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From my friend, Michael Cannon:
It appears that Medicaid-expansion enrollees are going to cost states a lot more than they thought. According to a just-released “2014 Actuarial Report on the Financial Outlook for Medicaid” from the Department of Health and Human Services, ObamaCare’s Medicaid expansion is costing significantly more than projected:
“In 2014, the average benefit costs of newly eligible adult enrollees are expected to have been substantially greater than those for non-newly eligible adult enrollees in the program. Newly eligible adults are estimated to have had average benefit costs of $5,517 in 2014, 19 percent greater than non-newly eligible adults’ average benefit costs of $4,650. These estimates are significantly different from those in previous reports, in which average benefit costs for newly eligible adults in 2014 were estimated to be 1 percent lower than those of non-newly eligible adults.”
So the Obama administration had projected newly eligible Medicaid enrollees would cost about $50 less than other Medicaid-enrolled adults, but they actually cost nearly $1,000 more. Nice.
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During oral arguments of the Burwell v Obamacare case before the Supreme Court, the U.S. Solicitor General Donald Verrilli made the case that the “court should defer to the interpretation of the Internal Revenue Service, which said the tax credits apply nationwide.” When the Obamacare decision was announced, it is clear that SCOTUS did apply deference, which was absolutely the worst possible solution.
The idea of “deference” refers “ to “Chevron deference,” “a doctrine mostly unknown beyond the halls of the Capitol and the corridors of the Supreme Court. It refers to a 1984 decision, Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., and it is one of the most widely cited cases in law. Boiled down, it says that when a law is ambiguous, judges should defer to the agency designated to implement it so long as the agency’s decision is reasonable.”
Given the current catastrophic state of the IRS, SCOTUS should have run from this idea as quickly as possible. The IRS has proven overwhelmingly in the last few years that no decision it makes is “reasonable” and therefore cannot be trusted as an unbiased, independent agency capable of carrying out a professional opinion on this or virtually any manner.
Even more unfortunately, not only did SCOTUS apply deference, which allowed the IRS rule to stand, it did so by taking expanding the concept of “Chevron Deference” even further in order to validate its decision. George Will, in a column written just after the Obamacare ruling was handed down, described how the decision now allows the executive branch to apply deference in situations that are not just ambiguous, but also “inconvenient for the smooth operation of something Congress created.” This is not interpreting law — this is legislating.
Therefore, the actions of the IRS — that is, willy-nilly creating rules which expanded the scope of Obamacare beyond its text — were indeed endorsed and given political cover by Roberts and his majority as they applied Chevron Deference. Instead of sending Obamacare back to the legislature for clarification, the judicial branch decided to step in and interpret the law for the sake of alleviating “inconvenience”. But this is wrong. Convenience, ease, and expediency should never be a rationale for the judicial branch to go beyond the scope of deciding whether or not a law is constitutional, as they did here.
The judicial branch, with this decision, seemed to act more in harmony with the legislative and executive one, instead of serving as a check against the others. What’s more, “besides violating the separation of powers, this approach raises serious issues about whether litigants before the courts are receiving the process that is due to them under the Constitution. It would result if its branches behaved as partners in harness rather than as wary, balancing rivals maintaining constitutional equipoise.”
Will summed up the damage Roberts has done, which is likely to have lasting effects in the courts for years to come. Roberts goes “beyond “understanding” the plan; he adopts a legislator’s role in order to rescue the legislature’s plan from the consequences of the legislature’s dubious decisions. By blurring, to the point of erasure, constitutional boundaries, he damages all institutions, not least his court.”
How the Supreme Court uses and applies Chevron Deference in the coming years, in the way they did with this decision, will be especially interesting, given the expanded roles of many government agencies such as the EPA and FCC.
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I really enjoyed this column by George Will, which was published soon after the Obamacare decision. Will explores how the decision exemplifies how Chief Justice Roberts embraced and expanded the concept of “Chevron Deference”, which, he contends, will have a lasting affect on future court decisions.
For those of you who don’t know, Chevron Deference basically says that agencies charged with administering statutes are entitled to deference when they interpret ambiguous statutory language. Will charges that the decision now allows the executive branch to apply deference in situations that are not just ambiguous, also “inconvenient for the smooth operation of something Congress created.” Check out the column below:
Conservatives are dismayed about the Supreme Court’s complicity in rewriting the Affordable Care Act — its ratification of the IRS’s disregard of the statute’s plain and purposeful language. But they have contributed to this outcome. Their decades of populist praise of judicial deference to the political branches has borne this sour fruit.
