Feel Free To Laugh: Rand Paul’s ‘Flat Tax’ Plan Would Cost $15,000,000,000,000

Rand Paul Tea Party

There’s this really stubborn myth that just won’t go away that says Republicans are the party of fiscal responsibility and Democrats are nothing but taxers and spenders. If we were to buy that myth, what are we to make of “fiscally conservative” Sen. Rand Paul’s new tax plan that would cost $15 trillion (that’s 15 followed by 12 zeroes), very nearly double America’s deficit, and would only help the rich? What part of that is fiscally responsible?

Front-runners like Jeb Bush and Scott Walker may be stealing a lot of the spotlight, but Paul is currently still hoping to be president of the United States someday soon. To prove that he’s a Serious Candidate with Big Ideas, Paul announced a new tax plan that he designed all by himself (and a guy unironically known as the “father of supply-side economics”). It’s quickly becoming the laughingstock of the financial world.

In an op-ed published in the Wall Street Journal, Paul said he’s going 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 glaring problem with this plan is that it would almost exclusively be a MASSIVE tax cut for the rich. His plan is a simple 14.5 percent tax on incomes, meaning most of the upper income brackets who already pay historically low tax percentages would pay 10 or 20 percent less than they had before. And as Hamilton Nolan at Gawker pointed out, it also pretty obviously screws over the poor to feed the rich:

Our whole progressive tax code, in which tax rates go up as income rises (broadly speaking), is based on the idea that as people get richer and richer, they can afford to contribute more to the public good, whereas people who are very poor cannot afford to contribute as great a percentage, because they need that money in a much more acute way. The progressive tax code, in other words, is based upon reality. A flat tax is based upon a fantasy that a millionaire and a minimum wage earner can both afford to pay the same percentage their salary towards the public treasury. The flat tax’s appeal is a millimeter deep — “the percentage is the same, therefore fairness exists!” — but a moment’s contemplation of it will reveal that it is a terrible policy for the poor.

It would also quite possibly destroy the economy.

The Institute on Taxation and Economic Policy ran the numbers and found that the only thing Paul’s tax plan would “blow up” is the federal budget. According to their analysis, the 14.5 percent flat tax would cost $1.2 trillion a year – $15 trillion over the next decade or so. (To put that in perspective, our entire national deficit is $18 trillion. This would nearly double it.)

Repealing payroll taxes, the estate tax and all customs duties would cost an additional $1.6 trillion, leaving a $2.3 trillion hole in the budget. Paul proposes to fill some of that hole with a 14.5 percent “business activity tax,” which appears to be conceptually identical to a VAT. While it’s uncertain exactly what would be included in the base of Senator Paul’s VAT, a VAT at this rate could plausibly raise about $1.1 trillion a year.

When the dust clears, this would leave the federal government with $1.2 trillion less in tax revenue in fiscal year 2016 if the plan were implemented immediately — a reduction of about one-third in total federal revenues. Over a decade, the plan would cost a stunning $15 trillion.

And if Paul tries to counter by suggesting his plan would offset these costs with massive economic growth because the job creators aren’t burdened by taxes, well Kansas already tried it. The job creator wealth never “trickled down” and now the state’s economy is one of the worst in the country. Paul wants to try this same experiment at the federal level. If insanity is trying the same thing over and over and expecting different results, than Rand Paul is certifiably nuts.

Now to be fair, President Paul may not actually need to “spend” $15 trillion, because coupled with this incredible lose in revenue would likely be major cutbacks to social programs, agencies, and welfare funding. When all is said and done he’d probably be saving us money… by cutting away the vital services many Americans depend on to get by. Not that he would shed a tear for the new American hardship, for Small Government Paul, that’s sort of the dream.

The infuriating thing here is that while Paul doesn’t seem to mind “investing” trillions of dollars in the rich in the hopes that they will magically boast the economy, he is fiscally conservative when it comes to spending money to help the poor, victims of natural disasters, or veterans. The results are clear: For anyone under millionaire status, Paul thinks handouts make you weak and a robust social safety net makes you lazy.

He really knows how to appeal to the common man, huh?

Reprinted with permission from Addicting Info

 

 

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