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 Richmans' Trade and Taxes Blog

An Analysis of the Proposals of the Republican Candidates for President
Raymond Richman, 3/15/2016

Following are the proposals and views of the Donald Trump. Sen Cruz, Sen. Rubio, and Gov. Kasich and my comments on their proposals:

Donald Trump, a businessman and graduate of the Wharton School at the University of Pennsylvania, makes the following proposals. Trump

1. would deport illegal immigrants. No other candidate approves this suggestion.
2. build a fence between the U.S. and Mexico. No other candidate makes this suggestion.
3. believes that marriage is a state not a federal concern. All the candidates except Kasich agree.
4. proposes to cut income taxes, corporate and personal. Cruz and Rubio suggest changes in corporate and personal income taxes. (See below.) We have our own proposals which differ from those of all the candidates.
5. suggests there is little man-made global warning and measures to reduce global warming are ineffective, costly, and damaging to the economy. Cruz is the only one who agrees.
6. urges balancing trade with China, Japan, Mexico, and other large trading partners. No other candidate appears to agree.
7. wants to prevent American firms from moving their factories abroad. None of the others mention this.
8. would impose a ban on travel of Muslims to the U.S. No other candidates agree.
9. opposes government financing abortions but otherwise approves Planned Parenthood. Cruz and Rubio have similar but not identical views.
10. Promises to reduce the national debt. All the candidates promise the same.

 Ted Cruz, a lawyer, graduate of Princeton University, received a law degree from Harvard University makes the following proposals:

1. proposes to abolish the IRS and institute a flat tax of ten percent, and to reduce the tax on capital gains. As we show below, we believe this to be a proposal to eliminate all progressive taxes, which the economics profession debated in the early 20^thcentury and unanimously (at that time) agreed that progressive taxes were needed to reduce inequalities of income and wealth that occur naturally in a private enterprise system. More on this below.
2. proposes to eliminate the payroll tax. How else would one finance social security?
3. proposes to eliminate the estate tax. The estate tax and accompanying gift tax are a proven means of reducing extreme inequalities of wealth over the generations. And like the income tax, the estate tax has few negative economic effects. Economists in the Public Finance area are nearly unanimous in their approval of the progressive income and estate taxes providing the tax rates are not confiscaatory.
4. proposes to eliminate the corporate income tax, replacing it with a 16 percent tax on business revenue minus allowable investments and other expenses, a value-added or sales tax. We propose integrating the corporate and personal income tax by providing the same treatment accorded to partnerships. More below.
5. would approve the Keystone XL pipeline and facilitate further pipeline construction, give states authority over regulating fracking on federal lands, give Congress a role in signing off on regulations from the EPA, open up exploration in the Arctic National Wildlife Refuge and the Outer Continental Shelf; end the oil export ban; increase natural gas export permitting; roll back the federal government’s environmental overreach by suspending the EPA’s ability to regulate greenhouse gases; and end the Renewable Fuel Standard. All the candidates approve the Keystone XL pipeline.
6. He opposes abortion and same-sex marriage.

Gov. Kasich earned a Bachelor of Arts degree in political science from The Ohio State University in 1974. He proposes:

1. a constitutional amendment to require a federally balanced budget. Cruz agrees with this.
2. A ban on subsidies, including ethanol and all subsidies. All the candidates more or less agree on this.
3. He accepts the Supreme Court ruling on gay marriage and attended a gay wedding. None of the others agree.

Sen. Marco Rubio earned a B.A. degree in Political Science from the University of Florida and a law degree from the University of Miami. He proposes:

1. to slash income taxes with incomes under $150,000 taxed at 15 percent, incomes between $150,000 and $300,000 taxed at 25 percent, and incomes over $300,000 taxed at 35 percent. He would also expand the child tax credit by $2,500, and would eliminate taxes on capital gains and dividends for new investments, The net result of his proposals, according to an analysis of the Tax Foundation would diminish revenues by $6 trillion over 10 years,
2. to cut corporate income tax rate to 25%,
3. to support funding for the development of renewable energy, wind, solar, and thermal,
4. to require illegal immigrants to return to their country of origin before becoming eligible for citizenship,
5. to support allowing individuals to divert a portion of their social security into personal retirement plans,
6. to ban abortion after 20 weeks since fertilization, making exceptions for the life of the mother, rape or incest.
7. He also proposes budget reforms that would leave the government and federal agencies unable to institute new economic regulations ones, essentially putting a halt to regulatory growth.