The court says the ACA’s stipulation that subsidies are to be administered by the IRS using exchanges “established by the State” should not be construed to mean what it says. Otherwise the law will not reach as far as it will if federal exchanges can administer subsidies in states that choose not to establish exchanges. The ACA’s legislative history, however, demonstrates that the subsidies were deliberately restricted to distribution through states’ exchanges in order to pressure the states into establishing their own exchanges.
The most durable damage from Thursday’s decision is not the perpetuation of the ACA, which can be undone by what created it — legislative action. The paramount injury is the court’s embrace of a duty to ratify and even facilitate lawless discretion exercised by administrative agencies and the executive branch generally.
The court’s decision flowed from many decisions by which the judiciary has written rules that favor the government in cases of statutory construction. The decision also resulted from Chief Justice John G. Roberts Jr.’s embrace of the doctrine that courts, owing vast deference to the purposes of the political branches, are obligated to do whatever is required to make a law efficient, regardless of how the law is written. What Roberts does by way of, to be polite, creative construing (Justice Antonin Scalia, dissenting, calls it “somersaults of statutory interpretation”) is legislating, not judging.
Roberts writes, almost laconically, that the ACA “contains more than a few examples of inartful drafting.” That is his artful way of treating “inartful” as a synonym for “inconvenient” or even “self-defeating.”
Rolling up the sleeves of his black robe and buckling down to the business of redrafting the ACA, Roberts invents a corollary to “Chevron deference.”
Named for a 1984 case, Chevron deference has become central to the way today’s regulatory state functions. It says that agencies charged with administering statutes are entitled to deference when they interpret ambiguous statutory language. While purporting to not apply Chevron, Roberts expands it to empower all of the executive branch to ignore or rewrite congressional language that is not at all ambiguous but is inconvenient for the smooth operation of something Congress created. Exercising judicial discretion in the name of deference, Roberts enlarges executive discretion. He does so by validating what the IRS did when it ignored the ACA’s text in order to disburse billions of dollars of subsidies through federal exchanges not established by the states.
Chevron deference does for executive agencies what the “rational basis” test, another judicial invention, does for legislative discretion.
Since the New Deal, courts have permitted almost any legislative infringement of economic liberty that can be said to have a rational basis. Applying this extremely permissive test, courts usually approve any purpose that a legislature asserts. Courts even concoct purposes that legislatures neglect to articulate. This fulfills the Roberts Doctrine that it is a judicial function to construe laws in ways that make them perform better, meaning more efficiently, than they would as written by Congress.
Thursday’s decision demonstrates how easily, indeed inevitably, judicial deference becomes judicial dereliction, with anticonstitutional consequences. We are, says William R. Maurer of the Institute for Justice, becoming “a country in which all the branches of government work in tandem to achieve policy outcomes, instead of checking one another to protect individual rights. Besides violating the separation of powers, this approach raises serious issues about whether litigants before the courts are receiving the process that is due to them under the Constitution. It would result if its branches behaved as partners in harness rather than as wary, balancing rivals maintaining constitutional equipoise.
Roberts says “we must respect the role of the Legislature” but “[A] fair reading of legislation demands a fair understanding of the legislative plan.” However, he goes beyond “understanding” the plan; he adopts a legislator’s role in order to rescue the legislature’s plan from the consequences of the legislature’s dubious decisions. By blurring, to the point of erasure, constitutional boundaries, he damages all institutions, not least his court.
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Dear Governor Rauner,
You have an enormous task before you in trying to navigate pension reform. Through political duplicity, the state legislature in cahoots with the public service unions have fashioned for themselves retirement benefits far in excess of any reasonable amount. The Courts, appointed by the same players, have determined that it is not even legal to revisit the magnitude of these retirement benefits. It must be difficult to draw up a plan when your hands are legally tied from being able to make actual changes to the pension system in order to alleviate the $100 billion in debt. As such, I propose an alternative solution:
Since the courts refuse to allow you to negotiate with the workers for lower pension benefits, then take the negotiations to the worker’s base pay. Simply take the costs of the excessive retirement benefits for each employee and subtract it from the worker’s base pay in determining the new base pay under the new contract. The Courts may not allow a reduction in retirement benefits, but there is certainly no Constitutional provision preventing the negotiating of a lower base salary.
