Responding to concerns about income inequality and acknowledging the nation's populist mood, former Gov. Jeb Bush has unveiled a detailed tax plan that offers something for everyone. While it has its merits, it tilts too far toward the wealthy and corporations — and it is unaffordable at a cost of several trillion dollars over a decade. But this is a substantive proposal from the most substantive candidate in a Republican presidential primary dominated by bombast and insults, and it deserves serious consideration.
Bush tackles some obvious issues that Washington has proven incapable of resolving. The federal tax code is far too complicated, and he would streamline it by reducing the number tax brackets and taking on some sacred cows such as the deduction for mortgage interest. Too much corporate money is parked overseas, and he would offer an incentive to bring it home. Too often the tax code offers businesses a greater incentive to borrow money instead of building capital improvements, and Bush would flip those priorities.
Dig into the details, and there are specific ideas that will draw bipartisan support and already are being attacked by antitax conservatives. For example, Bush proposes closing the "carried interest" tax loophole by taxing millions in earnings that private equity and hedge fund managers receive at the same tax rate as ordinary income instead of treating the income as capital gains, which are taxed at a much lower rate. This is an issue of fundamental fairness, and it addresses one of the 2012 issues that doomed Republican nominee Mitt Romney, who paid an effective tax rate of about 15 percent — a far lower rate than many middle-class Americans pay.
Bush also offers other progressive reforms. He would expand the Earned Income Tax Credit for the working poor. He would eliminate the so-called marriage penalty that forces couples to pay more taxes when filing a joint tax return than if they were single filing separately. And he says under his plan, families of four earning less than $40,000 a year would not pay any federal income tax. Those are all steps that would encourage work and create a fairer tax structure.
But those positives are offset by deep tax cuts that would benefit corporations and the wealthy. At a time when corporate profits are at record highs, Bush would cut the corporate tax rate from 35 percent now to 20 percent. The top tax rate for individual income would be 28 percent, compared to a top marginal income tax rate of 39.6 percent now. Ending Social Security taxes for working seniors would help many older workers who don't need the help, and it would encourage them to keep working at a time when the greatest demand for jobs is among younger Americans. Eliminating the estate tax on large inheritances, a favorite of conservatives who label it the "death tax,'' is another unnecessary tax cut for the affluent.
The biggest issue, of course, is the price tag of Bush's proposal. At a cost of $3.4 trillion over 10 years, it is simply unaffordable. As always, Bush counts on tax cuts to miraculously stimulate the economy and create more jobs. But even when economic growth is considered, the cost would be $1.2 trillion. That suggests there also would have to be significant cuts in federal spending at the very time when there is pressure from conservatives to increase defense spending, the nation's infrastructure is in dire need of repair and the financial pressures on entitlement programs will increase.
Despite these serious drawbacks, Bush deserves credit for delivering a serious, detailed tax plan that addresses long-simmering issues at both ends of the income scale. When the other big headline last week featured front-runner Donald Trump criticizing the physical appearance of another Republican candidate, Carly Fiorina, the former Florida governor's focus on policy should be respected by all voters regardless of their personal politics.