Rand Paul introduced his new tax plan Wednesday night, calling for the removal of thousands of pages of IRS tax code and implementing a 14.5 percent flat tax.
Sen. Paul posed his new tax plan as a way to help middle class families in a struggling economy, he said.
“The Fair and Flat Tax eliminates payroll taxes, which are seized by the IRS from a worker’s paychecks before a family ever sees the money. This will boost the incentive for employers to hire more workers, and raise after-tax income by at least 15% over 10 years,” the Kentucky senator wrote in a Wall Street Journal op-ed.
The flat tax had previously been introduced in 1996 by Steve Forbes during his run for the Republican nomination, Forbes then proposed by a 17 percent flat tax rate. Along with Forbes, Rand Paul sought out the advice of Reagan administration economist Arthur Laffer, and the non-partisan Tax Foundation.
His tax plan would also eliminate the current U.S corporate tax rate of 35 percent, replacing it with the 14.5 percent rate. Paul understands that he will receive criticism for his plan, with opponents saying that this is just a tax break for the wealthy.
Democratic New York Rep. Charles Rangel sums up the opposition to the flat tax writing, “The question in all of these proposals is who will pay: Are the rich paying their fair share, or are we continuing to shift the tax burden to the poor and middle class? The ‘flat tax’ proposals would materially raise the tax burden on many low- and middle-income taxpayers, who today face little or no tax under the income tax. I don’t think that is what the American public wants.”
Paul defends himself from these claims in the Journal, writing, “Most of the loopholes in the tax code were designed by the rich and politically connected. Though the rich will pay a lower rate along with everyone else, they won’t have special provisions to avoid paying lower than 14.5%.”
The proposed tax system would also remove taxes on the first $50,000 earned by a family of four. Paul would also remove the estate and gift tax, he projects his tax would be the largest tax cut in American history, reducing federal government revenue by $2 trillion over the first 10 years.
With American deficits nearing dangerous levels, Paul realizes fears over what less tax revenues would mean.
“The best way to balance the budget and pay down government debt is to put Americans back to work, my plan would actually reduce the national debt by trillions of dollars over time when combined with my package of spending cuts,” Paul wrote.
As for putting Americans back to work, he cites estimations from the Tax Foundation that in 10 years the “Fair and Flat Tax” would create 1.4 million new jobs and increase gross domestic product by around 10 percent.