by Rand Paul
According to the Tax Foundation, small businesses organized as sole proprietorships in states like Kentucky and Michigan have a top marginal tax rate above 45 percent; in California it’s as high as 52 percent.
It’s as though the current tax rate is structured to discourage business!
Can you imagine the boost a 40 percent reduction of the tax rate would be for small businesses in depressed areas? Not only would it help the businesses in place, it would encourage entrepreneurship and investment.
The plan also includes a reduction in the corporate income tax to a single flat rate of 5 percent for ten years. At 35 percent, the U.S. corporate income tax rate is among the highest in the world. Countries like Spain, Switzerland, and the United Kingdom have tax rates at 30 percent or less. China, one of our largest international competitors, has a corporate tax rate of just 25 percent. Even our neighbor to the north is outcompeting us. Canada’s tax rate is only 15 percent.
Brown-Foreman, the distilled spirit giant in Louisville that produces Woodford Reserve and Southern Comfort among other brands, employs a thousand workers. The company pays a corporate tax of 35 percent. Compare that to the corporate tax of 13 percent that Bacardi, which is located in Bermuda, pays, and you have to wonder how long it will take Brown-Foreman’s accountants to pressure family ownership to move, lock, stock, and barrel, overseas. Could you blame them?
We need to allow U.S. businesses to better compete internationally, and we need to reduce the corporate rate from the current 35 percent to a low rate of 5 percent for businesses in economically depressed areas to allow these businesses to expand and compete globally, and to keep their businesses here.
We’ll also reduce the payroll tax for the employer and for the employee to nearly one-third lower than the current rates. There is an oft-cited document by the Congressional Joint Committee on Taxation highlighting the statistic that 47 percent of all U.S. households pay no federal income tax. I want to help those people, too. All workers still pay the federal payroll tax, and for many of these households and individuals the payroll tax is their largest tax liability. Lowering the payroll tax is the best way to help low-income workers.
Allowing low-to middle-income families to keep more of their hard-earned money will increase their standard of living, help the local economy by giving people more to spend, and reduce individual debt. The plan would mean more jobs for everyone. By reducing the amount of payroll taxes employers have to pay, we would encourage them to hire more workers.
Inside these zones, we’ll suspend the capital gains tax to stimulate greater investment in business and real estate. We’ll allow all small businesses to deduct all they invest in their first year of operation. We’ll streamline the National Environmental Policy Act (NEPA) to encourage and speed up road and bridge projects and reduce the regulatory burden on these areas. We’ll cut out the red tape that keeps new businesses from starting and old businesses from thriving.
Economic Freedom Zones will expedite visas for those from foreign countries who have $50,000 that they are willing to invest in these areas. Let them come to our country to build their dreams. We’ll also offer a charitable tax credit that would allow all Americans to reduce their tax liability by the amount they donate to any educational institution, religious organization, or homeless shelter that is located within Economic Freedom Zone areas.
The zones are a win all the way around. Instead of raising the minimum wage, which places a burden on small businesses and start-ups and, in study after study, disproportionately limits jobs for blacks and teens, my plan will raise the wages for everyone who lives in these zones by significantly lowering their tax, which will leave more money in their paychecks.
Economic Freedom Zones represent an ambitious plan, but given the opportunity, it will work. It will work because it depends on the individualism that made this country great.
When he was fourteen, my great-grandfather came to America from Germany with nothing more than what he carried. His father died shortly after they arrived in Pennsylvania. Great-grandfather peddled vegetables, saved his money, and eventually came to own a few acres of land where he built a dairy business. When he died, he left the five acres to his five children.
My father worked at a drugstore, for a moving company, and painted houses. He paid his own way through college and medical school. He put his career on hold during Vietnam to join the Air Force as a flight surgeon. As an ob-gyn he has delivered more than 4,000 babies and provided discounted and free care to those who couldn’t afford it—he never accepted Medicare or Medicaid. He would tell his patients to put their cards away, but he never refused to help them.
I began working when I was eight. There was no allowance in the Paul house growing up. If you did nothing you got nothing. So I mowed my neighbor’s lawn. That job got me about three more lawns. I continued mowing lawns into my teens. I listened to Paul Simon and The Who on my cassette player while I pushed the mower. For you younger readers, a cassette player is like a prehistoric iPod.
I worked at a putt-putt golf course, cleaned pools, and later gave swimming lessons.
We certainly weren’t poor, but we were expected to work. We lived in a nice house, in a nice neighborhood. We also knew the value of a dollar. I was proud of the money I earned. I bought my cassette player with money I earned. I bought my brother’s bicycle and later my first car, the Volkswagen Rabbit with the defective roof, with money I earned. I bought my first stereo with money I earned, and thirty-three years later, I still have that stereo—how about that for fiscal conservatism!
I love to work, and, yes, making a buck is the idea of work. But the greatest satisfaction I received was not from the money I earned, but from the pat on the back from the homeowner whose lawn I mowed in straight lines, or the smile from a kid I taught to swim. The satisfaction comes from the feeling I get when I see the joy on the face of a patient who sits up from cataract surgery, smiles, and says, “I can see again.”
