Tax reform a popular topic among presidential candidates
With another debate on tap, Tuesday night in New Hampshire, Republicans and Democrats are lining up to unveil their plans for reforming the tax code. That reform is needed, they all agree. But each has their own prescription for change.
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As the U.S. presidential campaign gets into full swing, candidates on both sides of the aisle are lining up to make changes to the tax code.
From Democrat's efforts to levy a surcharge on the very wealthiest to Herman Cain's 9-9-9 plan, and several in between, it seems everyone has a proposal to overhaul the system by which the federal government raises money.
The overarching mantra is the system must be made more simple — on that, most agree — and more "fair" — and it's here that agreement ends.
Under Cain's plan, there would be a flat 9 percent income tax for all incomes. On top of that, there would be a 9 percent national sales tax. The last 9 represents the corporate tax rate, which would be lowered to 9 percent. There would be no deductions for anyone.
Democrats contend that the plan isn't progressive — that the poorest Americans would pay a vastly greater portion of their income in taxes than the wealthiest. And on the right, fellow Republicans contend that implementing a national sales tax would give Democrats another tax to raise. And from the middle, many non-partisan groups say the plan simply wouldn't raise the revenue that the federal government needs.
"While the Herman Cain plan is certainly attracting a lot of attention, a lot of interest, it is very unlikely to pass with opposition from both the left and the right," said James Politi, Financial Times U.S. economics and trade correspondent.
Another idea that is gaining some traction, at least in Congress, is to declare a "holiday" on corporate taxes, allowing companies to bring their foreign profits home to America, the idea being they would eventually start paying tax on that income stream. The Barack Obama administration is against the proposal.
"Interestingly, a one-year tax holiday on profits earned overseas was tried in 2004 and the evidence was quite mixed," Politi said.
And then there's Mitt Romney's plan, which seeks to exempt those making less than $200,000 a year from paying taxes on capital gains and dividends.
Politi said that proposal is aimed at pensioners and small scale investors who aren't particularly successful.
"Being a former private equity executive, Mitt Romney had to make sure this proposal was targeted solely at the middle class," Politi said.
Rick Perry hasn't said much about taxes, except to say he believes cutitng them will help create jobs — and he opposes the Buffet plan.
Politi said Perry may face some pressure to unveil his own tax proposal.
For Ron Paul, the plan is to cut corporate taxes to match Europe — from 35 percent to 25 percent — and eliminate personal income taxes so the federal government is funded with excise and import taxes.
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