Almost every presidential election cycle, there is a candidate or two that lambastes the federal tax code and offers his own plan to overhaul it. This cycle, though, almost every Republican candidate has now put out a plan that will make changes to what DC residents will end up paying in taxes.
Let’s take a look below at what each candidate is offering:
Contrary to popular belief, businessman Herman Cain’s plan actually operates in two phases. First, he wants to replace the entire tax code with his famous 999 plan. The 999 plan consists of a 9% corporate tax, a 9% income tax and 9% national sales tax. It also means an end to several other taxes Americans pay including the payroll tax, the double taxation on dividends, and the estate tax. The second phase is the Fair Tax, a proposal that will replace the individual and corporate income taxes and in Cain’s words “end the IRS as we know it.”
Texas Governor Rick Perry’s plan unveiled this week will give Americans the option of staying on the current tax system or accepting an optional 20% flat tax instead. The flat tax Perry is proposing, though, keeps popular expenditures such as the mortgage tax deduction, the earned income tax credit, and the state and local tax deduction. He also proposes lowering the corporate tax rate from 35% to 20% and moving toward a territorial tax system. Taxes that will be eliminated in this plan include the estate tax and long-term capital gains.
Former Massachusetts Governor Mitt Romney’s plan makes some changes to the current tax code but is not nearly as bold. He proposes lowering the corporate tax rate from 35% to 25% and eliminating capital gains taxes on people making less than $200,000 a year. He is open to lowering individual tax rates “in the long run” but gives no specific time period.
Former Speaker Newt Gingrich’s plan is similar to Perry’s except that he lowers the rates to 15% on the individual side and 12.5% on the corporate side. He also proposes to eliminate state and local tax deduction, capital gains taxes and replace the payroll tax with personal accounts.
Former Utah Governor Jon Huntsman proposes three tax brackets of 8%, 14%, and 23% and eliminate all tax expenditures. This borrows directly from the Simpson-Bowles deficit commission’s “Zero Plan” from last year. Huntsman also wants to lower the corporate tax rate from 35% to 25%, eliminate the alternative minimum tax and eliminate the tax on capital gains and dividends.
Texas Rep. Ron Paul wants to extend all the Bush tax cuts, cut the corporate income tax to 15%, and end all taxes on personal savings. Firms would also be allowed to repatriate without additional taxes under his plan.
We will examine which candidate has the best plan tomorrow. It is important to note that the DC cost of living is extremely high.