Rubio-Lee Plan Is Tax Reform We’ve Been Waiting For

To many in Washington, DC, comprehensive tax reform seems like a mirage. It is something to be spoken about, to float dream-world proposals of, and for bureaucrats to build careers chasing, without ever amounting to anything in law.

Yet, periodically, we see serious proposals emerge to fix the tax system once and for all. Some are good, some come up short, but all aim to make the system simpler and easier for average people to deal with.

The latest of these plans is the Economic Growth and Family Fairness Tax Plan, better known as the Rubio-Lee plan, after the senators who proposed it. The plan would fix many, if not the large majority, of the problems with the current federal tax system.

Some highlights include the end of damaging extraterritorial taxation of corporate income, ending taxation of capital income, and ending the vast majority of itemized deductions. All of these would dramatically simplify the current tax system for both corporations and average citizens, and remove much of the confusion that confronts taxpayers each April when they file their income taxes.

Simplifying the corporate tax system and ending taxation of capital income are clear and well-understood measures that would boost the economy. Ending extraterritorial taxation of corporate income and lowering the overall corporate tax rate are major components of the Rubio-Lee proposal.

We know the United States has one of the highest and most burdensome corporate tax regimes in the developed world, lagging behind her peers in Europe. The Rubio-Lee plan would put an end to that, encouraging companies to invest in new US operations, and bring some of the cash they have abroad for tax purposes back to the United States.

Read the rest at the PanAm Post…

Sorry, Democrats, but the Federal Tax Code Disproportionately Hits the Wealthy

Sen. Jeff Merkley, D-Ore., wrongly asserted Wednesday that the federal tax code is regressive, hurting low-income workers more than the rich. During a Senate Budget Committee Hearing on the benefits of a balanced budget, Merkley sparred with former Gov. John Engler, R-Mich., the president of the Business Roundtable.

Merkley asked Engler, “Why should low-income or middle-income Americans pay a higher tax rate for every $1,000 they earn than the rich?”

“I thought our tax code was progressive,” Engler responded.

Merkley replied, “Well then you’re deeply misinformed and I encourage you to read up a little on it.”

To the contrary, Merkley is the one deeply misinformed about how progressive the federal tax code is.

The wealthy pay far higher tax rates than the poor do. The highest fifth of income earners pay the government 12 times more of their income than the lowest fifth of income earners. The top one percent of income earners are hurt even more by the tax code, paying an average federal tax rate of 29 percent, compared to the two percent paid by the lowest-fifth.

Some tax breaks are claimed more often by high-income earners, such as the home mortgage interest deduction. But the size of these deductions and credits does not offset the higher tax rates the wealthy pay.

The progressiveness of the federal tax code is largely driven by the individual income tax, which provides nearly half of all federal revenue. The top fifth of income earners pay an average individual income tax rate of 14 percent, while the bottom fifth instead face an average rate of negative eight percent.

Read the rest at the Washington Examiner…