Details and Analysis of Governor Bobby Jindal's Tax Plan
October 16, 2015
Governor Bobby Jindal recently released details of his presidential tax reform plan. His plan would reduce individual income tax rates, lowering the top rate from 39.6% to 25% and would also lower the standard deduction and personal exemption.
While this plan would reduce federal revenues by $11.3 trillion over the next decade, it would also improve incentives to work and invest, which could increase GDP by 14.4% over the long term.
Among other changes, it would consolidate the current seven tax brackets into three, tax long-term capital gains and qualified dividends at ordinary rates, eliminate all itemized deductions except for the home mortgage interest deduction and most significantly, it would eliminate the corporate income tax.
According to an analysis by the Tax Foundation:
- The plan would lead to 8.7 percent higher wages and a 38.3 percent larger capital stock.
- The reduction of marginal tax rates on individual income would increase incentives to work and result in 5.88 million full-time equivalent jobs.
On the other hand revenue loss due to the reduction in individual income tax rates would be approximately $6.7 trillion over the next decade, while the elimination of the corporate income tax will reduce revenues by an additional $4.4 trillion. When accounting for the expected economic growth, this plan would increase the federal government's deficit by $9 trillion.
In the long run, the reforms would lead to higher incomes for taxpayers at all income levels. On a dynamic basis, the distributional impact would benefit all income deciles, however, it would favor the top 1% of all taxpayers much more.
Source: Kyle Pomerleau, "Details and Analysis of Governor Bobby Jindal's Tax Plan," Tax Foundation, October 8, 2015.
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