The tax-reform plan that Republican presidential candidate Jeb Bush detailed on Wednesday combines a faith in supply-side economics with a handful of measures meant to court populists and the middle class. It builds on the tax plan of the GOP’s 2012 nominee, Mitt Romney, and it is projected to grow federal budget deficits in the same manner as the tax policies of the last Republican president, Bush’s brother, George W. Bush.
Jeb Bush’s plan would cut rates for the rich, though not as ambitiously as many of his rivals’ proposals. It would end a favored break for Wall Street and free an estimated 15 million more lower-income Americans from paying federal income tax. By Bush’s advisers’ estimates, it would add between $1.2 trillion and $3.4 trillion to the national debt over the next decade, depending on how much additional economic activity is spurred by the plan.
The proposal comes as Bush, the former governor of Florida, attempts to regain lost ground to GOP front-runner Donald Trump. It is the latest sign of how, outside of Trump, nearly all of the Republican hopefuls are betting that the best way to reach struggling middle-class voters is a modified version of a long-held conservative formula: promising to unleash rapid economic growth by lowering tax rates, especially at the top, and by simplifying the tax code.
Bush laid out the plan with a North Carolina factory as a backdrop. “My plan works whether you’re on Main Street or Wall Street — no special favors, no special breaks,” he told workers and his invited supporters at Morris & Associates, an industrial refrigeration company in Garner, N.C.
Bush described the current tax code as “a disaster.”
“It punishes people for doing things we should encourage and rewards people for doing things that may not be so good,” he said. “It taxes paychecks hard but gives companies a write-off for debt. The current tax code makes it easier to borrow than to build. I believe it’s time we build for the future, not borrow from it.”
Democrats quickly dismissed Bush’s ideas as “an even more extreme plan than his brother’s.”
“Just as he did in Florida, Bush is embracing a disastrous economic agenda that benefits himself, and those like himself, while leaving the middle class out to dry,” said Holly Shulman, a spokeswoman for the Democratic National Committee.
Bush’s plan seeks to condense seven tax brackets into three: 10 percent, 25 percent and 28 percent. He would slash the corporate tax rate to 20 percent, allow companies to immediately deduct their capital investments and eventually end taxation of American companies’ income earned abroad. He would end the alternative minimum tax, the estate tax and the marriage penalty tax while continuing deductions for charitable giving. He would double the size of the standard deduction and expand the earned income tax credit, helping lower-income taxpayers in both cases.
Bush also would limit the size of other itemized tax deductions to 2 percent of adjusted gross income. He would eliminate state and local tax deductions.
Embracing an idea also backed by Trump and many Democrats, including President Obama and Democratic front-runner Hillary Rodham Clinton, Bush would end a lucrative tax loophole for managers of hedge and private equity funds, known as “carried interest,” that lets them avoid billions of dollars in taxes by treating their income as capital gains rather than as salaries.
Independent assessments of the total cost of Bush’s proposals weren’t immediately available. But in advance of its release, the Bush campaign asked four GOP economists — John Cogan, Martin Feldstein, Glenn Hubbard and Kevin Warsh — to analyze the plan. Buried within their 17-page analysis was the price tag, trillions of dollars.
The plan would add $1.2 trillion to the debt over 10 years, even when using a system favored by Republicans that takes into account any potential growth the tax changes could encourage, according to the GOP economists. The plan would add closer to $3.4 trillion using traditional methods, though Bush’s team called that figure “irrelevant.”
Given the price tag and some of the details, the plan carries political peril. Bush’s brother focused much of his 2000 presidential campaign on plans to slash taxes and jump-start economic growth. Those tax cuts contributed to the record deficit spending that even Jeb Bush criticized Tuesday night on the first episode of CBS’s “Late Show With Stephen Colbert.” In 2012, Romney campaigned on similar ideas that were widely dismissed by voters, who thought he was pushing policies that would mostly help wealthy people.
The economists predicted that the plan would spur an additional 0.5 percent growth in gross domestic product per year, as well as another 0.3 percent from regulatory reforms that Bush will propose soon. By most forecasts, that additional boost would still leave the U.S. economy short of the
4 percent annual expansion that Bush has said the country should shoot for.
Bush’s plan is one of the least aggressive ones in the GOP field, in terms of top-rate cuts — far behind the flat-tax proposals from Sens. Ted Cruz (R-Tex.) and Rand Paul (R-Ky.), as well as former neurosurgeon Ben Carson, among others. But it also tracks with the way the GOP-controlled Congress generally talks about tax reform.
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