Republican presidential candidates are in agreement that tax rates need to be lower, simpler and fair and enacting that kind of reform could be “rocket fuel” according to one of the chief architects the emerging proposals.
Stephen Moore is Senior Economic Contributor at FreedomWorks and has advocated for conservative tax reform for decades through his work at the Heritage Foundation, the Cato Institute and other institutions. He says dramatic action on taxes would quickly change our economy.
“The lower the better,” said Moore. “If you do that, I think it will be rocket fuel for the U.S. economy. The only bad news is the Democrats, Hillary Clinton and Bernie Sanders , are talking about running in the opposite direction.”
However, Moore is thrilled that there seems to be a consensus throughout the GOP field on the need to lower taxes.
“It’s hard for me to find a single Republican who has not talked about dramatic reductions in tax rates in exchange for getting rid of loopholes and all the carve-outs in the system that are causing revenue losses,” said Moore.
There’s a good reason Moore is happy with the plans. He and three other famed conservative economists have played key roles in drafting them.
“I’ve worked with a lot of these candidates to put these plans together, with my friend Art Laffer, Larry Kudlow and Steve Forbes. So the four of us have really been the four horsemen of tax reform. I think most of these plans were influenced by one of the four of us,” said Moore.
Moore specifically cited the plans of Ted Cruz, Jeb Bush and Donald Trump as being strong on lowering taxes and simplifying the system. He played a direct role in the drafting of Rand Paul’s flat-tax, calling for a 14.5 percent rate.
While Moore wants Americans to keep more of their earnings, he says the best reason to move to lower, simpler, flatter rates is to spark job creation.
“Let’s talk about our business taxes because, after all, businesses create jobs. Hillary Clinton said businesses don’t create jobs but of course they do. We have the highest business tax in the world. We’re at 35-40 percent. Most of the rest of the world is below 25 percent. That puts every one of our American businesses that does business abroad at a 10-15 percent competitive disadvantage,” said Moore.
He says decisive changes to our tax policy will make a huge difference in job creation.
“If we can get our business tax down to 15 percent or 20 percent, then all those businesses that have been leaving the United States, like Burger King and Walgreen’s and now Pfizer’s talking about leaving, one of our major drug companies, they would come back to the United States and bring the jobs back with them. It’s really important, if we want the high-paying jobs, to not have a tax code that encourages companies to invest abroad,” said Moore.
Tax policy is not an issue that often stirs passion in the electorate and Democrats are sure to paint the GOP plans as likely to favor the rich and drive up federal deficits. Moore says Republicans must be consistent and strong in their messaging. He says there are three reasons why voters should embrace conservative tax reform.
“One, we want to create jobs for America. We want the most competitive tax system in the world so that American jobs are here and not in China and Mexico,” said Moore.
He says the GOP must also make it clear that flat rates and closed loopholes is the fairest way to reform the system.
“We have to basically make the point that if you get rid of all the loopholes and carve-outs, that’s what makes the system unfair. You can have a flat tax where everybody is paying the same rate. If you make a million dollars a year at a 15 percent rate, you’re going to pay $150,000 in taxes. If you make a thousand dollars a year, you’re going to pay $150 a year in taxes. I think that can be sold to the American people as fair and equitable,” said Moore.
Finally, he says Americans will likely be attracted to a much simpler system.
“We have a tax code that takes people days and days, if not weeks, to figure out. It’s 60,000 pages long, this tax code that might as well be written in Greek. Nobody can understand it. Nobody can fathom it. It’s a huge dead-weight loss for the economy,” said Moore.
Moore says the twin promises of creating more jobs and getting the special interests out of the tax code ought to be music to the ears of many voters.
“We’ve got to find a way to convince Democratic voters and blue collar workers that we’re going to bring the jobs back. We’re going to save your job. We’re going to give you a pay raise if we can get this done. I think that’s a very popular message with Americans who despise Washington,” said Moore.
“By the way, the tax code is the center of power in Washington. If we didn’t have a complicated, loophole-ridden tax system, you wouldn’t have anything to buy and sell in this town,” he added.
In a recent column, Moore laments that any reform will likely have to come despite Democratic opposition. He says that’s a far cry from the tax reform of the 1980’s, when reforms passed Congress by huge bipartisan majorities.
Moore says Clinton and Sanders want the exact opposite.
“If you listen to Hillary Clinton and you listen to Bernie Sanders, they’re talking about raising taxes on the rich. Raising taxes on the rich is fine except every time we’ve tried to do it over the last 50 years, when we raised the tax rates we get less revenues not more because people either move out or find ways to get around the tax system,” said Moore.
But Moore says the whole “rich need to pay their fair share” argument from Democrats is a canard.
“They’re interested in a radical redistribution of income. Instead of creating wealth there are too many liberals who want to redistribute it. In other words, instead of people going out and taking risks and building a business and becoming rich, they’re saying you don’t have to do those things. Just take it from people,” said Moore.
