Cutting taxes is part of the DNA of the modern Republican Party. All four of the remaining GOP candidates for president have proposed steep cuts in business and personal taxes, and it sometimes seems like Republicans are competing to show the most enthusiasm for tax cuts.
At a debate last month former Sen. Rick Santorum said tax cuts were needed to get the economy thriving again — even if they benefit the wealthy.
“We need to have as much money funneling through this economy as possible and the people who make those investments are people who have resources and wealth,” Santorum said. “We want them to deploy that wealth in the most productive way possible,”
The candidates all want to keep the George W. Bush-era tax cuts in place. They also want to get rid of the estate tax for good and lower taxes on corporations, but there are differences among them.
Curtis Dubay of the Heritage Foundation says the plans put forward by Santorum and former Massachusetts Gov. Mitt Romney are a bit less ambitious than the others.
“Those plans work within the confines of the system we have today,” Dubay says. “They look to make improvements around the edges, whereas if you were going to go with Speaker [Newt] Gingrich’s plan or Congressman [Ron] Paul’s plan those plans would really have to blow up the whole system and start from scratch.”
Romney wants to lower the corporate tax from 35 to 25 percent and cut capital gains taxes for households earning less than $200,000 a year. He also says he likes the idea of an overhaul of the tax code down the road.
As a multi-millionaire, Romney would actually fare much less well under his own plan than under the one put forward by Gingrich.
The former House speaker wants to eliminate capital gains taxes altogether and lower corporate taxes to 12.5 percent, which would be among the lowest in the world. Do this, he says, and investment dollars will flow back into the country.
But critics like William Gale of the Brookings Institution say Gingrich’s plan would cost the treasury some $800 billion a year.
“Gingrich’s plan is both extremely expensive in terms of lost revenue and extremely regressive in terms of providing huge benefits for households at the top of the income distribution,” Gale says.
But Gingrich shrugs off such criticism.
“My goal is to shrink the government to fit the revenue,” he said, “not to raise the revenue to catch up with the government.”
Gingrich’s plan is less radical than that of Ron Paul. The Texas congressman says for now, he favors a flat tax but his ultimate goal is to get rid of the income tax altogether.
“My goal is to get rid of the 16th Amendment,” he said. “The only way you can do that is not run a welfare system and a warfare system in policing the world.”
As for Santorum, he has proposed reducing the number of tax rates to just two, at 10 and 28 percent. That would greatly simplify the tax code — something a lot of Republicans and Democrats favor. But Santorum also wants to triple the child tax credit and give tax breaks to manufacturers.
Dubay of the Heritage Foundation says that doesn’t set right with a lot of conservatives.
Costs Of Lower Taxes
“One thing that [as] conservatives we try to focus on is not having the tax code pick winners and losers in the marketplace,” he says. “That’s one area where Sen. Santorum will get pushback from economic conservatives.”
But Gale of the Brookings Institution says there’s a bigger problem with all of these plans. The country just can’t afford them.
“It’s delusional for the discussion in the policy circles to be about whether we extend the Bush tax cuts and have a two or six or $10 trillion tax cut on top of that when what we have is looming budget deficits as far as the eye can see,” he says.
But for the Republican Party, lower taxes remain the elixir that can help make the U.S. economy prosper again — and whoever wins the nomination will have to prove to voters he can carry that banner forward.