John Allison, president of the Cato Institute, puts it well. The only kind of self-esteem, he says, is earned self-esteem, and that primarily comes from work.3 I want every American to work. If you have lost your job, I believe in a temporary safety net, but everyone who can work should work as part of a safety-net program—not as punishment but as a stepping-stone to a real job, independence, and legitimate, earned self-esteem.
I’ve practiced medicine for twenty years, and after my political career is over I will continue to practice until I physically cannot. I don’t know why anyone wouldn’t want to work if they could. When our kids were younger I’d make an announcement at the start of each week: “Today is Monday, the best day of the week!” The boys would look up from their cereal and roll their eyes. Whether it was school or work, I always looked forward to Monday. Work for me has never been a punishment but rather a challenge.
I know I’m not alone in this. America is a country of workers, a country that works toward its dreams and doesn’t dwell on its limits. In fact, the only thing that limits our dreams, I believe, is our bloated government. In my vision for America I see a job for everyone. After all, no one dreams of a life of dependency on government.
Actually, the goal of a job for everyone is not as farfetched as it sounds. The math is actually pretty simple. It only requires more money for job creation. Money equals jobs.
How do we do that?
By cutting everyone’s taxes, and I mean everyone’s: middle class, poor, or rich. Some will say the rich are already too rich—why would we cut their taxes? Why? Because their tax cut will leave the most money in the marketplace. I’ll say it again: money equals jobs.
I know the liberals will scream. Paul Krugman will write a raft of “how dare he cut taxes on the rich” columns in the New York Times. Yet even Paul Krugman would have to agree that you can’t have jobs without money. You can’t sufficiently stimulate the economy if you only cut taxes on the working class. To really stimulate the economy you must cut everyone’s taxes.
Ever since our older sons could drive, they have worked as lifeguards, in restaurants, and in telemarketing jobs, usually for minimum wage. There is much higher teen unemployment in countries like France that set their minimum wages at a rate above what the market will bear. When our son Duncan was seventeen, he took a job delivering pizza for Mr. B’s in Bowling Green. Just before he started working, he asked a friend what kind of money he could expect to make. Though only seventeen himself, Duncan’s friend could speak from experience: he worked at a local restaurant.
“With tips, the money’s great,” the friend said. “But don’t expect much out of your check.”
“Why’s that?” Duncan asked.
“’Cause the taxes will kill ya,” he said.
Unfortunately, the conversation Duncan had with his friend is repeated countless times every day in America. Very early on in our American working lives we find out the sad truth of just how much our government costs us.
In my plan, a tax cut for “everyone” means especially the working class—and it will be the largest tax cut in our history. We will create a maximum 17 percent income tax for every taxpayer in America, individuals and businesses with a standard deduction per individual filer. Every single taxpayer in America would see a tax cut under my plan. No one will be left behind. In fact, in addition to the income tax cut, I am creating a special tax cut for lower-wage workers, people who are often left out of tax cuts because they don’t pay federal income taxes.
I call this the worker’s tax cut, and it can make a big difference for families struggling to get by.
My goal is to eliminate the worker’s tax entirely for low-income workers. As your income rises, the worker’s tax cut will be lessened or phased out, so that those who earn more won’t receive this particular part of the plan. This part is aimed at those who have often been ignored at tax cut time. If you are trying to make ends meet in an hourly wage job, my tax plan will mean $1,000 or more in take-home pay every year.
My plan for America will bring the largest tax cut in our country’s history, and it will benefit all Americans.
In my plan, everyone pays their fair share. So what’s fair? Well, for starters, we’ll eliminate the loopholes that allow the superwealthy to avoid taxes, and that allow some corporations, with armies of lawyers, accountants, and lobbyists, to pay nothing.
The days of big business filing 50,000-page tax returns and getting away without paying tax will be over.
Here is real tax fairness: Make sure no one can lobby for special breaks. End corporate welfare. Stop the system that rewards the biggest businesses versus the mom-and-pop store. Stop the system that lets the superrich have tax shelters everywhere.
Make a tax code every American can both understand and afford.
You will be able to file your taxes on a single sheet of paper, without an accountant or lawyer.
I want the system to be fair to taxpayers, and it just isn’t right now. Everyone knows it. But the other side is too busy demagoguing.
I’ll say this again: I entered politics because I abhorred a government that took from the middle class to bail out big banks. I hate the concept of legalized privilege. As a Republican, I fight each day to end welfare to big business and to end special breaks that apply only to the rich. With my plan, we will end ALL corporate welfare. According to economist Stephen Moore, direct corporate welfare exceeds $20 billion each year. In the National Review, he tells us the average handout for Fortune 100 companies is about $200 million. Of these “corporate-welfare queens,” as he calls them, the biggest grant recipients are General Electric ($380 million), followed by General Motors ($370 million), Boeing ($264 million), Archer Daniels Midland ($174 million), and United Technologies ($160 million).4
This practice is indefensible and, in my America, there is no place for it.