There is no rule that someone must be paid the same base pay amount as last year. If you are constrained from the pension end of the contract, then you ought to change their next offer and reduce their overall compensation from the base pay end, thereby restricting compensation and benefits to amounts no greater than what those skills would command and be realistically afforded in the private sector.
Overhauling the contract process from this end will provide an opportunity for fiscal reform. This will ensure that, going forward, no worker be paid more in any new contract then what can be actually afforded, without regard to what the prior contract provided. Once a current contract ends, there is nothing on the table; nothing prevents any new contract from offering less that the prior contract, especially where pay and benefits of the prior contract are out of line and hamstrung by ironclad guarantees.
The people of Illinois realized when they elected you, that decades of fiscal mismanagement needed to end in order to ensure that Illinois has a chance. Even though it may be politically difficult and unpalatable, anybody representing the taxpayers has an obligation to those taxpayers. Budget reform and deficit reduction will naturally follow once compensation levels have been stabilized and brought in line with realistic affordability. Contract negotiations must happen in order for long term sustainability to be achieved.
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The SCOTUS ruling against the EPA was a breath of fresh air (see what I did there?). Before adjourning until October, the Supreme Court decided that recent EPA rules did not consider cost compliance. The Washington Examiner had a good overview of the ruling. This decision will likely affect other recent EPA rules.
“The Supreme Court ruled 5-4 against Environmental Protection Agency pollution rules for power plants Monday, in a blow to President Obama’s environmental agenda.
The majority decision, written by Justice Antonin Scalia, said the EPA has to consider the costs of complying with the rules and sent the air pollution regulations back to the agency.
The EPA rules in question regulate hazardous air pollutants and mercury from coal- and oil-fired power plants, known as the MATS regulations. The regulations went into effect April 16. The utility industry had argued that the rules cost them billions of dollars to comply and that EPA ignored the cost issue in putting the regulations into effect.
“EPA must consider cost — including cost of compliance — before deciding whether regulation is appropriate and necessary. It will be up to the agency to decide (as always, within the limits of reasonable interpretation) how to account for cost,” Scalia wrote in agreeing with the industry.
The decision will have repercussions for other EPA regulations that are key to Obama’s climate change agenda. The EPA will now have to examine the cost of compliance for the Clean Power Plan, which is at the heart of the president’s environmental agenda.
Many of the companies have either made the investments or closed power plants to comply. If the investments necessary to upgrade a plant to comply with the regulation aren’t justified when considering the operational costs, revenues earned and other factors, then the decision is made to retire it.
The D.C. Circuit Court Appeals favored the EPA in a previous lawsuit filed by the industry, attempting to overturn the rules, which is why they took it to the Supreme Court to decide the cost issue.
The D.C. Circuit was split in its decision, but the majority ruling prevailed. At the center of the case is the question of whether the regulation of hazardous air pollutants from electric utilities are “appropriate and necessary.” On that issue the court was split, but a two-judge majority agreed that the EPA could ignore costs in determining whether to regulate the utility sector.
The D.C. Circuit majority also agreed the EPA could focus solely on the utilities’ contribution to the pollutants of concern, rather than identifying any specific health hazards attributable only to utility emissions.
The EPA had argued that the rules are both appropriate and necessary regardless of the costs, and that it has the discretion under the law to act as it deems fit in regulating hazardous pollutants.”
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Chief Justice Roberts on Obamacare in 2012: “It is not our job to protect the people from the consequences of their political choices.”
This line famously echoed in Robert’s majority the first time Obamacare came before the Supreme Court, pointing out that it is not the business of the Supreme Court of the United States to fix laws (good or bad) that Congress passes.
Three years later, Roberts made an about-face on this exact point essentially saying with his decision that Obamacare is a bad law and poorly written — so we will fix it.
It really is a fascinating thing. First we have Pelosi saying we have to pass the law to see what is in it. And then when we actually get to see and experience the incoherence of the law, Roberts declares that Congress’s stupidity is not his job to fix.
But then the problem became that the Senate didn’t actually have the votes to fix it properly or repeal it entirely. Congress discovered that the law which was passed (state exchanges only) was not the version Congress wanted (federal exchanges too), but the Senate couldn’t get the 60 votes they needed to pass the version they wanted, especially after the Republicans lost Massachusetts a couple years ago.
