Last week Governor Christie explained where he thinks federal tax policy should go. He wants a tax reform that reduces the number of tax brackets to three, with the bottom rate in the single digits (it’s now 10) and the top rate no higher than 28. He would eliminate various tax breaks so that the tax code raised the same amount of revenue, but keep the mortgage deduction for first homes and the charitable deduction. He would cut the corporate tax rate to 25. And he would eliminate the payroll tax for people younger than 21. (He had previously said that he would also eliminate it for people older than 62.)
The plan is similar though not identical to the plan on which Mitt Romney campaigned in 2012. It has the same top income-tax rate, the same promise to lower the bottom rate to single digits, the same corporate tax rate, and the same unspecified reduction of tax breaks to achieve revenue neutrality. The differences: Christie would have fewer tax brackets, would cut payroll taxes for the young and the old, would allow businesses to write off the expense of investments immediately, and does not plan to end the AMT or estate tax or cut taxes on capital gains and dividends.
The Wall Street Journal is happy with the plan, which it suggests might fare better politically than Romney’s similar plan because Christie is more committed to it. The Journal also says the plan is “superior” to Senator Rubio’s plan because it is more pro-growth: It does not include Rubio’s expanded tax credits for children and has a lower top income tax rate (28 vs. Rubio’s 35).
To believe that Christie’s plan is more pro-growth than Rubio’s, you have to believe that a top tax rate that’s seven points lower makes up for capital-gains and dividend rates that are 23.8 points higher, an estate tax that’s 40 points higher, and an AMT rate that’s 28 points higher. This seems unlikely.
Lowering the bottom tax rate as Christie wants to do, meanwhile, would provide almost no supply-side benefit while substantially reducing revenue. Everyone who pays income taxes will pocket additional money from it, but it won’t raise the after-tax return on work for people in the higher tax brackets and won’t raise it much for people in the lowest bracket (since the rate is so low as it is). On the Journal’s “bang for the buck” criterion, it ought to be nearly as mad about this feature of Christie’s plan as it is about Rubio’s tax credit for children. But the Journal has been railing against the child credit for two decades, and the tradition is going strong.