What We Know So Far about the GOP Presidential Tax Plans

 

Bobby JindalThe Tax Foundation analysis of Bobby Jindal’s tax plan:

  • Governor Jindal’s tax plan would substantially lower individual income taxes, eliminate the corporate income tax, and repeal a number of complex features in the current tax code.
  • Governor Jindal’s plan would cut taxes by $11.3 trillion over the next decade on a static basis. However, the plan would end up reducing tax revenues by $9 trillion over the next decade when accounting for economic growth from increases in the supply of labor and capital.

So let’s summarize the four plans examined by the Tax Foundation model:

  • The Jeb Bush plan would lose $1.6 trillion over a decade (with economic feedback), lead to a 10% higher GDP over the long-term, and boost income in the bottom fifth by 10%, the middle fifth by 13%,the top fifth by 10%, and the top one percent by 16%.
  • The Marco Rubio plan tax plan would lose $1.7 trillion over a decade (with economic feedback), lead to a 15% higher GDP over the long run, and boost income in the the bottom fifth by 40%, the middle fifth by 16%,the top fifth by 18%, and the top one percent by 28%.
  • The Donald Trump plan would lose $10 trillion over a decade (with economic feedback), lead to an 11% higher GDP over the long term, and boost income in the the bottom fifth by 11%, the middle fifth by 19%,the top fifth by 21%, and the top one percent by 27%.
  • The Rand Paul plan would lose $1 trillion over a decade (with economic feedback, lead to a 9% higher GDP over the long term, and boost average incomes by 16%.
  • The Jindal plan would lose $10 trillion over a decade with economic feedback, lead to a 14% higher GDP over the long run, would boost income in the the bottom fifth by 8%, the middle fifth by 15%,the top fifth by 22%, and the top one percent by 26%.

One important caveat (other than the vagaries of dynamic scoring) is that the TF model does not factor the “fiscal costs of higher interest payments, as well as the macroeconomic effects of the spending reductions needed to bring the budget into balance.” Let me also add that one other thing the TF model shows is that personal income tax cuts tend to have the biggest revenue loss and the least GDP bang for the trillion bucks.

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  1. jetstream Inactive
    jetstream
    @jetstream

    Let me also add that one other thing the TF model shows is that personal income tax cuts tend to have the biggest revenue loss and the least GDP bang for the trillion bucks.

    The results of the Reagan Revolution proved this theory to not just be wrong but proof of ideological blindness.

    Jim, you and TF need to put aside ideology and learn from what Art Laffer taught the world.

    • #1
  2. Jamie Lockett Inactive
    Jamie Lockett
    @JamieLockett

    This leaves out the most important part of Gov Jindal’s plan – everyone pays something. That might not mean much from a strictly economic perspective, but from a cultural perspective its YUUUUUUUUUUUUGE.

    • #2
  3. Eric Hines Inactive
    Eric Hines
    @EricHines

    Couple things. Pethokoukis seems to talk about reducing Federal revenue as though that’s a bad thing. It would be good if he clarified that, or explained in small words, so even I can understand, why it’s a bad thing.

    He also takes these analyses seriously, even though he noted that the macroeconomic effects of the spending reductions were not considered.

    But there’s a much larger flaw, one that too many make: all of these take the proposals as the final word, to last over the entire 10 year analytical period. The need to assume that for the sake of analysis is clear. However, it’s critical to keep firmly in mind that none of these plans, even if enacted exactly as proposed, is the final word on anything. They’re the first step.

    It’s always necessary to come back next year and make adjustments based on empirically realized results from the just-completed year. That realization and those adjustments are difficult enough to hold and to enact politically, but it’s an impossibility for the ideologues in both parties.

    Eric Hines

    • #3
  4. Jamie Lockett Inactive
    Jamie Lockett
    @JamieLockett

    Eric Hines: Couple things. Pethokoukis seems to talk about reducing Federal revenue as though that’s a bad thing. It would be good if he clarified that, or explained in small words, so even I can understand, why it’s a bad thing.

    If you are at all concerned with the debt – massive reductions in revenue would be problematic.

    • #4
  5. John Penfold Member
    John Penfold
    @IWalton

    We can’t know what any of them would do to growth because the regulatory regime will have more impact along with developments we know nothing about. With lower taxes, especially corporate taxes there should be more investment and hence growth, but how much we can’t know, so we can’t know what will happen to revenues. What does he mean by reduced revenues? Net decrease? Below what it would be under the current tax code but with the economy growing as if we’d cut taxes. Does he mean revenues per unit of GNP? Net tax burden on individual tax payers? These models capture inertia but not much else, but I guess we have to try. I’d rather we looked at the tax cuts from a different perspective. Do they enhance freedom, reduce incentives for corruption, is it simple and transparent, does it increase after tax returns, reduce the cost of preparation, contain crony carve outs, does everybody pay, including the poor and those whose change in wealth comes from unrealized gains. There are many other criteria we might consider that don’t depend on global warming models, oops, macro models I mean.

