Rand Paul

Rand Paul: "Blow Up the Tax Code and Start Over"

The Kentucky senator outlines plans in WSJ, on same opinion page that blasts Marco Rubio's budget-busting proposal.


Daily Beast

Libertarianish Republican Sen. Rand Paul of Kentucky has announced the outlines of an income tax plan that will, in his words, "blow up the tax code and start over." In the Wall Street Journal, Paul writes:

I am announcing an over $2 trillion tax cut that would repeal the entire IRS tax code—more than 70,000 pages—and replace it with a low, broad-based tax of 14.5% on individuals and businesses. I would eliminate nearly every special-interest loophole. The plan also eliminates the payroll tax on workers and several federal taxes outright, including gift and estate taxes, telephone taxes, and all duties and tariffs. I call this "The Fair and Flat Tax."

To paraphrase Matthew McConnaughey, all right, all right, all right. Then again, the details, which have not yet been released, really matter. Especially when, like all flat taxes, you start out immediately with exemptions, despite the whole idea of a flat tax being equally applied to all people and income, right?

All deductions except for a mortgage and charities would be eliminated. The first $50,000 of income for a family of four would not be taxed. For low-income working families, the plan would retain the earned-income tax credit.

I would also apply this uniform 14.5% business-activity tax on all companies—down from as high as nearly 40% for small businesses and 35% for corporations. This tax would be levied on revenues minus allowable expenses, such as the purchase of parts, computers and office equipment. All capital purchases would be immediately expensed, ending complicated depreciation schedules.


The business-activity tax is causing a rumble in the gut of everyone I know who looks at taxes from a free-market perspective. The main fear is that it ends up being even worse than a VAT by dint of being fully hidden from any specific activity or transaction. Taxes that are not visible to the people paying them tend to expand, after all.

Well, we'll see what's in the cake once Paul releases the details later today. Check back for that.

For now, read Paul's outline.

Interestingly, in the very same opinion section that carries Paul's piece is a stinging house editorial by the Journal that critiques the tax reform plan of his fellow presidential candidate Sen. Marco Rubio of Florida. Some wees back, Rubio released with Sen. Mike Lee (R-Utah), a tax plan that promised "family fairness" and economic growth. As Shikha Dalmia and I explained in separate pieces, the plan was the product of "reform conservatives" who seek to use the tax code to engage in both social engineering and vote-buying. Here's Dalmia's piece and here's mine.

Rubio-Lee would raise the credit to $2,500 per head. The left-leaning Tax Policy Center (TPC) estimates this would forgo revenue of $1.576 trillion over a decade. The Tax Foundation estimate is in the same ballpark—notably, on both a static budget basis and using dynamic scoring.

The reason is that unlike the investment portions of Rubio-Lee, the child tax credit does nothing for economic growth. The only growth case for it is the Keynesian claim that it would boost consumer spending and aggregate demand, but by now we've seen how that doesn't work….

there are also big political problems. One is that child subsidies concede the use of the tax code for social policy, and more political mediation over neutrality and individual decisions. By dumping the goal of a cleaner, more neutral code, Republicans will have less credibility to oppose liberal favoritism. Democrats can always outbid Republicans on this kind of policy, starting with the demand that the credit be "refundable," or paid in a check to those who have no tax liability….

Mr. Rubio has let himself be swayed by a coterie of non-economist conservatives who view the tax code as an engine of social policy. This crowd denigrates marginal-rate cuts as politically déclassé, but then the child credit is one of the hoariest forms of tax gimmickry, an echo of Jimmy Carter's New Jobs credit, or Mr. Bush in 2001 and hisPelosi tax rebates in 2008.

Read "Rubio's Tax Mistake" here.

Related: "Is 'Reform Conservatism' a Friend or Foe of Limited Government?", a forum moderated by Dalmia and including a debate with Yuval Levin, the leader of the reformocon movement, and responses from The Federalist's Ben Domenech, Cato's Jason Kuznicki, and me.

Matt Welch recently interview Rand Paul about his new book and just about everything else that matters. Take a look:

NEXT: Nine Killed in S.C. Church Shooting, Alexander Hamilton Off the $10 Bill, Lester Holt to Replace Brian Williams as Nightly News Anchor: A.M. Links

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  1. All deductions except for a mortgage and charities would be eliminated.

    Because God forbid we stop fucking with the housing market and encouraging people to possibly trap themselves in dying cities and regions.

    1. Yes, well the cult of homeownership is hard to overcome. What Rand is proposing is still a pretty solid leap in the right direction, at least based on the outline.

