Tim Pawlenty wants the U.S. to aim for an accelerated economic growth rate. In a speech to be delivered at the University of Chicago this morning, Pawlenty will outline the policies that he thinks can reinvigorate the country’s sputtering economy.
“Let’s start with a big, positive goal,” Pawlenty will say, according to excerpts of the speech released by Team Pawlenty this morning. “Let’s grow the economy by five percent, instead of the anemic two percent envisioned currently.”
Among the proposals Pawlenty will push for are cutting the business tax rate to 15 percent from 35 percent and eliminating “special interest handouts, carve-outs, subsidies, and loopholes” in the tax code. He is calling to change the individual tax rate to two rates: 10 percent for those making $50,000 or less (those who do not currently pay income taxes would still be exempt) and couples at $100,000 or less, and a 25 percent rate for all income above those levels. “A one-third cut in the bottom rate to allow younger, middle, and lower-income families to save and build wealth. And a 28 percent cut in the top rate to spur investment and job creation,” Pawlenty will say.
Pawlenty will also call for the elimination of the capital gains tax, interest income tax, dividends tax, and the death tax.
On spending, after touting his own record in Minnesota, Pawlenty will turn his attention to what he has dubbed “The Google Test,” which proposes that “if you can find a good or service on the Internet, then the federal government probably doesn’t need to be doing it.” Programs that don’t pass the Google threshold in Pawlenty’s mind include the “the post office, the government printing office, Amtrak, Fannie and Freddie.”
He will also work to cut the federal budget. “I propose that Congress grant the President the temporary and emergency authority to freeze spending at current levels, and impound up to 5 percent of Federal spending until such time as the budget is balanced,” Pawlenty plans to say. “If they won’t do it…I will. As an example, cutting even 1 percent of overall federal spending for six consecutive years would balance the federal budget by 2017.”
Regulation will also be targeted by Pawlenty, who will argue that all regulation should be “sunset[ed]” unless Congress votes to keep it it in place.
UPDATE: Just to clarify, my understanding is that the 25 percent tax would only apply to income above the $50,000 level for singles or $100,000 for couples. So if a couple made $150,000, they would be taxed at 25 percent for $50,000 and 10 percent for $100,000. Here’s the full excerpt from the speech:
On the individual rates we need a simpler, fairer flatter tax system overall. I propose just two rates: 10% and 25%. Under my plan, those who currently pay no income tax would stay at a zero rate. After that, the first $50,000 of income – or $100,000 for married couples – would be taxed at 10 percent.
Everything above that would be taxed at 25 percent.
Long past time for a hard focus on regulation. And let's include litigation as well. Those are the real obstacles to new business, not taxation.
His Google test doesn't work, though. You can find private security services and septic tank services on the net (or in the Yellow Pages) but that doesn't mean police and sewage should be privatized.
Reply to this commentLinkReport Abusegoogle test for passenger rail?
is there another national passenger rail system that is privately run?
what company runs the DC to Boston Corridor line?
I am unaware of any such company.
I am sure that some private firm would love to take over this profitable business, but that would prove that old adage about capitalists loving to privatize profits and socialize losses, AGAIN.
Reply to this commentLinkReport AbuseNot a good start.
Couples making $100,000 or more get whacked at 25%? I know there has to be a breaking point somewhere on this flat-tax idea, but $100,000 isn't a lot of money for a couple with kids. If the federal government uses salary modifiers for their employees, based on location, why not use the same principle for this flat-tax idea? And bump it to at least $250,000.
I make $50,000. Wife makes $49,000. We're taxed at 10%, leaving us with $90,000 for other taxes and living, investing, paying for college.
I make 50,000. Wife makes 51,000. We're taxed at 25%, leaving us with $75,000 for taxes, investment, etc.
My wife would have to ask for a pay cut to avoid a government-forced paycut.
At least at $250,000 (or $500,000), you're left with more of a buffer. $100,000 is too low. I'd vote against it and would hound any politician who voted for it.
The "Google test" is also weak. Blackwater will provide security. Is that what we want? No. That's just one area he'll have to walk this back.
Cutting spending. Get prepared for the question on cutting grandma's check or walk that back, too.
Reply to this commentLinkReport AbuseI hope folks can look past my fast math, excuse the numbers ($89,100 and $76,000), and see my point.
Reply to this commentLinkReport Abuse"Programs that don’t pass the Google threshold in Pawlenty’s mind include the “the post office, the government printing office, Amtrak, Fannie and Freddie."
Technically, Amtrak doesn't pass the Google test, for when you Google "passenger rail service," your only hit is Amtrak.
