Former Florida governor Jeb Bush laid out details of his economic plan in North Carolina Wednesday, focusing primarily on how he would reform the tax code as president. The proposal, Bush said, would help achieve his stated goal of four-percent annual economic growth.
“Of all the terrible things that can be said about our tax code, and I can think of a few, the worst is probably this: It punishes people for doing things we should encourage and rewards people for doing things that may not be so good,” Bush said. The Republican’s plan, which he first outlined in an op-ed for the Wall Street Journal, would create three income-tax brackets, lower the corporate-tax and capital-gains tax rate, and eliminate what Bush calls a set of “special favors, carve-outs, phase-outs and subsidies” found in the code.
In a return to what Bush called the structure of Ronald Reagan’s 1986 tax reform, the three tax brackets would be set at 10, 25, and 28 percent. The standard deduction would also be nearly double its current levels, including an added $5000 for individual filers and an added $10,000 for married filers. The Bush campaign says these changes will give 42 million “middle-class” Americans a 33-percent reduction in their tax liability.
It’s a tax cut for middle-class families, yes, but also for the wealthiest Americans. The current top tax bracket is 39.6 percent, meaning top earners would see a drop in their tax rate by more than 10 percentage points. But, the Bush campaign points out, the proposal also caps itemized deductions (except for charitable contributions) to two percent of adjusted gross income, which would likely reduce the overall affect of the significant rate decrease.
In his remarks, Bush seemed to anticipate the argument that faced Mitt Romney in the 2012 general election. “I think we all know the same old song the left will sing about this plan, so let’s get the record straight up front,” he said. “Under my plan, tax bills will be going down, but those earning $200,000 or more will bear a greater share of our income tax burden than they do today. So the top 5 percent will bear a greater share, and the top 10 percent as well.”
On corporate taxes, Bush plans to eliminate deductions on corporate borrowings but add deductions for capital investment, “something which will help businesses buy equipment, build factories and invest in other growth.”
“If your business model depends on heavy debt and leverage, that’s your choice. Under my plan, you’ll pay for it,” Bush said. The plan also eliminates the “worldwide” taxation regime that forces American companies operating overseas to pay U.S. corporate rates in addition to the rates they pay in the country of operation.
In addition to the details of his tax plan, Bush denounced “protectionism” and protective tariffs, and specifically called out Democrat Hillary Clinton and fellow Republican Donald Trump for supporting those ideas. “Now those on the left, and even some people who call themselves Republicans, will tell you that to save U.S. jobs, we have to throw up a bunch of walls and tariffs and protect our businesses from competition,” Bush said. “That’s a siren call of surrender, and I won’t go for it. Protectionism never works. It forces prices up, it restricts choices, it kills jobs. Sales there create jobs here, and fighting to get rid of trade restrictions overseas is the best way we can help our companies compete, win and create good jobs right here in North Carolina.”
Bush called his proposal a “radical change to our tax code,” but there are few radical notions in the plan. One notable departureis his call to close the carried-interest loophole in the code, whereby private-equity and hedge-fund managers who are paid commission as a share of the investments they manage pay the lower capital-gains rates on those commissions. Bush has proposed that money be taxed at income-tax rates instead, raising the effective rate from 23.8 percent to 28 percent.
For the most part, however, the Bush proposal reads like a typical Republican tax-reform proposal: lower rates, a simpler code, and a more business-friendly tax regime. While he’s drawn fire from the right for his deviations from GOP orthodoxy on issues like immigration and education policy, Bush isn’t likely to see similar outrage over his economic plan. In a quick reaction to the plan, the influential Americans for Tax Reform listed out nine positive attributes of Bush’s plan and objected only to the closing of the carried-interest loophole. The U.S. Chamber of Commerce’s Scott Reed, a veteran of GOP campaigns, also praised Bush’s tax proposal.
“Very strong, thoughtful and goes places no one else has gone,” said Reed, adding the plan is “sustainable in a general election fight.”
Most of the criticism is coming from the left, including Paul Waldman at the Washington Post and Jonathan Chait at New York magazine, who notes similarities to the plan Mitt Romney proposed in 2012. By the end of that presidential race, the Romney campaign had begun to back away from its promise of cutting rates by 20 percent across-the-board. Would the same happen in a Bush general election?
One weak point for budget hawks on either side of the aisle is the likelihood that Bush’s plan would add to the deficit. According to a score of the plan by four conservative tax and economic experts, Bush’s proposed rate cuts would lose $1.2 trillion over ten years, assuming an estimated 0.5 percent economic growth over that decade.