      1. Well, he does get way more points than Rubio.

      2. The big issue is the “industries” affected by the flat tax. Tax attorneys, CPA’s, IRS employees, TurboTax, H&R Block…blah, blah, blah…are the real impediments to this sort of thing.

    2. Agreed. It’s the only deduction I get and I’m willing to get rid of it for a simpler, flatter tax code.

      Disclosure: I still think all involuntary taxes are theft

      1. Now, I’m not attacking, and I do believe taxes are somewhat confiscatory…but what constitute “involuntary” or “Voluntary” taxes?

        1. A voluntary tax isn’t really a tax at all I guess. I think government services should be fee for use. So a road tax or fee is a legitimate tax for road use. Court fees for using the court system, etc. then you would only get government services that people voluntarily pay for. No one is going to send money to fund prawns running on ttead mills voluntarily.

        2. The lottery is a voluntary tax.

          1. So if I volunteer as tribute, am I doubly taxed?

          2. The lottery is an idiot tax.

            1. Lottery is a tax on those who flunked math.

              1. I see this so many times, and while it may be true for those who think they depend on it, in other ways it is perfectly rational. Some people will never get rich by their own work, whether from lack of skills or lack of ambition, but if they can afford to dump $5 a week on lottery tickets instead of a beer or two or a pack of ciggies, it at least has the upside of possibly winning enough to make a difference in their lives.

            2. The lottery is a reasonable gamble is you restrict yourself to just a few tickets a year. One ticket per large jackpot infinitely increases your odds of winning. It’s that second ticket on the same jackpot that experiences massive diminishing returns.

              1. However, if everybody played like I do the jack pots would be about 10K.

            3. I will buy mega millions or power ball when they hit $250 M . If I’m to be a loser, I want to lose BIG.

        3. I think you could make a legitimate case for a voluntary tax on the notional value of contracts. You could get around the tax, but the contract wouldn’t be enforceable in a court of law.

          1. So, income taxes are voluntary because you can opt out by not earning money?

            1. Not exactly comparable. With income taxes, you aren’t in and of itself consuming government services in the act of earning money. For a contract to be legally binding, you are.

            2. Income taxes are a direct tax and essentially immoral, unethical and a tax on a persons being, not on some abstract economic activity of choice.

      2. You deduct property taxes and sales tax too presumably.

    3. He’s spoken in the past about phasing out the mortgage deduction. As for charities, I support the deduction if it means privTe groups are more likely
      To get money than a government. Especially if they are competing for services with that government.


  2. Rubio-Lee would raise the credit to $2,500 per head.

    Doesn’t sound very fair to my family, Rubio.

    1. This is a new spin on an old proposal from Ramesh Ponnuru of NRO. Their argument is that we should be incentivizing child birth because in the long run, more people means more productivity (as well as more people to support SS and Medicare).

      In general, I’m not terribly against credits for additional children, and I tend to agree that if you are going to subsidize anything, this is one of the least harmful.

      My big problem with this proposal is Ponnuru himself. He launches ridiculous attacks against any tax plan- liberal or conservative- that doesn’t follow his Catholic-inspired plan. Thus any improvement that conservatives offer is often undermined by its own pundits. In essence, Ponnuru and his chronies have made every tax plan an enemy of theirs rather than looking for improvements wherever we can get them.

      1. I disagree that its the least harmful. I think its just as harmful but the least obvious harm.

        Presumably, the least productive people produce the least productive children, while the most productive, produce the most productive children. unfortunately the least productive people product the most children. This reduces future income from the next generation while increasing the expensiveness of that generation. By incentivizing the least productive people to burden the society with the least productive most expensive descendants you are burning the candle at both ends..

        1. Even the least productive children are still productive. Would we prefer it if every new child were a doctor or engineer in the making? Sure. But even if that kid is a future fry cook, they will provide value.

  3. Anyone who talks about blowing things up is a terrorist! See? Libertarians are terrorists!

    1. I know, right? Where is Preet Bharara when you need him?

      1. He’s probably at a hardware store trying to find an even broader paintbrush.

        1. Trouble is, the paintbrush aisle takes you right past the woodchippers.

          1. That hardware store is microagressing me!

  4. I’m a little surprised. WSJ is typically very pro-establishment.

    1. I bet they’re even more pro-readership.

      Besides, next week’s op-ed page will consist almost entirely of pieces “rebutting” Rand’s “insane, dystopic tax plan.”