So good old Roberts gifted them what they needed to have the law that they should have written with this recent opinion. And for Robert’s act of judicial overreach and maneuvering, Scalia’s dissent was particularly scathing:
“Rather than rewriting the law under the pretense of interpreting it, the Court should have left it to Congress to decide what to do about the Act’s limitation of tax credits to state Exchanges…The Court’s insistence on making a choice that should be made by Congress both aggrandizes judicial power and encourages congressional lassitude…
Just ponder the significance of the Court’s decision to take matters into its own hands. The Court’s revision of the law authorizes the Internal Revenue Service to spend tens of billions of dollars every year in tax credits on federal Exchanges. It affects the price of insurance for millions of Americans. It diminishes the participation of the States in the implementation of the Act. It vastly expands the reach of the Act’s individual mandate, whose scope depends in part on the availability of credit…
But this Court’s two decisions on the Act will surely be remembered through the years. The somersaults of statutory interpretation they have performed (“penalty” means tax, “further [Medicaid] payments to the State” means only incremental Medicaid payments to the State, “established by the State” means not established by the State) will be cited by litigants endlessly, to the confusion of honest jurisprudence. And the cases will publish forever the discouraging truth that the Supreme Court of the United States favors some laws over others, and is prepared to do whatever it takes to uphold and assist its favorites. I dissent.”
Scalia was particularly clear that the Supreme Court took it upon themselves to insert themselves into the legislative branch. Put another way, Chief Justice Roberts became the 60th vote in the Senate.
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From Scotusblog:
Decision of the Fourth Circuit is affirmed in King v. Burwell. 6-3.
This means that individuals who get their health insurance through an exchange established by the federal government will be eligible for tax subsidies.
Chief Justice writes for the Court. Six are the Chief, Kennedy, Ginsburg, Breyer, Sotomayor, and Kagan.
Dissent by Scalia, joined by Alito and Thomas.
Court refused to apply Chevron deference — that is, to find that the statute is ambiguous and that the federal government’s interpretation was reasonable.
From Scalia’s dissent: “We should start calling this law SCOTUScare.” From the intro to Scalia’s dissent: the majority’s reading of the text “is of course quite absurd, and the Court’s 21 pages of explanation make it no less so.”
From the majority opinion: “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them.”
The majority also acknowledges that the challengers’ “arguments about the plain meaning . . . are strong.”
‘In this instance, the context and structure of the Act compel us to depart from what would otherwise be the most natural reading of the pertinent statutory phrase’…
The opinion is here
Justice Scalia’s dissent, via the WSJ:
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One of the major sticking points regarding the free trade talks is a portion known as TAA, or “Trade Adjustment Assistance”. “The Trade Adjustment Assistance (TAA) Program is a federal program that provides a path for employment growth and opportunity through aid to US workers who have lost their jobs as a result of foreign trade,” and this program is slated to expire at the end of September, unless Congress reauthorizes is. The funding source for the new TAA bill, as passed by the Senate last month, is a $700 million reduction to Medicare funding. But the vote neared, the pressure to change the funding source and spare Medicare reached a crescendo.
An alternative funding solution was prepared, one that is particularly odious. TAA, if passed, will be financed by “raising the penalties for misfiled taxes”.
Here’s how it would work. As it stands now, small businesses who pay independent contractor/freelancers are supposed to report that income to the IRS using a 1099 form. Another copy of that form goes to the contractor/freelancer. If a small business files all their forms past the deadline or not at all, it receives a fine. The new proposal, “would double and triple these fines.”
This merely serves to empower the IRS, who frankly, is the last arm of the government who deserves increased power right now. Because this measure specifically creates an incentive to raise revenue for the express purpose of funding another government program, you can be sure the IRS will be incentivized to pay closer attention to our small businesses and pounce on paperwork error.
This proposal is reminiscent of the program that was approved as a revenue raiser for Obamacare a few years ago. Congress initially voted to increase the fines meted out for small businesses who did not file a 1099 for anyone paid a mere $600 or more in a calendar year, but the backlash was so great, that Congress appealed it before the law took effect. Though this new gimmick is not quite the same, it is equally abhorrent.
The underlying assumption is that there are enough businesses who don’t file, or misfile all their forms, so they deserved to be penalized even more by substantially increasing compliance fines – all for the express purpose of funding something else by the government. Instead of the government making spending cuts to existing programs in order the TAA program alive, it chooses to target the private sector again for more money.
Congress has a deadline of July 30th to re-vote on the TAA bill. If it plans to re-authorize the program, perhaps it will find a better way to fund it than off of the backs of small businesses.