My plan includes Economic Freedom Zones, which I’ve already discussed, and which will provide a billion-dollar stimulus for Detroit and a billion-dollar stimulus for Appalachia and other economically depressed areas, with the money staying in the pockets of those who need and deserve it.
In my plan for America the income tax burden on a family making less than $32,000 will be removed.
My design for America will allow you to save for your health care, your childcare, your kids’ college, and your retirement in one unlimited tax-free account.
My plan for America will allow you to deduct not only the interest but the principal of student loans. Your student loans should be treated as a business expense, and you should be able to deduct them over a period of time as your career begins. Linking student loan relief to work provides incentives. This is one of my big concerns: how young people are going to pay for college. The Democrats, typically, want relief but no strings attached, which only exacerbates the problem: nearly a quarter of all student loans go into default after three years. There are Democrats, including Senator Kirsten Gillibrand, who are starting to talk with me about my plan.
In the America I envision, there will be a 100 percent tax credit to care for children with special needs and for disabled adults.
Wait a minute. I can hear the naysayers lining up. How will we pay for all of this without exploding the debt?
By doing something not attempted by our government in a century but something that millions of American families accomplish every month, and that’s spending no more than what we make. So let’s do something extraordinary. Currently some $3 trillion comes in in tax revenue. Let’s spend just that.
We will cut spending by no longer sending aid to countries that despise us and burn our flag. We will quit building bridges in foreign countries and instead do something really novel, such as building new bridges at home.
We will audit the Pentagon. We will audit the Fed. Our government is rife with waste and fraud. The America I see will eliminate all duplicate programs. It will send back to the states any and all functions that don’t need to be located in Washington, D.C.
Government workers will no longer be paid more than ordinary private sector workers. Government contracts will go to the lowest bidder. We will not rehire federal workers who retire until we seriously shrink the size of government.
The federal government will get smaller so the private sector can grow larger, and we’ll grow the economy like never before. We will, like President Reagan before us, create millions of jobs by dramatically lowering taxes and reducing the size and scope of government.
We’ll bring back manufacturing jobs that pay well. We will dramatically lower the tax on American companies that wish to bring profits home. More than $2 trillion in American profit sits overseas. In my vision for America, highways, bridges, and other infrastructure projects will be built not by raising your taxes but by bringing back the $2 trillion in tax revenue that U.S. companies have stashed in foreign banks. The idea is to lower the repatriation tax and put that revenue into the highway fund. I’m working on this concept with Democrat senator Barbara Boxer.
Under my plan, we will immediately and responsibly open up new energy exploration in our country. The energy industry employs pipefitters, welders, electricians, and dozens of other skilled workers at good wages. The current administration has blocked permits that would allow these great jobs to be offered. Instead of putting our foot on the brake, let’s put it on the gas.
My plan will open the door for American energy independence and hundreds of thousands of new skilled jobs. American jobs have been going overseas because our taxes are too high and our regulations too burdensome. I will put a moratorium on new regulations, sunset old regulations, and require Congress to carefully review and approve any new, expensive regulations.
Is my vision for America too extravagant? I think not. It hurts me deeply that America’s work ethic is in question.
My plan for America doesn’t mean an end
to assistance, but it does mean that every able-bodied person in America is working.
Those who can work and who need temporary assistance will collect assistance by showing a pay stub. What do I mean? All companies with government contracts will be required to have daily job pools for the unemployed. When the taxpayer pays to build roads, the unemployed will show up daily to join the work pool. No new government money will be paid out. Existing programs will pay these workers. What will be new is that government assistance will simply require work either in the private market, in charity work, or in government contractor work. Those who find private jobs will receive more assistance than those who must accept government jobs. Assistance, though, will be temporary. Even New York Times columnist Nicholas Kristof admits that America’s safety net can “sometimes entangle people in a soul-crushing dependency.”
Disability payments have exploded and threaten the solvency of Social Security. Sixteen percent of Social Security payments go to the disabled. Of course, those who are truly disabled with medical problems that preclude them from working should not be forced to work. More money will be available for the truly disabled if we find work for the able bodied who have found their way onto the disability rolls. It is these people who are sending Social Security into bankruptcy.
Under my plan an independent doctor will examine and evaluate every claim, every year. If you’re only able to do a desk job, we’ll find one for you. For example, instead of getting a machine or a person in a foreign country when you call a government agency, you will get an American who is doing his or her fair share—and is grateful for the opportunity. A work requirement like this will help reform the disability program.
The choice is pretty clear. We can stick with the failed Great Society policies that for too many years have chained the poor to poverty. We can keep the policies that have doubled the unemployment rate of minorities, the policies that feign compassion but are in reality not in the least bit compassionate, or we can do something so exciting, so special, that we will again have a middle class, the class that once made America great. We can be a country that is again driven by, and takes pride in, its work ethic, one that is driven by excellence and driven by the spiritual replenishment and hope that work brings.