  5. Here is a better tax plan: tax representation in Congress, charge it to states, let them figure out how to collect it, and completely eliminate all direct federal taxation. Change the constitution if need be.

    1. ^^^^THIS. So much this. Get the worthless federal government out of the busines of setting tax policy.

      1. And if a State can’t pay because it’s broke? Toss it out of the Union!

        1. I think you could just deny the state representation in Congress until the tax is paid. That is not perfect, but I think dissolving the state government or forcing the state’s secession would be far more problematic. Alternately, you could just exempt the state and its citizens from any federal government benefits that are not paid in advance (e.g. Social Security) or funded by user fees (e.g. passports).

          1. While you couldn’t (and I think shouldn’t) Constitutionally deny it representation, you could refuse to send any Federal money to any of the States for anything until their bill is paid. This would include payments to individual citizens/corporations within the state.

            1. Why would you pay to get federal money unless you pay less to get more? If you pay less to get more, why can’t they just deduct the difference?

    2. Holy crap, that’s brilliant.

      Totally stealing this idea.

      1. I call it the (Old) Tea Party Obverse. They said “No taxation without representation”, this says “Taxation only with representation”.

    3. Isn’t this more or less what the Articles of Confederation had?

      1. It’s more or less what the US Constitution had prior to 1913. Congress wanted to tax those filthy rich people but didn’t want their beloved working class to have to pay anything (sound familiar?) and there was a lot of debate, both politically and legally, about whether taxes on incomes were “direct” taxes and needed to be apportioned pursuant to Article I, Section 2, Clause 3. In 1909 Congress, not willing to wait for that debate to shake out, passed the 16th Amendment that essentially established income taxes as direct taxes that do not need to be apportioned, which was finally ratified in 1913 (CT, RI & UT voted against it).

    4. FEDERALISM! Didn’t see your comment before I posted a somewhat longer version of what amounts to exactly the same thing — Return to Federalism

      1. Dang, blew the hyperlink in that last post, let’s try it again 🙂

        Return to Federalism

    5. Only problem is that over half of all federal spending now is direct transfer to individuals (SS/Medicare) – and that ain’t going anyway anytime soon

      Other than that – I really like the idea

    6. You don’t seem to get it.
      FEDGOV looks at itself as the great equalizer.
      They collect from everywhere and decide who gets what. I think they would rather not have the states collect any taxes and all of it get sent to them.
      It is from there that FEDGOV’s power is derived, and we know how often people will relinquish power, once they have it.
      The Founders wanted FEDGOV to be able to fund itself only through tariffs and excises, not through any direct taxes, “unless in Proportion to the Census or Enumeration”.
      Well, once FEDGOV learned that a compliant SCOTUS would let them change that, the move was on. The amendment process was made far too easy IMHO.

  6. While a bona fide flat tax would be best (well, aside from doing away with income tax, which ain’t happenin’ anytime soon),this plan is a fuckton better than what we have. At least the average person could understand what is being taxed and how much. While corporate/business taxes are a waste and just hide personal taxation in the prices of goods and services, at least it’s lower than the current corporate tax rate.

    1. “Don’t let perfect be the enemy of good”.

      I’d say it’s a long awaited step in the right direction.

    1. Definitely. Anything that gets rid f the corrupt ad despicable IRS in the process is a bonus.

  7. This plan is real. And it’s spectacular.

    1. +two nice tits.

  8. While I’m in fantasyland, Rand should demand a budget cap set by the previous years actually tax receipts, instead of projected revenues and all income tax should be paid at the end of the year in a lump sum.

  9. Tax reform. Fanfuckingtastic. It’s about time. Let’s get rid of property taxes while we’re at it.

    1. That’s a state issue. And it would be nice.

      1. All taxes suck, but at least property taxes are closer to user-fees than income tax. You pay the tax locally and presumably for local services (like roads, sewer, police, etc.). Property taxes should, IMO, be WAAAAAAY down the list of tax bitches. Plus, property taxes are visible, and you have to pay them every month (or semi-annually in most states, if you don’t have a mortgage payment). That’s why people hate property taxes — you can see them and you have to pay them out of pocket. This keeps people aware and invested in making sure that they’re low, reasonable, spent on actually necessary services, etc. If property taxes were the only taxes collected, we’d have a lot smaller government.

        1. Good points. I suppose I should have prefaced my statement by saying is like them replaced with user fees.

          1. No disagreement from me on that. User fees are the way to go, but that’s a pipe dream in my lifetime. The best I can reasonably hope for is a FedGov that stops growing. A transparent tax policy would be a step in the right direction in that regard.

