Kasich and Santorum Unveil Tax Plans

Republican presidential candidates John Kasich and Rick Santorum have released their tax reform plans.

[IMGCAP(1)]Kasich, the governor of Ohio and a former House representative, released his tax plan Thursday. It involves reducing the number of individual income tax brackets from seven to three, cutting the top rate from the current 39.6 percent to 28 percent—the same rate President Reagan used in his 1986 tax cut—and cutting the other rates as well.

Kasich’s plan also would increase the Earned Income Tax Credit by 10 percent, cut the long-term capital gains rate to 15 percent, eliminate the death tax and preserve the deductions for charitable donations and mortgage interest, “consistent with current limits.”

Kasich also proposed to cut the top rate on business taxes from 35 percent to 25 percent, establish a low tax rate to repatriate the estimated $2 trillion in profits held overseas, double the research and development tax credit for businesses under $20 million, allow same-year expensing for new investments, and create a “territorial” system that only taxes U.S.-produced income, like most other major industrialized nations.

In addition, Kasich’s campaign said he would “launch a top-to-bottom review of the IRS and tax code to root out the barriers to innovation and small business start-ups, as well as to end the IRS culture of bias, arrogance and political favoritism.”

Santorum Plan

[IMGCAP(2)]Santorum unveiled his tax reform plan during a campaign stop Monday in Fort Worth, Texas, according to the Fort Worth Star Telegram. Santorum calls it the “20/20 Flat Tax Plan. According to a white paper released by his campaign, it would replace the seven rates in the current system with a single-rate system. The plan from the former U.S. Senator from Pennsylvania features a 20 percent flat tax on all sources of individual income (including wages, salaries, business and investment income such as capital gains and dividends) after “generous exemptions” to shield much of a worker’s income from federal taxation ($2,750 per person credit, plus retention of the Child Tax Credit).

Under Santorum’s plan there would be no more marriage penalty, estate tax, or alternative minimum tax. The plan would also eliminate all tax increases imposed by the Affordable Care Act. In addition, the plan would eliminate all individual tax deductions, except two—an uncapped charitable deduction to encourage generous giving to churches and nonprofit organizations and the home mortgage interest deduction, which would be capped at $25,000 a year.

In terms of business taxes, Santorum plan would levy a 20 percent flat tax on business income. He would allow all capital investments in plant and equipment, including inventories, to be fully deductible in the year they are purchased. The plan would eliminate the deductibility of interest expenses and eliminate all other corporate deductions, loopholes and shelters.

Santorum’s campaign firmly rejected the idea of introducing a value-added tax. The plan also envisions dramatically downsizing, restructuring, and reforming the Internal Revenue Service. Santorum’s campaign said he would prosecute violations of taxpayers’ rights and privacy by IRS administrators and employees and create a zero-tolerance policy for taxpayer abuse.