If you want to design from scratch a tax system that makes sense practically and philosophically, you could hardly do better than the one Louisiana governor Bobby Jindal proposed this week as part of his presidential campaign.
I spoke to him about his plan in a one-on-one interview Thursday night. Jindal’s tax-reform proposal is well worth close consideration. Two elements in particular — just two parts of an impressively detailed, comprehensive approach — are extremely bold and absolutely right on target. First, he wants to completely eliminate the corporate income tax; second, his plan would require all working Americans to pay at least a 2 percent income tax, rather than allowing some 45 percent of Americans to escape income-tax payments altogether, as is now the case.
The elimination of the corporate tax (for which I’ve been a longtime advocate) would be, all at once, spectacularly pro-labor and pro-investment, and effectively a major ethics reform as well. And the broadening of the tax base to all workers, at a very, very low rate for those low on the income scale, would ensure that all Americans understand that government isn’t a freebie. As Jindal has explained repeatedly since he released his plan, such a reform would make sure that everybody “has skin in the game” rather than letting any able-bodied American be a freeloader.
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“Right now it’s too tempting for many Americans to think money just grows on trees in Washington,” Jindal told me. “If we have generations of Americans who don’t pay any taxes at all, it will be easier for them to ignore exorbitant spending and taxes on everyone else.”
‘If we have generations of Americans who don’t pay any taxes at all, it will be easier for them to ignore exorbitant spending and taxes on everyone else.’
This, by the way, is a Reaganesque insight. While governor, Reagan shifted the tax structure around so that various “hidden” taxes would be replaced by ones more easily noticeable, on the theory (as he somewhat famously put it) that “taxes should hurt.” He didn’t mean tax rates should be punitive; he meant exactly what Jindal does: Citizens should recognize that “there ain’t no such thing as a free lunch,” as fans of Nobel Prize–winning economist Milton Friedman like to put it.
Jindal ties this insight into a broader philosophical point: If everybody pays at least a tiny bit and learns the spuriousness of the idea of a free lunch, we will all tend to value industriousness more because even those at the low end of the scale will look to work rather than to government for their sustenance.
“Earned success,” he said (echoing Arthur Brooks of the American Enterprise Institute), “is so much more fulfilling than dependence.”
As for his bold corporate-tax proposal, Jindal explains it this way:
Liberals will hate this proposal, but it really makes sense. We currently have the highest corporate tax rates in the developed world, which has led to American companies having trillions of dollars parked overseas. The high rates give incentives for companies to create jobs and wealth overseas rather than inside America. We want to encourage them to create jobs here instead.
It’s also a fairness issue, Jindal said, adding:
Big companies spend a whole lot of money on lobbyists with big corporate accounts to figure out how to avoid paying these high corporate taxes. The small businesses can’t afford these lobbyists to arrange special breaks, so [the current system] is very unfair to them.
Plus, the complexity of today’s corporate tax system “gives the IRS way too much power,” he noted. “We need to level the playing field rather than letting the IRS choose whom to [hassle].”
#share#Jindal, of course, has a reputation as a policy wonk, and it is a reputation well earned. Other candidates can outline their campaign proposals in broad strokes, but they refer an interviewer to their staff when pressed for details. Jindal, on the other hand, sounds eager to delve as deeply as an interviewer wants, talking about “expensing” and “pass-through corporations” and whatever else comes up. (For purposes of this general-interest column, I’ll spare readers the specifics. But a business-focused or trade publication would probably do well to probe the governor’s impressive policy chops.)
One aspect of his overall plan sure to turn heads is its utter unconcern with being “revenue neutral,” even by “dynamic scoring” that takes economic growth into account. Jindal delightedly explains, in his fast-paced delivery, what he would do when faced with any overall reduction in tax revenue: “We have to dramatically reduce the size of government. As conservatives, we have to have that debate. This is a major theme of what this election is about.”
Jindal said that reducing overall revenues in no way lessens his commitment to balancing the budget. “We’re explicitly starving the government in order to help grow the American economy,” he said, listing the Department of Education, the Internal Revenue Service, and the Environmental Protection Agency as examples of federal bloat. “It just means we’re going to have to cut more, and I’m fine with that.”
Jindal likes to cite his own record as a budget cutter in Louisiana, saying he cut state spending by 26 percent in just eight years. The number is accurate — although perhaps slightly less impressive than it appears at first glance, because he inherited a government temporarily awash with federal reconstruction funds after Hurricane Katrina. The elimination of those funds (and the need for them) accounts for a large part of Jindal’s 26 percent.
#related#Even so, Jindal’s governorship has been marked by real spending discipline and a few major, cost-saving, long-range reforms to back up his pledge that he would make a real dent in the size of the federal government.
All told, Jindal is, as always, a knowledgeable, thoughtful advocate for conservatism — one who clearly merits a spot on the main debate stage in this presidential contest. He offered thoughts on that subject, too, when I spoke with him.
The Republican National Committee and the networks “are making a mistake by trying to clear the field,” Jindal said. “I think democracy is messy, and that’s a good thing. Let the voters, not the polls, vet the candidates. Debate organizers and the RNC should be unafraid of open debates with as many people as possible to exchange ideas.”
Nobody can ever accuse Jindal of being unafraid of new ideas, or say that he’s unwilling to try to put them into practice. He’s well worth a listen.
— Quin Hillyer is a longtime contributor to National Review.