            1. I fully support user taxes, so long as all the USERS are paying. Property taxes are insanely skewed by users who do not pay their fair share (primarily for education), so in many cases a more direct matriculation (user) fee for those services is warranted.

        2. Also, some of us asshole Geoists think that the undeveloped value of land should not belong, in a moral sense, to any person; property rights are a utilitarian concession the public makes to avoid the tragedy of the commons, and land value tax is taken to make the public whole (though, in such a scenario, much of it should be redistributed on a per cap basis).

          1. And, indeed, in an agricultural economy dominated by remnants of feudalism, the Georgist approach isn’t totally insane.

            In the modern world, though . . . .

            1. People still eat.

            2. The Georgist approach works BEST in a modern world. Taiwan and Singapore are hardly agricultural economies and their Georgist tax means that they don’t need much taxes on other stuff. No surprise they are the model for actual free competitive market economies as well. Estonia is easily the best example of former Soviet place transitioning to free market – and probably more of a free market now than the US – and not agricultural either. Denmark adds a whole slew of social welfare nonsense and taxes on top of Georgist land tax – but it is that land tax base that makes it the most sustainable of the social welfare states.

              The reality is that a Georgist tax only really harms pure speculation. And the reason it is opposed in the US so vociferously is precisely because land speculation based on insider knowledge of either manipulated interest rates or zoning/infrastructure is how most American billionaires made their money.

              1. Just looking at one ‘ranking’ of countries by ‘free market’ (not some UN crap – but still obviously flawed) –


                The US ranks 12th. HK and Singapore rank #1,#2. Estonia is #8. Denmark is #11. Taiwan is #14. Australia (has LVT in Sydney area) is #4.

                For a tax system that is nearly forgotten and obsolete elsewhere, that is one hell of a record of a tax system that doesn’t itself creates distortions elsewhere in the market.

        3. Disagree.

          Property taxes are the most evil of taxes because they function more like lease feed or rent. We don’t own our property so long as not paying property taxes = have your home taken from you rather than simply being denied the services listed on the tax bill.

          1. I couldn’t agree with you more. You never own your own land with property taxes. You rent from the govt. If you don’t pay, men with guns show up and take it away from you. We can never be fully free without the ability to own our own land.

            1. What do you do with the land when you die? Do you expect the state to transfer the land to someone of your choosing simply because it should obey the will of a dead person for nothing?

              And let me assure you – without the state, you still don’t ‘own’ anything that can’t be taken from you by someone with a bigger gun. Ask the Indians how that works.

  10. I don’t have any illusions about it being taken seriously, but to have a sitting senator actually write and publish this is still god damn exciting.

    1. Oh, it’s gonna be his main campaign point. And he’s gonna sell it on MSNBC more easily than he will on Fox News. This could be a game changer. It’s a progressive tax with a huge initial deduction.

      He needs a website where people can plug income levels and family size, mortgage and charitable donTion levels in and see where they’d end up. He does that effectively and it sells itself.

      1. meh…get ready for a lot of “blow a hole in the budget” comments

        1. It needs to be calculated by an outside group to see what the receipts would be.

          He could sell it up to 17-18% though. It still works out better for little guys.

      2. I just did the math, and at my income level it would save me about $3,000 a year.

        Not to mention the additional benefits of lowering taxes on corporations will boost job creation, investment.

        Also, laying off 90% of the IRS (hopefully) would be awesome.

        So yeah, pass it.

        1. For me, according to my math…probably $6k-$8k a year.

          I’d say that’s a significant difference.

        2. Did you factor in what you would no longer be paying in payroll taxes, SSI and Medicare as well? Because that’s where the big savings will occur for people under $100k a year.

          1. Would this replace payroll taxes? Until we see the details, I wouldn’t presume that.

            If so, it would save me about $30k. If not, it would save me about $10k.

            1. The WSJ article says it replaces payroll, SSI and Medicare taxes too. Which is why it will be a big seller to poor-to-middle class people.

              1. Not sure the numbers add up. Even tho payroll doesn’t cover outlays, it’s still several hundred billion per year. I think the cut has to be even more than 2TT.

  11. I think Gillespie has a thing for Shailene Woodley (NTTAWWT).

    The only explanation for his obsession with that picture.

