The Rand Paul Tax plan: Kentucky senator and Republican presidential hopeful Rand Paul first outlined his plan for restructuring the federal tax system in a Wall Street Journal op-ed on June 18.
He proposed replacing the personal income tax and payroll taxes with a flat-rate income tax. Pundit Glenn Beck labeled Paul's tax ideas "exotic" a few days later on June 22.
But largely since its release, the Rand Paul tax plan has fallen away from public attention.
That changed on Wednesday night. The third Republican debate brought Paul's tax plan back into focus in what was considered by many a shining (albeit quick) moment for the senator of Kentucky.
"My [tax] plan is unique in that I'm getting rid of payroll taxes," he said. Paul went on to argue that his plan was fairer because payroll taxes bite more heavily into the middle class.
In the middle of Paul's diatribe, fellow presidential hopeful Sen. Ted Cruz (R-TX) chimed in with praise. It is, according to Sen. Cruz, a good plan.
So what does Rand Paul's tax plan entail, exactly?
Let's have a look at the candidate's tax code proposal and what makes it - to some, at least - "exotic"...
Rand Paul Tax Plan: The Magic Number is 14.5
Paul's tax revision includes:
- Replacing the individual and corporate income tax, the payroll tax, the estate tax, and federal excise taxes with what he calls a "flat 14.5% levy on all personal income and business activity."
- For individuals, maintaining deductions for mortgage interest and charitable giving, and exemption from tax on the first $50,000 of income for a family of four.
- For families, retaining the Earned Income Tax Credit and child credit for low- and moderate-income working families.
- No payroll tax, which employers and workers both pay to fund Social Security. Most tax breaks and deductions would also go away altogether.
"The left will argue that the plan is a tax cut for the wealthy. But most of the loopholes in the tax code were designed by the rich and politically connected," Paul wrote. "Though the rich will pay a lower rate along with everyone else, they won't have special provisions to avoid paying lower than 14.5%."
According to the right-leaning, non-partisan think tank Tax Foundation - whose evaluations were brought up several times in the GOP debate last night - Paul's plan has its pros and cons.
On the negative side, it would end in a $1 trillion revenue loss over the course of 10 years. Paul's column said he would make up for the cost of the tax cut by reducing government spending, although his column didn't detail what would be cut.
On the positive side, the 14.5% tax would increase the incentive to work and result in 1.55 private business hours of work. That is equivalent to 1.4 million full-time jobs.
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