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Daniel Mitchell, a libertarian economist and Senior Fellow at the CATO Institute, offered an overall positive review of Rand Paul’s tax plan that was released today. He had three minor quibbles and one major concern with the proposal. It his his evaluation of Paul’s 14.5% business activity tax that is the interesting point for discussion — Mitchell asserts is a Value-Added Tax (VAT) for all intents and purposes.
Paul’s argues that he “would also apply this uniform 14.5% business-activity tax on all companies…. This tax would be levied on revenues minus allowable expenses, such as the purchase of parts, computers and office equipment. All capital purchases would be immediately expensed, ending complicated depreciation schedules.”
As Mitchell points out, the high corporate tax rate (35%) would be reduced down to 14.5% which is obviously a great thing. His bone of contention is the “business-activity tax doesn’t allow a deduction for wages and salaries” and therefore, “he is turning the corporate income tax into a value-added tax (VAT).” In theory, he argues, a VAT would not be a terrible thing because “is a consumption-based tax which does far less damage to the economy, on a per-dollar-collected basis, than the corporate income tax.”
However, the VAT’s place in other economies have proven to be, as Mitchell suggests, “a money machine for big government”, and therefore Mitchell cautions against its implementation in the United States.
Mitchell contends,
“The VAT helped finance the giant expansion of the welfare state in Europe. And the VAT is now being used to enable ever-bigger government in Japan. Heck, even the IMF has provided evidence (albeit inadvertently) that the VAT is a money machine. All of which helps to explain why it would be a big mistake to give politicians this new source of revenue.
Indeed, this is why I was critical of Herman Cain’s 9-9-9 plan four years ago. It’s why I’ve been leery of Congressman Ryan’s otherwise very admirable Roadmap plan. And it’s one of the reasons why I feared Mitt Romney’s policies would have facilitated a larger burden of government.
These politicians may have had their hearts in the right place and wanted to use the VAT to finance pro-growth tax reforms. But I can’t stop worrying about what happens when politicians with bad motives get control. Particularly when there are safer ways of achieving the same objectives.”
Mitchell gives an alternative suggestion for reforming the corporate part of the tax code. He calls for “an incremental reform”, consisting of the following:
–Lower the corporate tax rate
–Replace depreciation with expensing
–Replace worldwide taxation with territorial taxation
His suggestion is that if there is enough support within Congress to potentially reform the corporate income tax (and replace it with a VAT), there should also be support for an alternative reform done incrementally, which would be far better in the long run than introducing a VAT for good.
So are Mitchell’s concerns about Paul’s “business activity tax” valid? Is it essentially a VAT? Pretty much. The VAT gets added to products along the way in the process of production and distribution, and is ultimately passed on to the consumer in the form of the final price.
One could certainly argue that the VAT is not a positive solution for reasons such as the fact that European economies which have the VAT are also in shambles. Also, though many of the VATs started out small, most VATs average nearly 20%. That would likely happen here too — while we still continue to collect an income tax. What’s more, it also tends to disproportionately affect small businesses because they often can’t pass along the cost increases associated with the VAT, and compliance will be burdensome and expensive.
Overall, though, Mitchell was pleased with Rand Paul’s plan, which is to be expected from a fellow libertarian economist. His points about the business activity tax are fair, but Paul’s roadmap is overall a decent one. As more contenders for 2016 release their tax plans, we’ll evaluate them here. Thoughts?
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Rand Paul blew up the pages of the Wall Street Journal this evening with his Op-Ed he released a few hours ago on his plan to reform the tax code. The formal announcement comes tomorrow, but his tax plan is what he calls “The Fair and Flat Tax”.
The basic tenets call for a 14.5% tax for both individuals and businesses, elimination of the payroll tax, gift tax, and estate tax, and more. He’ll keep mortgage and charitable deductions, as well as the Earned Income Tax Credit, and the first $50,000 of income of a family of four will not be taxed.
Rand Paul boosts working with Stephen Moore and Arthur Laffer and says his plan will jump start the economy. The only thing he didn’t really delve into was how much federal income his plan would bring.
You can read the entire proposal below, but I’ll give Rand Paul credit for talking about our byzantine, convoluted tax code and making it a focal point of his campaign. Let me know what you think in the comments below. Here it is:
Some of my fellow Republican candidates for the presidency have proposed plans to fix the tax system. These proposals are a step in the right direction, but the tax code has grown so corrupt, complicated, intrusive and antigrowth that I’ve concluded the system isn’t fixable.
