John Kasich has tried a bit of everything when it comes to tax policy, but his next proposal could seem out of place.
As House Budget Committee chairman, Kasich developed a plan that balanced the budget and cut taxes in negotiations with the Clinton White House in the late 1990s. As Ohio’s governor, he has lowered income taxes and offset the lost revenue with tax hikes elsewhere. And as another face in the growing crowd of Republican presidential hopefuls, Kasich is floating a flat tax.
Lest anyone doubt his sincerity, Kasich has touted his discussions with Steve Forbes, the wealthy publishing executive who has championed the flat tax for decades. Forbes, a former presidential candidate himself, told the Washington Examiner he is interested to see the final details of the plan that Kasich’s team produces.
“They understand the concept, they’ve looked at some of the work we’ve done in the past and they’re fashioning their own plans, so [I’m] delighted that he’s doing it and hope more follow his good example,” Forbes said. “At least half a dozen [presidential candidates] out there are either working on something or have expressed interest in the concept, so I think this is the way we’ll get not only in the discussion in the public square, but also get the mandate for it next year. That’s the only way you’re going to get it to happen.”
Forbes said he has spoken in “general terms” about the flat tax with Kentucky Sen. Rand Paul. Texas Sen. Ted Cruz supports a flat tax and is expected to provide a detailed tax plan soon. Some GOP presidential contenders, such as New Jersey Gov. Chris Christie and Florida Sen. Marco Rubio have put forward their own tax plans.
But Kasich is not in a rush, and Ohio Republicans may have temporarily stunted his ambitions. While talking about a flat tax on the campaign trail, Kasich has repeatedly fought with members of his own party about how to offset the tax cuts and his desire to raise taxes on oil and gas profits in his home state.
Scott Drenkard, an economist at the Tax Foundation Center who has studied Ohio’s taxation policies, said the Kasich administration appears to have been singularly focused on lowering the individual income tax, at the expense of much-needed structural reforms to offset lost revenue.
“Kasich’s approach has been a little bit schizophrenic,” Drenkard said. “If Kasich’s proposals were directly lifted into the federal system it might look something like income tax cuts, but corporate tax increases, and that would be a very wrong direction at the federal level.”
Some worry that Kasich could bite off more on the campaign trail than he could chew as president. While undoing the tax code would be a heavy lift for any president, Kasich also has called for a balanced budget amendment to the Constitution.
Kasich’s approach to fiscal policy in Ohio has caused doubt about whether he would follow through on a flat tax nationally. Will Upton, a state affairs manager at Grover Norquist’s Americans for Tax Reform, said “you have to wonder” whether Kasich would push for a flat tax in 2017, given his record in Ohio.
Forbes said he has had no indication that Kasich would contemplate tax increases at the federal level. But in an interview with the Cincinnati Enquirer on the campaign trail in South Carolina, Kasich said he’s not necessarily opposed to federal tax increases.
He also appears to have found some elements of the flat tax difficult to swallow. At a lunch sponsored by the Christian Science Monitor last month, Kasich openly expressed his lingering doubts about how to measure a flat tax’s economic impact.
“I’ve been a little bit concerned about the issue of dynamic scoring,” Kasich said. “I’ve talked to [Forbes] about it, and he said, ‘Look John, if we open up the floodgates we think we will have significant growth in the early years and in the later years it returns to mean.’ A pretty good answer to me.”
In other words, even if the federal government loses revenue in the near-term after implementing a flat tax, such a plan would spur economic growth that would provide revenue over the long term that would be comparable to the amount brought in under the existing tax code.
Kasich also indicated that he favors tax reform that would allow individuals the option of choosing the most favorable tax plan for them.
“It’s simpler, it’s flatter — I look at the distribution tables — and if you don’t like it, you can keep the current system, which is really appealing to me,” he said.
While Kasich has yet to detail how both systems could function concurrently, his “If you like your existing tax rate, you can keep it” approach may not work. Alan Viard, a resident scholar at the American Enterprise Institute and former senior economist at the Federal Reserve Bank of Dallas, said the notion that you could choose between both systems “does not make any sense.” Viard said such a system would likely make filing taxes even more complicated as people would attempt to calculate their taxes under both systems, and select the option that burdens them the least. The resulting impact, he added, could interfere with existing economic incentives and have unforeseen consequences.
If Republican primary voters do develop an appetite for Kasich’s next tax proposal, they may find Kasich’s other controversial policies have left a bad taste in their mouth. He expanded Medicaid through Obamacare, then defended his actions by noting that President Ronald Reagan was the last Republican he could think of who expanded Medicaid. And as President Obama took executive action to prevent the deportation of potentially millions of illegal immigrants last November, Kasich voiced his support for a pathway to citizenship for illegal immigrants.
Kasich has also made a habit of winning elections, and doing so by large margins. In 2014, he won 86 of Ohio’s 88 counties. He has not yet announced whether he will officially pursue higher office. But he is hovering around 2 percentage points in national polls of Republican voters, and his previous electoral success portends well as he courts a larger audience nationwide.