    1. How else to reach precious millennialls besides constantly referencing YA fandom!

  12. As much as I like this, I can’t help but think this just torpedoed his chances. I think he would have been far better off going with a two-tier system. “$100k gets taxed at 25%”

    I want a flat-tax as much as everyone else here, but I just don’t think it is palatable for most of America. They’re going to go “the rich don’t pay their fair share.” Now when he includes businesses at the same 14%, they’re going to go “LOLOLOLOL businesses are people and Rand hates workers and loves the rich”

    It just plays right into the left’s hand.

    1. Except it kills all of the money taxed under $50k for that same person. He can sell that easier by saying “now these workers get more say in where all of their money gets spent”.

      1. Right, but you could still do the same thing with a two-tier system. You leave the same standard deduction in place. That has nothing to do with adding a second marginal rate.

        1. It becomes unnecessary once people see that it’s actually a sliding scale due to the huge deduction.

          The only people that would clamor for a two tier system are the people that would want to fuck rich people out of wealth more so than income. Anything short of a wealth tax won’t satisfy them.

        2. This is a good point. A tiered system may have been more palatable. That being said, if the MSM wants to make Rand out to be a hater of the poor, it can do so with or without a two tier system. They’d just say “see, he’s lowering the tax rate for the ‘rich’ by X%, while raising the tax rate for the poorest Americans.” While we all know this is BS, the average voter woouldn’t.

    2. Your problem is that you let the leftoid in your head beat you. The left has been pushing class warfare in this country for over a century, and it’s still not taken root in the American public (hence their insistence to import third world socialist scum, which you guys naively support).

    3. Yeah, it isn’t the complexities of multi-linear curves that shit up our tax system, it’s deciding what counts as income in the first place. Leave the progressive tax rate as a battle for another day, just simplify the determination of income and eliminate withholding.

      1. it’s deciding what counts as income in the first place…
        …just simplify the determination of income and eliminate withholding.

        THIS. No tax simplification is going to help me (freelancer) as long as I have to figure out how much I make. There’s no way Schedule C is going away under any flat tax scheme.

  13. I hope Rand didn’t pull this card too soon on the campaign trail.

    IF I was one of his competitors, I would be loving the fact that I get to see a test case for this type of proposal so long before election day. If it bombs, watch Paul go down and disown anything with the Rand brand. If it proves to be successful, co-opt it cause you have a year and a half till election day to include it in the platform and chase more money!

    Otherwise, I like the idea of a flat tax. It would be a big improvement.

    1. My guess is he has some other sensational announcements that he will dole out periodically. At any rate, he’s gotta gain some interest and traction in this crowded GOP field which shows no sign of plateauing.

  14. Related: “Is ‘Reform Conservatism’ a Friend or Foe of Limited Government?”, a forum moderated by Dalmia and including a debate with Yuval Levin, the leader of the reformocon movement, and responses from The Federalist’s Ben Domenech, Cato’s Jason Kuznicki, and me.

    A forum moderated by Dalmia?!? “Yes Mr Levin, your tax rate proposal is all well and good, but why are you avoiding the subject of the recent electoral happenings in this remote corner of India? Why aren’t you demystifying the Hindu religion? The real issue that everyone here wants to hear about though, is the wonderfulness of 3rd world immigration.”

  15. It’s certainly a breath of fresh air.

    In addition to any up front cash savings, it will alleviate huge hidden costs of tax based misallocation of economic activity.

  16. You’d probably want to set the flat tax rate equal to federal spending divided by GDP. Since 1950, that’s averaged about 20% with variations of up to 3% or so in both directions, but it’s remained fairly steady. For example, in 2012 Gary Johnson called for a 23% federal flat tax that would have been revenue neutral at the time (today it would be closer to 21%).

    A flat tax rate of 14.5%, with deductions, would require a significant drop in expenditures. Now I’m all for that, but it will be politically difficult.

    1. He’s counting on a boost to GDP and broadening tax base due to increased economic activity as people who get to keep more of their money spend and invest it.

  17. My question – is the 50k a deadline, or is there some escalation? Because there is the obvious issue of people around that level of pay getting screwed over.

    Nothing else against the plan. Tax codes needs simplification. This will never actually happen or even come close, though.

    1. First 50K untaxed. 50,001 means you pay 14.5 cents income tax which is less than the stamp on your federal return.

      1. Ah. So, I read it wrong. First 50k is simply untaxed and earnings after that are taxed. Makes a lot more sense than the progressive taxes that get put forward.

        1. Yes, it looks like the standard deduction is $20k/adult and $5k/child. There have been other plans that use similar standard deductions.

