‘Main Street Tax Plan’

The Main Street Tax Plan would expand the U.S. economy by $2 trillion within a decade, according to the nonpartisan Tax Foundation. That is in the ballpark of the growth generated by the Reagan and Kennedy tax cuts. Moreover, this tax cut would raise revenues by $679 billion over a decade, as taxes on increased growth would exceed lost revenues. The Tax Foundation found that the tax plans of Donald Trump, Sen.Ted Cruz, Sen. Marco Rubio and Ben Carson would all benefit the top 1% more than the median American. Three of these four plans would increase the national debt by more than $2 trillion—Mr. Trump’s by $10 trillion, Mr. Carson’s by $2.5 trillion and Sen. Rubio’s by $2.4 trillion, even after accounting for economic growth. Sen. Cruz’s plan would avoid that result only by implementing a new value-added tax. The Main Street Tax Plan also beats out the Republican blueprints in terms of bang for the buck: 7% of increased GDP growth over 10 years for every $1 trillion in tax cuts. Sen. Cruz’s would generate 3.8%, Mr. Carson’s 2.8%, Sen. Rubio’s 2.5% and Mr. Trump’s less than 1%. My plan would allow full expensing of capital investments, lower the corporate tax rate to 25%, and reduce the top individual rate to 33%. It would eliminate the business tax deduction for interest paid, thereby ending the government preference for debt-financing. The proposal would also focus on the well-being of typical Americans, first by adding a 20% tax bracket. In the current tax code, the biggest marginal-rate increase—to 25% from 15%—kicks in at $47,751 for individuals and $95,501 for couples. That hits many people right when they are starting to get ahead and perhaps thinking about getting married or having children. My plan would convert the first quarter of that 25% bracket to a 20% bracket, thus providing tax relief for millions of middle-class Americans. The plan would streamline the code by reducing the number of different federal taxes. Americans must pay income tax, Social Security payroll tax and Medicare payroll tax. Social Security is largely a pay-in-for-yourself program, and so the reason for that levy is clear. But there is no justification for the Medicare payroll tax. It covers barely over a third of Medicare’s costs and functions as a stealthy second income tax. My plan would scrap it and fund Medicare through general revenues. The $679 billion in additional revenue the plan would raise over a decade would leave more money available for Medicare, not less. This plan would maintain the deduction for charitable donations and the mortgage-interest deduction (for one home); it would eliminate almost all other deductions, including for state and local taxes, except those for business expenses. And because people shouldn’t view April 15 as a payday, it would not let anyone’s income taxes go negative, apart from an Earned Income Tax Credit or health-care tax credit, as other tax credits would be made nonrefundable. The plan would also do three things to end the marriage penalty: eliminate the head-of-household filing status; stop income-testing the child tax credit, which the plan would cut in half and supplement with a deduction; and make the income range of couples’ tax brackets double that of singles’.