NCPA - National Center for Policy Analysis

Rand Paul's 'Fair and Flat' Tax Proposal

July 2, 2015

Sen. Rand Paul's flat tax plan hits all the right notes, including greater simplicity, lower rates for everyone and a more competitive system of corporate taxation, says Allen B. West, president and CEO of the National Center for Policy Analysis, and research associate Jacob Kohlhepp.

  • Collapsing all of the brackets into a single 14.5 percent rate will make tax filing less complicated. This is important when Americans are spending $400 billion and nearly 6 billion hours on compliance.
  • The territorial business taxation system will encourage American multinational corporations to bring home their revenue and avoid double taxation.
  • The suggested change to upfront expensing of capital would reduce uncertainty and encourage investment, making businesses more productive.

But there are some items that should be addressed by Mr. Paul if he hopes to take his plan from paper to reality. 

  • Capital gains would still be double-taxed, as corporate profits would be taxed both at the corporate level and at the shareholder level.
  • The Tax Foundation has pointed out that even with the massive economic growth unleashed by the plan, there will still be a $1 trillion revenue loss over the course of 10 years. This means there must be an accompanying plan to sensibly reform federal government spending.

At the end of the day, Mr. Paul has composed a solid melody of economic growth that has the conversation on tax reform going in all the right directions. But as with any proposal unveiled in a single newspaper column, the devil will always be in the details.

Source: Allen B. West and Jacob Kohlhepp, "Rand Paul\'s 'Fair and Flat' Tax Proposal," Washington Times, June 30, 2015.

 

Browse more articles on Tax and Spending Issues