The Next GOP Tax Reform

by Reihan Salam

For years, a number of conservatives, including our own Ramesh Ponnuru and Corner contributor Robert Stein, have argued that Republicans need to broaden their agenda for tax reform. Rather than focus on the top marginal tax rate, they’ve called for a greater emphasis on corporate tax reform and middle-class tax cuts. This election cycle, the GOP presidential candidates have answered their call by offering a series of ambitious tax reform proposals. And on Tuesday, the Conservative Reform Network, a group I’ve been involved with since its inception, and Americans for Tax Reform, best known for its tireless advocacy for tax cuts, are sponsoring a debate featuring senior advisors to several of the major campaigns. The occasion for the debate is the release of a new CRN report by Ryan Ellis, the tax-policy director of ATR, who will also serve as the moderator of the debate. The news organizations that have sponsored GOP debates so far have tended to avoid substantive, nitty-gritty policy questions. Rest assured, it is these questions that will be at the heart of the discussion tomorrow morning. 

And there are many, many questions I’d like to ask. Ted Cruz and Rand Paul, for example, have called for replacing the corporate tax with a new value-added tax (VAT). Are Cruz and Paul concerned about where the burden of these new VATs will fall, and do they have any intention of mitigating their distributional impact? Jeb Bush and John Kasich are committed to giving low-wage workers stronger incentives by making the EITC more generous. Do they have a plan for reducing the improper payments that plague the current version of the EITC? Marco Rubio has courted controversy by offering a hybrid plan, which drastically cuts taxes on investment income while also creating a new child credit aimed at middle-income families. What does he intend to do about households that seek to redefine labor income as investment income to secure more favorable tax treatment?

All of these plans have their weaknesses, and all of them raise far less revenue, in static terms, at least, than the tax code we have today. Yet all of them also reflect a new policy creativity that bodes well for the conservative movement going forward. Whether or not one embraces the idea of a U.S. VAT, it’s remarkable than Cruz and Paul would suggest such a radical departure from the status quo. You might think Rubio’s child credit is poorly-designed, or that expanding the EITC is a bad idea because of widespread improper payments. But both proposals at least begin to address how policymakers can make low-wage work more rewarding for families that have seen precious little income growth.

In a perfect world, the candidates themselves would debate the specifics of the tax plans that have been released in their names. But the debate will feature the next best thing — the advisors who helped craft the plans in the first place: Danny Heil, economic policy advisor, will represent Governor Jeb Bush; Harold Furchtgott-Roth, surrogate, will represent Senator Ted Cruz; Kerry Knott will represent Governor John Kasich; Steve Moore will represent Senator Rand Paul; Johnny Slemrod, policy director, will represent Senator Marco Rubio.

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