(Bloomberg) Jeb Bush’s tax plan attempts to fuse disparate streams of Republican thinking on U.S. fiscal policy, moving beyond the base-broadening, rate-lowering mantra that has animated the party.
The plan would be a $3.4 trillion tax cut over a decade, reducing federal revenue by about 8 percent. That’s according to an estimate prepared by four economists, including Glenn Hubbard, one of Bush’s top advisers. They expect the plan and forthcoming regulatory proposals to generate enough economic growth to cover about 65 percent of the costs, leaving a net revenue loss of $1.2 trillion.
In his proposal, Bush emphasizes ending income tax liability for millions of low-income households, taxing carried interest as ordinary income and letting businesses write off expenses immediately. These are all planks that haven’t been Republican priorities in past presidential campaigns.
“This plan moves money out of the hands of politicians in Washington, D.C., and gives it back to hard-working Americans like you,” Bush said Wednesday at a company in Garner, North Carolina, that makes cooling equipment.
The former Florida governor’s proposal incorporates some of the populism of Donald Trump and some of the pro-family ideas embraced by Marco Rubio without being as provocative as either of those fellow presidential contenders.
The approach of 2012 Republican nominee Mitt Romney—lower rates and fewer deductions—is still at the core of the Bush plan. That’s little surprise given that Bush’s economic adviser, Glenn Hubbard, had the same role for Romney in 2012. Both plans cut the top individual rate to 28 percent, cap itemized deductions and repeal the estate tax and the alternative minimum tax. By the end of his campaign, though, Romney’s tax plan became a liability as President Barack Obama warned that it could translate to a tax increase for middle- class Americans.
Yet what’s most fascinating about Bush’s plan is his departures from Romney and from the tax revamp proposed last year by Dave Camp of Michigan, then the chairman of the House Ways and Means Committee.
Romney and Camp set a 25 percent corporate income tax rate. Bush goes to 20 percent.
Camp, hemmed in by congressional scoring rules and his promise to offer a revenue-neutral plan, proposed lengthening depreciation schedules. Bush, in a nod to supply-side economists, plans to allow companies to write off capital expenses immediately. He would pair that with the elimination of the tax deduction for interest payments.
“We need to move to a completely different direction,” Bush said on CNBC Wednesday. “Can you imagine a country that would have the lowest tax rate in the industrialized world and where you’re rewarding investing in a factory, 100 percent deduction, and you’re rewarding equity? You’re going to see an explosion of investment in this country. That’s what we need. And the Wall Street guys will do fine.”
Romney’s 47 Percent
Romney mused aloud about how 47 percent of people didn’t pay income taxes. Bush bragged in a Wall Street Journal op-ed piece published Tuesday that his plan would push 15 million people off of the income tax rolls.
Romney wasn’t specific about how his deduction cap would work. Bush is proposing to protect the deduction for charitable giving and then cap all other deductions at 2 percent of gross income. That move would starkly limit the benefit of the state and local tax deduction and the mortgage interest deduction.
So far, Bush is also avoiding some of the traps that ensnared Romney in the 2012 general election, as he tried to explain—without ever providing full details—that his tax plan would add up.
Romney and Camp both promised not to increase the U.S. budget deficit and not to shift the tax burden from high-income households to others.
Bush said on CNBC Wednesday that the rich would pay a greater share of taxes than they do now. He hasn’t said anything about how much his tax plan would cost.
—With assistance from Michael C. Bender in Washington.
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