Of course, faster future growth will lead to more taxable income, so there will be revenue feedback. So the size of the tax cut will shrink over time, but even a curmudgeon like me doesn’t get that upset if politicians get more revenue because more Americans are working and earning higher wages.

That simply means another opportunity to push for more tax relief!

What’s missing in Rubio-Lee

There are a few features of the tax code that aren’t addressed in the plan.

The health care exclusion is left untouched, largely because the two lawmakers understand that phasing out that preference is best handled as part of a combined tax reform/health reform proposal.

Some itemized deductions are left untouched, or simply tweaked.

And I’m not aware of any changes that would strengthen the legal rights of taxpayers when dealing with the IRS.

Let’s close with a reminder of what very good tax policy looks like.

To their credit, Rubio and Lee would move the tax code in the direction of a flat tax, though sometimes in a haphazard fashion.

P.S. There is a big debate on the degree to which the tax code should provide large child credits. As I wrote in the Wall Street Journal last year, I much prefer lower tax rates since faster growth is the most effective long-run way to bolster the economic status of families.

But even the flat tax has a generous family-based allowance, so it’s largely a political judgement on how much tax relief should be dedicated to kids and how much should be used to lower tax rates.

That being said, I think the so-called reform conservatives undermine their case when they argue child-oriented tax relief is good because it might subsidize the creation of future taxpayers to prop up entitlement programs. We need to reform those programs, not give them more money.

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