  18. I think we need a flat tax with no exemptions. The status quo creates disastrous political incentives. We have a relatively small group of people (“the rich”) paying the overwhelming portion of our tax bill, with much of the population paying little or nothing. As a result, people have no real incentive to be concerned about spending because it isn’t their money being spent. And any attempt to cut taxes automatically becomes “cutting taxes for the rich” because they’re the ones paying taxes in the first place.

    1. Set the tax rate every year based on the budget and what should be needed to pay for it. Everyone pays a flat rate.

      It would be the death of the progressive agenda.

      1. Not to mention the country would be a lot pickier about what wars it wants to fight because they aren’t just magic costs pushed off until tomorrow like Iraq and Afghanistan. Everyone would have skin in the game when some hawk wants to bomb some Muslim country most Americans can’t find on a map.

    2. National sales tax. Stop taxing production and start taxing destruction. Also everyone gets to “contribute” and they get to see the taxation every time they buy something. Whether you make it progressive or not is left as an exercise for the reader.

  19. By “payroll tax” WTF are people referring to? 7.65% for both employee and employer for FICA was my first thought.

    I’d be fine with an offset raising the ceiling for wages subject to FICA taxes.

    Also, does anything happen to FUTA or will that remain untouched? SUTA being a state tax, I’m assuming it remains unmentioned/untouched.

    1. Yes. In Rand’s video he specifically mentions FICA going away. No mention of FUTA, but who the hell cares about FUTA? SUTA is a state tax and that’s up to your local government.

  20. Great idea Rand – – never going to happen. Your money grubbing colleagues have too much to gain ($$$) by keeping the current tax code with all the exceptions for members of the chamber of commerce.

    Corporate wellfare is a hell of a drug.

  21. I just don’t think it is palatable for most of America. They’re going to go “the rich don’t pay their fair share.” Now when he includes businesses at the same 14%, they’re going to go “LOLOLOLOL businesses are people and Rand hates workers and loves the rich”

    It just plays right into the left’s hand.

    I see what you’re saying, but I think it could be sold, if you carefully laid out the elimination of the loophole and “special” treatment the evil rich get.

    1. It may work. I just think it is a fine line to walk without getting totally skewered. He’s going to get hit on the right because his plan doesn’t favor families enough, he’s going to get hit from the special interests, and he’s going to get hit from the left with a populist message (particularly for corporate tax).

      1. This may actually work for the corporate tax because much of the left believes that corps pay no taxes.

        1. Corps don’t really pay taxes.

    2. The interesting counterpoint is that this eliminates the payroll tax. Consider that a right person pays around 15% in payroll taxes only up to the maximum. After that, their only taxes are income tax. As Buffett loves to point out, there are simply too many loopholes that allow the rich to lower that cost way down. While upper middle class families dependent on Income pay around 28% of their income (after deductions), the rich are paying closer to under 10%.

      Now, the big problem is and will continue to be: What is income? That is not an easy task and will still require plenty of IRS goons to keep straight.

      1. Yes, but essentially eliminating the deduction side of the equation, or at least making it so simple it fits on a postcard, is significant progress. Also, revenue is easier to audit than expenses.

  22. once people see that it’s actually a sliding scale due to the huge deduction.

    People are always surprised how “progressive” a flat tax is, once you show them some numbers, in my experience.

  23. Return to Federalism. Repeal the 16th Amendment and apportion the Federal revenues to be raised from citizens’ incomes amongst the states. Here’s how it works:

    Federal government passes budget (weird I know but it might happen) that includes planned revenue from individual income taxes e.g. in 2014 revenue was $1,394,568,000,000

    Each state is responsible to collect a percentage of that amount from the incomes of their citizens in whatever manner they want.

    Using 2014 official populations estimates:
    California has 12.168% of the US population and would thus owe $169,708,412,599.78.

    Wyoming with only 0.183% of the US population would only have to collect $2,554,878,637.86

    California could put massive taxes on only the top 1% of income earners to pay their portion while Wyoming might choose to divide their bill evenly amongst all of their citizens (approx $4,373.65 for each man, woman and child) Maybe Texas uses a flat tax and the state of Washington makes Bill Gates pay their portion. Ok that last one is kinda like a bill of attainder but you get the idea. Each state would do what they thought was the best way to raise the revenue and people who agree that form of taxation could move in and those who don’t agree can move out, Federalism at it’s best.

    Source info from:
    Tax Data
    Census Data

  24. Any candidate who begins with acknowledging that tweaking the current taxation mess is futile is starting off on the correct foot and has a leg up on the competition in my view.

  25. First and foremost, must nick Gillespie pepper his articles with juvenile pop culture references? Yes, nick, we all know you’ve watched ever South Park episode three times already. Can we move on?

