Huntsman would eviscerate all deductions and credits in the tax code — including the mortgage-interest deduction — “in favor of three drastically lower rates of 8, 14, and 23 percent.” (For good measure, he’d “scale back” other homeowner subsidies, too.)
And he would get rid of capital gains and dividends taxes.
Doing these things would encourage people to spend less time jumping through government hoops (should I buy a house? should I put money in my IRA? should I give money to charity?) and to spend more time seeking out good investment opportunities on their merits.
In reality — or at least somewhere vaguely closer to reality — the capital gains and dividends tax plan could never pass Congress without a cap. But it would be good nonetheless if, say, people who earn less than $250,000 a year saw these taxes disappear.
And while he’s at it, Huntsman should get rid of the tax on interest, too, so that people don’t have to think about differential tax treatment at all when investing.
It’s politically (and fiscally) unlikely, however, that any tax-reform package would be “revenue-neutral” (meaning that it wouldn’t increase the amount of money that the government collects each year), as Huntsman proposes.
Still, though, big, big fixes to the tax code would be worth it — and would be far more desirable than hefty income-tax rate hikes. Ridding the nation of tax-induced economic distortions is a fine thing.
— Nicole Gelinas is a contributing editor to the Manhattan Institute’s City Journal.