But sure, whatever, why not. We're $75 trillion in debt, what's a few gimmicks among friends?
Reply to this commentLinkReport AbuseWhy is anyone exempted from paying income tax? Everyone should have to pay something, even if it's a 1%-2% token tax just so they have skin in the game.
Reply to this commentLinkReport AbuseSo if your joint income is $95,000 you pay $9,500. But, if your joint earnings are $101,000 you pay $25,250? That's a $15,750 penalty for earning an extra 6K! This is the type of plan that kills incentive to earn just a little more. Why not just stick with a flat tax?
Reply to this commentLinkReport AbuseNo. That is not correct. If a couple earn $95,000/year, they would pay 10% (9500) but if they were to earn a combined $101,000/year, they would pay 10% up to $100,000 (which is $10,000) plus 25% ABOVE $100,000 (which is $1000*25%=$250). Their total tax would be $10,250.
Reply to this commentLinkReport AbuseWhat a simple an unrealistic world Timmy lives in.
Reply to this commentLinkReport AbuseAlso, everyone pays taxes in the form of FICA and SS taxes if they work, along with sales taxes of many forms.Plus income taxes are paid in steps. If you are making slightly more than 100,000 in this example, only that income above 100,000 is taxed at the higher rate.
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Pawlenty is done.
Reply to this commentLinkReport AbuseWith the update, it makes more sense.
I look at income tax reform the same way I look at illegal immigration. Fix the problem before coming in with a gimmicky solution. Secure the border, control spending. Show me that you're serious and I'll take other reforms seriously.
Reply to this commentLinkReport AbuseTo all of you throwing out scary numbers for Pawlenty's tax proposal: haven't you ever paid income taxes before? Marginal tax rates only apply to earnings above the threshold. So in Pawlenty's proposal a couple making $100,000 is only taxed 10% on the amount above $50,000, or $5,000. A couple earning $101,000 only pays an additional 25% on the last $1,000 they earn, or an additional $250 of tax. At least understand how his proposal works before bashing it.
Personally I'd say he is off to a good start. I especially like the idea of sunsetting all regulations and looking for departments and services that can be cut out entirely.
Reply to this commentLinkReport Abuse"Marginal tax rates only apply to earnings above the threshold."
THANK YOU! Someone finally said it.
I also like the idea of sun-setting regs as well. I have often thought that almost all laws should be required to come with a sunset provision. Of course, that would simplify our legal system which not be economically beneficial to our esteemed legal profession - so it's probably not going to happen.
Reply to this commentLinkReport AbuseOilwatcher,
You should understand that the post has been updated to reflect the 25% as a marginal and not flat rate.
That was not the case when I and others posted earlier. It was initially presented as a flat tax rate for couples earning $100,000.
Reply to this commentLinkReport AbuseI agree. Pawlenty is opening up a discourse on the issue by putting some ideas out there to be discussed - and criticized (and from what I can tell, already misunderstood by many). It's a great first step and more than any other candidate currently in the race has done (inc. the Great Barack O, who has been campaigning for the Oval Ofc. since '06). Right now, a Pawlenty/Ryan ticket would be very appealing to me, but two conservative candidates telling Americans the truth and offering real proposals is more than the average, insipid voter in this country can handle.
Reply to this commentLinkReport Abuse@wpa38 - so you think the federal government should handle policing and sewage?
Re: Passenger rail - One can Google many ways of getting from DC to Washington. It's only when you specify a particular means that you're limited to Amtrak.
@RTP, Craig L - As Trinko has noted, the 25% rate is (quite obviously) only on amounts in excess of 100K.
Reply to this commentLinkReport AbuseWouldn't the military fail the Google test as well? There are private militaries as well. We even contract with some of them, such as Blackwater (now Xe).
Reply to this commentLinkReport AbuseSo instead of soaking the rich, Pawlenty would soak singles (like we don't get nailed already). Thanks, but no.
Reply to this commentLinkReport AbusePawlenty is not "soaking singles" (I am one as well). He is maintaining the current tax code treatment of singles and marrieds. This was put into place to eliminate what was called the "marriage penalty." If it was not set up this way, when two singles married, they would pay more in taxes, even if their incomes stayed constant.
Reply to this commentLinkReport AbuseWasn't the narrative on Pawlenty that he's really, really boring?
Opposing ethanol in Iowa, calling for cuts to Medicare and Social Security in Florida, calling for substantial tax cuts, and the elimination of large government programs...
This is not the Pawlenty I saw in 2008.
Is he making a play for Ron Paul's supporters?
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