The foregoing is, as far as we have been able to determine, the current positions of the four candidates. Trump has clearly made a series of original proposals which have been castigated unjustifiably as racist, etc. Clearly they are not considered politically correct. Cruz’s proposal to abolish the Internal Revenue Service and the progressive personal income tax, and enactment of the Flat Tax with a single tax rates is not a conservative position, it is a reactionary one. Pres. Lincoln, a Republican President, created the position of commissioner of Internal Revenue and enacted an income tax to pay Civil War expenses. The current income tax was passed in1913, more than a hundred years ago. Congress levied a 1 percent tax on net personal incomes above $3,000 with a 6 percent surtax on incomes of more than $500,000.In 1918, during World War I, the top rate of the income tax rose to 77 percent to help finance the war effort. It dropped to 24 percent in 1929, and rose again during the Depression. Currently the maximum rate is 39.6% and the richest 24% of taxpayers pay 86% of the personal income taxes collected. Indeed, the bottom half of income earners pay no income tax at all and many receive an earned income tax credit from the IRS. Under the Cruz Flat Tax, the top 24% would pay at most 28% and the bottom fifty percent would pay about 20%. Those households with incomes below $10,000 per year would pay no tax at all but under the current law, those with incomes below $30,000 pay no tax at all and most receive a tax credit, payments from the IRS. It is hard to imagine a more reactionary proposal. One of us has a law degree as well as a Ph. D. in Economics. Nothing would induce us to vote for any of the candidates who are lawyers. They appear to be woefully ignorant of economics. The only candidate who has studied economics appears to be Donald Trump. And while we do not agree with his tax proposals because we have our own much better ideas, at least the knows the economic consequences of what he is proposing. None of the others appears close to having his economic understanding.

In the 1950s, the IRS was reorganized and the patronage system replaced with a non-political career system, a conservative idea.  Only the IRS commissioner and chief counsel are selected by the president. The Obama Administration abused the internal revenue system. A new President can easily restore the credibility of the IRS by his appointment of a new commissioners. Cruz’s proposal to abolish the Internal Revenue Service  has no merit whatsoever.

 As for the corporate income tax, Cruz proposes replacing it with a 16% value-added tax, a sales tax, a regressive tax that will fall on all consumers, including low-income consumers. . A more reactionary proposal is hard to imagine. The Ideal Taxes Association has been arguing for the elimination of the corporate income tax and taxing corporate earnings under the  personal income tax, which is the treatment given partnership income. It would not only yield more revenue than the corporate income tax but eliminate the defects of the corporate income tax, which discriminates against low and middle class owners of corporate stock, pension funds, and IRAs.

Cruz and Rubio both propose to eliminate the estate tax which in its present form dates back to 1916. The current estate tax has an exemption of $5 million and a rate of 40 percent. Coupled with the gift tax it is the only tax that prevents the accumulation of vast wealth from one generation to the next.

Crux and Kasich propose a constitutional amendment mandating a balance budget. In other words, Congress cannot be relied upon to balance the fiscal budget even though it has the power to do so. Trump, Crux and Rubio favor elimination of the “common core” mandate, imposed by the Department of Education.  A few years ago, conservatives proposed eliminating the Department of Education. Present day “conservatives” don’t have the courage any longer to do so. Nor do they have the courage to eliminate the Department of Housing and Urban Development, even though under the Constitution cities and towns are creatures of the States. Reactionary positions are an inducement for ordinary people to vote Democratic. Democratic policies are what brought this great nation into its moral and economic decline.

While many self-described conservatives say they will not support Donald Trump because they do not consider him to be a conservative, Republicans, a majority of whom describe themselves as conservative,  have controlled the federal government’s purse-strings for the past six years and have little to show for it. Their only accomplishment was a 5% across-the-board cut in federal expenditures that cut good programs and worthless programs equally with the cut in the military budget and some other programs being restored. Recently, House Speaker Paul Ryan capitulated to the President’s threat of a veto and gave him a budget larger than 2015. That is one reason why so many Republicans are disgusted with the leaders of the party and are backing an outsider like Trump.  

Comment by Bruce Bishop, 3/21/2016:

Obama has learned that he can respond to any "cuts" by Republicans by "shutting down the government."  Thanks to a compliant Mainstream Media, he will blame that shutdown on the Republicans.  His "shutdown" will be calculated to cause the most pain to innocent people -- school children will not be allowed to tour the White House; veterans will not be allowed to visit Arlington; soldiers will not get their pay, and senior citizens will not get their social security checks.  

The Republicans are too weak, and too stupid, to fight back, so they let Obama (or Clinton) win.  Trump will change the game.  He might lack political savvy, but he has common sense, and he is a fighter.