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Rand Paul’s Giant Tax Cut Misunderstanding

By Ryan Ellis

When it comes to the conscience of liberty in the United States Senate, no one beats the intellectual honesty of Senator Rand Paul (R-Ky.) He really does try to get the policy right, and much more often than not does so.

But he’s suffering from an honest misunderstanding when it comes to the GOP tax framework.

Senator Paul is against the framework as written. Rather than explain his position for him, I’ll quote his own explanation below:

I’m not looking to dictate the details, nor am I set that the plan has to have a definite amount of tax cuts – it just should not be a tax HIKE on anyone.  The problem comes because in their plan they’ve eliminated the deductions many Americans take for their state and local taxes, and they’ve also eliminated the personal exemption. This could put many Americans in the $50,000-$200,000 range in a trap where their taxes would go up – some very significantly. 

Now, on its face that’s totally reasonable. A Republican tax plan probably shouldn’t result in a tax increase for working or mass affluent middle class families. And if the GOP Framework did as Senator Paul is describing, we’d have some tinkering to do.

The only problem is, the GOP Framework does no such thing.

Senator Paul is assuming the Framework has laid out the tax brackets in dollar terms for the 12 percent, 25 percent, and 35 percent brackets. You can tell by reading Paul’s “solution” to the “problem” he has:

First, if you really do want to eliminate the state and local deductions and think it is good policy, that’s fine. But then the rate the taxpayer pays must be low enough to compensate for it. That’s always been the idea behind the “Flat Tax,” but it applies here. You have to lower the middle rate from 25 to 20 to come near fixing the problem for everyone. You can also adjust the brackets, making more middle and upper-middle class people subject to the 12 percent rate for a larger share of their income. In order to fix the problem of eliminating the personal exemption, you could increase the child credit by an additional $1,000 and make the income and age limits of the old exemption system apply, so more people in the middle can take it. 

There are several big problems here:

The GOP Framework doesn’t say when the 12 percent bracket ends. The 12 percent bracket is the first bracket, for sure. But it’s up to the tax writing committees and the Congress to decide how far up the income scale the 12 percent bracket goes. Senator Paul is assuming it will stop at a certain point, and that taxpayers earning income above that point will be squeezed. He can’t know when the 12 percent bracket will stop, because no one does–it’s not in the Framework.

The GOP Framework doesn’t say how much it will grow the child tax credit, or where it will phase out. Under current law, the child tax credit is $1000 and begins to phase out at $110,000 of adjusted gross income for a married couple. The Framework calls for both of these numbers to rise, but it leaves how high to the tax writing committees and the Congress. Senator Paul cannot possibly know if middle class families with kids are getting squeezed if he doesn’t know how big the child tax credit will be, nor to whom it will be available.

Senator Paul is getting his assumptions not from the GOP Framework, but from the ultra-liberal “Tax Policy Center,” whose job it is to tear Republican tax plans to shreds. Senator Paul is assuming that the 12 percent bracket depth, the size of the child tax credit, and the phaseout of the child tax credit are exactly as described in the Tax Policy Center’s controversial “study” of the GOP Framework which has come out in recent days.

This TPC study has been universally panned in Washington by the authors of the Framework and its boosters as inaccurate, biased, assumptive, and hostile. It does not deserve to be accepted uncritically by Senator Paul. He actually ought to know better–the TPC hated the VAT he ran on as a presidential candidate.

So is Senator Paul wrong? Not in his intentions, but assuredly in the certainty of his assumptions.

Read more here.

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