by Michael Nachbar | Run through of the Republican candidates’ tax policies.
One of the central tenets of conservatism is the responsible use of taxpayers’ money. Candidates often promise to reduce taxes and spending in order to return money to the taxpayers, allowing them to independently improve their standard of living and invest in the American economy. This follows the belief endorsed by Reagan that tax cuts often finance themselves by boosting national revenue. All of the major candidates for the Republican nomination claim to support this value, but have demonstrated varying levels of commitment.
Fred Thompson has greatly distinguished himself from the field with his bold flat tax proposal. His plan would give Americans the choice of keeping their current tax plan or switching to a plan that would offer a simple rate of 10 percent for their first $100,000 earned or 25 percent for all additional earnings. This would greatly simplify the tax system, eliminating the billions upon billions of dollars in deadweight loss incurred annually by the IRS and an industry of tax workers who interpret and attempt to find loopholes in the current over-complicated tax code. If this legislation passes, thousands of tax lawyers and IRS employees could quit their jobs and use their advanced math skills to benefit the economy.
Even more radical than Thompson is Paul, the self-proclaimed “Taxpayer’s Best Friend.” Ron Paul is by far the most vehement candidate in terms of lowering taxes. He has announced his plan to eliminate the IRS, national income tax, and Federal Reserve, sending much more money back into the economy. A follower of the Austrian School of Economics, Paul has received the highest scores possible from conservative groups that rate candidates on tax issues. While his positions are too far from the mainstream to garner a serious chance at election, Paul’s candidacy has spread awareness of the need to simplify, minimize, and reform the current tax system.
Current frontrunner Giuliani opposed a flat tax while mayor of New York, but has since claimed that while he supports the idea of a flat tax, he believes it would be difficult to implement. He is a good fiscal conservative, however, and has an outstanding record of cutting taxes while mayor of New York. While his tax reforms would not have the impacts of those of Paul or Thompson, Americans can rest assured that Giuliani will uphold conservative principles in his tax legislation.
Like Giuliani, John McCain supports lowering taxes and simplifying the tax system and has expressed support of a flat tax. Despite this, he still has not laid out a specific tax plan. While Thompson beat him to the punch with his flat tax proposal, McCain, who has struggled recently in the polls, should take a more definitive stance on taxes to separate himself from the pack.
Mike Huckabee, who has seen an upsurge in polling with his brand of compassionate conservatism, and may win the Iowa primary, possesses one of the most unique tax plans. He supports the Fair Tax, which would eliminate the income tax and tax citizens only on their purchases. On the surface, the plan seems to have distinct advantages: it eliminates the IRS, eliminates business taxes, and encourages saving as opposed to spending, which would benefit the economy. Unfortunately, enforcing the plan would be difficult, and it would greatly encourage and tempt Americans into making transactions under the table to avoid the immense 23 percent tax. More significantly, in order to prevent the tax from being absurdly regressive, the government would have to send monthly stipends to poorer families. This would counteract every good effect of eliminating the IRS and create a massive government bureaucracy needed to dole out these entitlements. The system would become inefficient and ripe with fraud, quite possibly even surpassing our current tax system. Despite the fiscal conservatism Huckabee claims to endorse, he had a terrible history of raising taxes as governor of Arkansas. His support of the Fair Tax only furthers the notion that he lacks good understanding of economic principles.
Of all the Republican candidates, Mitt Romney has the most uncertain record on taxation. He claims to be a conservative and has signed a pledge promising not to create any new taxes or raise taxes. However, in 2002, Romney refused to sign such a pledge referring to it as “government by gimmickry.” He also claims that he did not raise taxes as governor of Massachusetts, despite pressure to do so by Democrats in the state government. While he did not raise taxes, he did raise fees which act like taxes and brought in hundreds of millions of dollars. However, as governor of Massachusetts he inherited a $3 billion dollar deficit and eliminated it through fiscal responsibility, and used his business skills to overcome the massive debt facing the 2002 Winter Olympics, which he managed. Supporters of Romney believe that his business acumen has and will transfer into sensible and efficient economic policy.
With Democratic candidates competing over who can offer more wasteful social programs and more “progressive” anti-growth legislation, it is important that these Republicans stay sharp on conservative economic policies, one of their biggest advantages as a party.
Mr. Nachbar is a junior majoring in Quantitative Economics.