So on Thursday I am announcing an over $2 trillion tax cut that would repeal the entire IRS tax code—more than 70,000 pages—and replace it with a low, broad-based tax of 14.5% on individuals and businesses. I would eliminate nearly every special-interest loophole. The plan also eliminates the payroll tax on workers and several federal taxes outright, including gift and estate taxes, telephone taxes, and all duties and tariffs. I call this “The Fair and Flat Tax.”
President Obama talks about “middle-class economics,” but his redistribution policies have led to rising income inequality and negative income gains for families. Here’s what I propose for the middle class: The Fair and Flat Tax eliminates payroll taxes, which are seized by the IRS from a worker’s paychecks before a family ever sees the money. This will boost the incentive for employers to hire more workers, and raise after-tax income by at least 15% over 10 years.
Here’s why we have to start over with the tax code. From 2001 until 2010, there were at least 4,430 changes to tax laws—an average of one “fix” a day—always promising more fairness, more simplicity or more growth stimulants. And every year the Internal Revenue Code grows absurdly more incomprehensible, as if it were designed as a jobs program for accountants, IRS agents and tax attorneys.
Polls show that “fairness” is a top goal for Americans in our tax system. I envision a traditionally All-American solution: Everyone plays by the same rules. This means no one of privilege, wealth or with an arsenal of lobbyists can game the system to pay a lower rate than working Americans.
Most important, a smart tax system must turbocharge the economy and pull America out of the slow-growth rut of the past decade. We are already at least $2 trillion behind where we should be with a normal recovery; the growth gap widens every month. Even Mr. Obama’s economic advisers tell him that the U.S. corporate tax code, which has the highest rates in the world (35%), is an economic drag. When an iconic American company like Burger King wants to renounce its citizenship for Canada because that country’s tax rates are so much lower, there’s a fundamental problem.
Another increasingly obvious danger of our current tax code is the empowerment of a rogue agency, the IRS, to examine the most private financial and lifestyle information of every American citizen. We now know that the IRS, through political hacks like former IRS official Lois Lerner, routinely abused its auditing power to build an enemies list and harass anyone who might be adversarial to President Obama’s policies. A convoluted tax code enables these corrupt tactics.
My tax plan would blow up the tax code and start over. In consultation with some of the top tax experts in the country, including the Heritage Foundation’s Stephen Moore, former presidential candidate Steve Forbes and Reagan economist Arthur Laffer, I devised a 21st-century tax code that would establish a 14.5% flat-rate tax applied equally to all personal income, including wages, salaries, dividends, capital gains, rents and interest. All deductions except for a mortgage and charities would be eliminated. The first $50,000 of income for a family of four would not be taxed. For low-income working families, the plan would retain the earned-income tax credit.
I would also apply this uniform 14.5% business-activity tax on all companies—down from as high as nearly 40% for small businesses and 35% for corporations. This tax would be levied on revenues minus allowable expenses, such as the purchase of parts, computers and office equipment. All capital purchases would be immediately expensed, ending complicated depreciation schedules.
The immediate question everyone asks is: Won’t this 14.5% tax plan blow a massive hole in the budget deficit? As a senator, I have proposed balanced budgets and I pledge to balance the budget as president.
Here’s why this plan would balance the budget: We asked the experts at the nonpartisan Tax Foundation to estimate what this plan would mean for jobs, and whether we are raising enough money to fund the government. The analysis is positive news: The plan is an economic steroid injection. Because the Fair and Flat Tax rewards work, saving, investment and small business creation, the Tax Foundation estimates that in 10 years it will increase gross domestic product by about 10%, and create at least 1.4 million new jobs.
And because the best way to balance the budget and pay down government debt is to put Americans back to work, my plan would actually reduce the national debt by trillions of dollars over time when combined with my package of spending cuts.
The left will argue that the plan is a tax cut for the wealthy. But most of the loopholes in the tax code were designed by the rich and politically connected. Though the rich will pay a lower rate along with everyone else, they won’t have special provisions to avoid paying lower than 14.5%.
The challenge to this plan will be to overcome special-interest groups in Washington who will muster all of their political muscle to save corporate welfare. That’s what happened to my friend Steve Forbes when he ran for president in 1996 on the idea of the flat tax. Though the flat tax was surprisingly popular with voters for its simplicity and its capacity to boost the economy, crony capitalists and lobbyists exploded his noble crusade.
Today, the American people see the rot in the system that is degrading our economy day after day and want it to end. That is exactly what the Fair and Flat Tax will do through a plan that’s the boldest restoration of fairness to American taxpayers in over a century.