    My father-in-law made me take the child proof code off of the Fox Business Channel so when I turned on the tv I got to watch Stuart Varney get an old man hard-on for rand paul and this flat tax proposal. The argument turned– as it should– to whether or not a tax system that gave a huge tax increase to the poor and an even bigger tax cut to the rich was fair. The idea, I guess, is that a flat tax would be easier to enforce and a sop to the rich because “they’d have to pay it.” To which I wondered. Couldn’t you enforce a tax system that would tax rich people at 99% of their income and enforce it? Why is enforceability a talking point for those that want to get the government off their back. Eh, these are the types of things I think of when I watch FBN.

    You guys can help me out because I think there may be some Flat Tax supporters here in the comments. I’ve had trouble getting Flat Tax supporters to tell me who would pay more in taxes under that system than the one we have now. If everyone is paying less in taxes and we’re spending the same amount of money how exactly does this work out?

    1. If everyone is paying less in taxes and we’re spending the same amount of money how exactly does this work out?

      Incredibly, supporters of flat taxes also think the government should cut spending. I know that’s crazy talk to a guy who calls himself ‘american socialist,’ though.

    2. I’ve had trouble getting Flat Tax supporters to tell me who would pay more in taxes under that system than the one we have now.

      Sadly, your obsessive fixation on income quintiles will make this difficult to explain, but let me try to give you some hints. And just so we aren’t chasing multiple targets, let’s focus on what we know about Rand Paul’s plan.

      The poor will not see a massive tax increase, since

      1) this eliminates the payroll tax. That taxes even the poor at around 12.4% (Including both the employer and employee’s cut) for social security for the first $115,000 or so. It also includes an additional 3% which has no maximum. This ~15% tax rate is a terribly regressive tax.

      2) Each adult keeps their first $20,000 of income untaxed. If they have children, they get another $5,000 untaxed per child.

      3) The plan maintains the Earned Income Tax Credit. This credit is paid to taxpayers based on their total income, phasing out as they get more income.

      Leaving out #3 for a minute, a single parent with one child who earned $50,000 would get a $25,000 exemption and pay $3,625 on the rest. Under the current system, those poor would pay $7500 on the $50k. The remaining would be taxed at their normal rate. They deduct their Head of Household ($9250) and Personal Exemptions ($4000) to get a taxable income of $29250 – taxed at around $3700. So under the current system they pay $11,200 compared to $3,625

      1. This is complicated by the Earned Income Tax Credit. That would net the person around $3,250 if my reading is correct (it has a complicated sliding income schedule that I don’t want to calculate). So, basically that person pays no Income Tax today (give or take a few hundred) but pays significant payroll taxes and would pay no taxes at all in the Rand Paul Plan.

        So who is really going to pay here? Based on the elimination of deductions, and payroll tax, this will be spread among a large portion of the US across multiple income quintiles. It isn’t clear whether this is supposed to be a revenue neutral tax or not, and my bet is that they say that they will increase the tax base. But those issues aside, you can expect tax increases for:

        Single or Married no children, non homeowners who have lots of tax deductions and income over $200,000.

        People who have “Unearned Income”- i.e. income that was not earned by business or employment. Unearned Income is not subject to Payroll Taxes, but some types ARE subject to income tax. For example, there are various Life Insurance schemes (Whole Life, VUL) that you get tax free. The interesting thing is that these schemes are well known as tax shelters, so the people optimizing their saving to get tax free income (generally upper middle class to rich) will take a hit. Many people mix this income with income from 401ks and pensions to keep taxable income low and “appear” to be in lower brackets while they live quite well.

        1. Additional people who will see a lift in taxes:

          Companies that made no major purchases this year may see higher overall taxes. Paul’s plan eliminates depreciation. So a company making a major purchase deducts the entire expense in the year they made a purchase. If that goes past their revenue, they won’t pay taxes one year, but won’t get “credit” for the amount over revenue on following years. I am unclear from Paul’s plan on how financing will affect this. Do you deduct the entire value of your purchase in year one, or only the payments you made? If the former, it means that startup companies will enjoy great tax savings (as they invest in startup infrastructure), but their tax bill will ramp up more quickly on following years.

          So, again, it will be hard to quantify this just by income quintiles. A large number of people in lower and middle quintiles are actually quite well off since they take tax free income that doesn’t show in the usual statistics. You will see taxes spread from workers to people deriving most of their income from investments.

          1. You are wasting your time.

            He is immune to basic arithmetic.