    • #5
  6. SParker Member
    SParker
    @SParker

    Jamie Lockett:

    Eric Hines: Couple things. Pethokoukis seems to talk about reducing Federal revenue as though that’s a bad thing. It would be good if he clarified that, or explained in small words, so even I can understand, why it’s a bad thing.

    If you are at all concerned with the debt – massive reductions in revenue would be problematic.

    Yes, we’d have to address the immutable Law of the Ratchet for spending. When did we start taking Balbus’ Essay seriously? (Lewis Carroll, A Tangled Tale)

    • #6
  7. Eric Hines Inactive
    Eric Hines
    @EricHines

    Jamie Lockett:

    Eric Hines: Couple things. Pethokoukis seems to talk about reducing Federal revenue as though that’s a bad thing. It would be good if he clarified that, or explained in small words, so even I can understand, why it’s a bad thing.

    If you are at all concerned with the debt – massive reductions in revenue would be problematic.

    That would be the bit about spending that you left out of your quote of me, and that Mr Parker also addressed.

    Eric Hines

    • #7
  8. Eric Hines Inactive
    Eric Hines
    @EricHines

    John Penfold: I’d rather we looked at the tax cuts from a different perspective. Do they enhance freedom, reduce incentives for corruption [etc]

    Valid concerns, but I’d rather we looked at taxing in general in terms of the Constitution. The Congress shall have Power To lay and collect Taxes…to pay the Debts and provide for the common Defence and general Welfare of the United States…. Full stop.

    The general Welfare, too, is limited to the other clauses of that Article and Section.

    The rest falls out of successfully implementing that perspective.

    Eric Hines

    • #8
  9. Jamie Lockett Inactive
    Jamie Lockett
    @JamieLockett

    Eric Hines: That would be the bit about spending that you left out of your quote of me, and that Mr Parker also addressed. Eric Hines

    Why would you expect a Tax Policy to address spending?

    • #9
  10. BrentB67 Inactive
    BrentB67
    @BrentB67

    Eric Hines:

    John Penfold: I’d rather we looked at the tax cuts from a different perspective. Do they enhance freedom, reduce incentives for corruption [etc]

    Valid concerns, but I’d rather we looked at taxing in general in terms of the Constitution. The Congress shall have Power To lay and collect Taxes…to pay the Debts and provide for the common Defence and general Welfare of the United States…. Full stop.

    The general Welfare, too, is limited to the other clauses of that Article and Section.

    The rest falls out of successfully implementing that perspective.

    Eric Hines

    Eric, of all the people on Ricochet I look up to, and they are legion, you are the first person I expect to know the preamble of the Constitution.

    …provide for the common defence, promote the general welfare..

    Promote was and is a very different word from provide.

    • #10
  11. Eric Hines Inactive
    Eric Hines
    @EricHines

    Jamie Lockett:

    Eric Hines: That would be the bit about spending that you left out of your quote of me, and that Mr Parker also addressed. Eric Hines

    Why would you expect a Tax Policy to address spending?

    Maybe because taxing is only to raise revenue for Constitutionally allowed spending and not because a politician feels like it. Legally, tax policy can be set independently of spending, even in a complete vacuum. It would be stupid to do, though.

    BrentB67: Eric, of all the people on Ricochet I look up to, and they are legion, you are the first person I expect to know the preamble of the Constitution. …provide for the common defence, promote the general welfare.. Promote was and is a very different word from provide.

    Indeed, promote and provide are different from each other. I suspect the Constitution’s authors had than in mind when they stayed with provide in the opening clause of Art I, Sect 8. Which is what I quoted.

    Eric Hines

    • #11
  12. BrentB67 Inactive
    BrentB67
    @BrentB67

    Eric Hines:

    Jamie Lockett:

    Eric Hines: That would be the bit about spending that you left out of your quote of me, and that Mr Parker also addressed. Eric Hines

    Why would you expect a Tax Policy to address spending?

    Maybe because taxing is only to raise revenue for Constitutionally allowed spending and not because a politician feels like it. Legally, tax policy can be set independently of spending, even in a complete vacuum. It would be stupid to do, though.

    BrentB67: Eric, of all the people on Ricochet I look up to, and they are legion, you are the first person I expect to know the preamble of the Constitution. …provide for the common defence, promote the general welfare.. Promote was and is a very different word from provide.

    Indeed, promote and provide are different from each other. I suspect the Constitution’s authors had than in mind when they stayed with provide in the opening clause of Art I, Sect 8. Which is what I quoted.

    Eric Hines

    Thank you and well done.

    • #12
  13. Ward Robles Inactive
    Ward Robles
    @WardRobles

    Senator Rubio may be the youngest candidate, but he acts like the adult in the room. His plan would make a big difference to working families, increase economic growth, include major reforms, and is nearly deficit neutral compared to the Jindal and Trump plans. With similarly aggressive reform plans on the spending side, Marco Rubio may just be able convince voters that he could lead the turnaround of the bloated, listing, leaking, un-piloted super-tanker that is the U.S. Government. Or, we could just put up a reality TV star/real estate developer against Madame Secretary and every major news organization (other than Fox, maybe) and see how that goes.

    • #13

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