Over the years, the Republican party has steadfastly maintained that it is the party of fiscal responsibility while the Democrats are big spending teenagers racking up debt on daddy's credit card. "It sounds great, but who is going to pay for it?" you hear condescending Republicans say to the public when discussing all those freebies the Democrats plan on giving away.
In reality, the Republican Party is about as fiscally responsible as a Bernie Madoff investment scheme. Their ideological belief that huge tax cuts for the wealthy create economic growth is not grounded in any actual evidence, and their sums never, every add up. Republicans claim tax increases hamper growth, and welfare spending encourages dependency -- all fact-free assertions designed to attract middle Americans who rightly believe they are getting a raw deal in the current economic system. After all what could be better than cutting taxes, getting better government services while forcing lazy people to work? Except of course, it is complete bullshit.
In a break down of several of the Republican presidential candidate's tax plans, the New York Time's Josh Barro analyzed what their proposals would actually mean. Unsurprisingly, none of their plans make any sense or help the majority of Americans. Here's how Barro summarized their plans:
Ted Cruz (proposing a 10% personal income flat tax and a 16% Value Added Tax):
Added up across the whole economy, Mr. Cruz’s VAT would be equivalent to a very broadly based sales tax, applying even to services like health care that are ordinarily exempt from sales taxes. Like a sales tax, this tax would be built into prices and paid by consumers — and for many lower-income households, it would be a far greater burden than the income tax.
Marco Rubio (proposing large increases in after-tax income to low earners and highest earners with not much for the middle):
Mr. Rubio’s plan would greatly increase the budget deficit, unless offset by sharp federal government spending cuts that would have their own impacts on families’ well-being. You’d have to weigh those against the benefits of tax cuts.
If these tax cuts were simply financed with government borrowing like the last round of Republican tax cuts, economists would generally expect that borrowing to slow economic growth, offsetting positive growth effects from the tax cuts themselves.
Ben Carson (proposing a 10 percent tax based on tithing, though apparently now a 15% tax):
Essentially, he’s saying, if the base is broad enough, a 15 percent tax will suffice. The main problem is his assumption that you can have a tax with a base equal to 100 percent of the economy.
Some things are always tax-exempt, for a mixture of good reasons and bad. We don’t tax investment income earned by nonprofits like churches and universities, nor do we tax investment returns to pension funds and 401(k) retirement accounts. We don’t tax income that people give away to charity. We don’t tax employee health benefits. Most tax plans decline to tax at least some income for low earners; Mr. Cruz said his flat tax wouldn’t apply to the first $36,000 of income for a family of four.
It would be possible to have a tax base that is broader than today’s, but it’s unlikely that Mr. Carson would succeed in getting it to 100 percent.
John Kasich (proposing cutting top personal income tax rate to 28 percent from 39.6 percent, top capital gains tax rate to 15 percent from 23.8 percent, and corporate income tax rate to 25 percent from 35 percent while still balancing the budget):
Partly, Mr. Kasich says he would do this by sharply cutting spending. But he is also indulging in a healthy dose of supply-side optimism: Projections from his campaign depend on his tax plan to add over $250 billion a year to government revenues by 2025 — despite sharply cutting rates.
He’s betting on a healthy economic expansion, too, but he didn’t disclose his exact assumptions.
So basically all of the Republican candidates are promising tax plans that can't possibly add up. Cutting taxes for everyone while balancing the budget and assuming sustained economic growth isn't a plan -- it's fantasy thinking that could spell disaster for the economy. For those of you interested in what actually happens when the wealthy are given disproportionately generous tax cuts, this New York Times graph charting the implementation of tax increase and cuts against economic growth should clear up any misconceptions:
As you can see, the modest tax increases implemented by George H. Bush and Bill Clinton created economic growth, while George W. Bush's tax cuts sent growth plummeting.
No matter the evidence, the current crop of Republicans want the American public to believe tax cuts are going to be good for them and the country as a whole. Given their combined wealth the state of the US economy means virtually nothing to them, so it isn't surprising they are crafting tax plans based on whatever they think will get them elected.
One way around this would be for voters to demand Presidents live on the average US salary, like former Uruguayan president Jose Mujica did while in office.
Then, we might see some sensible tax proposals that don't rely on the magical idea that you can have your cake and eat it.