  26. I turned the channel I started watching the Lion, the Witch, and the Wardrobe. And it struck me. Maybe we could get the money from Narnia! That Aslan looks like he’s got a stash somewhere. It’s time to get fantasy creatures and the economic constructs to start paying their fair share. Everyone, to their broom closet!

    1. Your murderous philosophy is more fairy tale than anything CS Lewis ever wrote.

      +1 New Soviet Man

  27. Subliminal Big Jim McBob and Billy Sol Hurok jokes, Nick? Seriously? You’re older than fucking Hillary Clinton!

  28. I’m not sure how the IRS is destroyed in this plan. It sounds like there are still a bunch of deductions. So they’re presumably done by the Treasury Dept, they would still need a lot of similar powers, wouldn’t they?

    1. The plan isn’t perfect. Acknowledging any deductions likely will leave the core of an enforcement agency and likely lead to future additions just like in the past. But if this actually somehow happened, you would still have a significantly reduced tax burden, and a drastically reduced enforcement agency with far less means to screw people.

      None of it is politically realistic.

    2. Any flat (or flatter) tax will never destroy the IRS because it still is based on how much income you have. It will hopefully put a dent in the amount of money poured into the black hole of tax accountants and related parasitic industries.

  29. Also, blow up the federal budget and start over. No mandatory appropriations. None. The new baseline is zero. Reset everything to zero at the start of each year. Everything. Every year. Then, if a legislator wants to allocate some money to something, he starts by justifying it. Obviously there wouldn’t be any problem keeping a program operating if it’s wildly popular, like, say, social security or the military.

  30. Did Rand Paul just suggest blowing something up? Oh, crap. Now Reason will be receiving a court order demanding they reveal Rand’s identity and location.

  31. Start making cash right now… Get more time with your family by doing jobs that only require for you to have a computer and an internet access and you can have that at your home. Start bringing up to $8596 a month. I’ve started this job and I’ve never been happier and now I am sharing it with you, so you can try it too. You can check it out here…

  32. Lot’s for Libertarians to like in his preliminary proposal. Would like to know why he thinks the mortgage deduction should remain — doesn’t it just distort residential real estate prices? Canada has no such deduction and home ownership rates are about the same as in the USA.

    The frequent complaint about corporate tax rates being the highest among developed countries is misleading. If one looks at the effective tax rate, then the USA is a tad higher than the OECD average. If adjusted for GDP when looking at OECD rates, the effective corporate tax rates are the same here as there.

    Finally, any politician — anybody — that thinks a balanced federal budget is in all cases a good thing – does not get my respect. Either they don’t understand how our monetary system works — or they’re lying. Rand seems like an honest enough guy, so I must assume he doesn’t know how our monetary system works.

  33. Dumping the IRS would be a job-killer. Directly: how many people work there? Indirectly: support people (maintenance, IT departments). Then there are the people who depend on the convoluted code: tax preparers (large and small, from H&R Block to independent accountants and enrolled agents

    It would be a disaster. Just not for us the taxpayers.

    1. Broken windows? Really, you’re going with broken windows?

  34. I always thought the most bipartisan tax reform would be getting rid of the muni bonds’ tax exempt policy.

    1) Lefties should love making rich guys like Kerry pay taxes.

    2) Righties should like government having to pay the market rate for borrowings.

  35. Senator Paul seems to be intelligent; however, his tax plan was conceived within the last six months or so. Why doesn’t the investigate the standard flat tax or Fair Tax plans which have been studied and approved by others? These plans have been developed over several years and are available right now for implementation.

  36. I like reading the comments on this board. But when some fucktard like hihn gets on here with his pretentious bullshit it kills the mood. Nobody cares what you have to say. I would, if you wouldn’t be such a douche bag, but a self proclaimed “life-long libertarian”(born to be free?) like him wants to be the square peg for the round world around him. Get a life. Understand that others have points too and they are not just obstacles to get your point out to all the people “that need help understanding the world” by Top Men like you. Hugs, kisses and woodchippers to you and yours.

  37. Much as I appreciate what Rand is doing, and who can not appreciate someone who wants to gut the IRS – No tax plan will work. It can’t happen.

    What people want from the government is too much. Each side wants what it wants. Some people want a huge military, some want a big police state, some want free education for all (art history degrees for the masses!), everyone wants their medicine. And, so on.

    The country wants a lifestyle that does not match its productivity. You either deficit spend, or you buy cheap foreign goods to accomplish this. Either way is an economic disaster, over time.

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