Rand Paul Gets Flat and Fair - Stephen Moore

Overnight, Rand Paul changed the dynamics of the Republican presidential race when he released his "Fair and Flat" tax plan on Thursday. As he said when he unveiled the plan on video, this is the boldest rewrite of the income tax system in 100 years. Even Ronald Reagan -- who dramatically improved the federal tax system -- didn't perform such a sweeping clean-up of the tax code.

For full disclosure, I spent the last several months helping design this plan with Sen. Paul -- so I'm biased. But there is no doubt that this plan, which reduces income tax rates from as high as 40 percent and business taxes from 35 percent down to a flat 14.5 percent rate, can only be described as explosively pro-growth and pro-jobs.

The 14.5 percent tax would apply to wages, salaries, capital gains, rents and dividend income. The plan eliminates the estate tax, telephone taxes, Internet taxes, gift taxes and all customs and duties.

This plan would take America from being one of the highest income tax rate nations in the world to the lowest. This would suck capital and jobs from the rest of the world almost immediately to these shores. America would move from a nation offshoring jobs, to one that would start in-sourcing millions of them. It gives U.S. workers a fair advantage.

Under the current tax system, the IRS taxes what is produced in America and sold overseas. Under Rand's plan, when goods are produced on these shores and sold abroad, no tax is applied. But when China brings goods into the United States for sale, a 14.5 percent tax at the border is applied. This will reward production and jobs here -- big time. Industrial unions should love this plan because the business tax is a GATT-legal tariff on all imported goods.

For low income and middle class families of four, the first $50,000 of income would be tax free. Moreover, because this plan eliminates the payroll tax withheld from worker paychecks, the average worker with a $40,000 income would get a $3,000 take home pay raise. At a time of falling wages, that would be a big boost to middle class financial security.

More