On Wednesday, former Governor of Florida and current Presidential candidate Jeb Bush announced his tax reform plan, "The Reform and Growth Act of 2017," during a speech in North Carolina.
Bush's proposal comes a week ahead of the next installment of GOP primary debates, and three months after Kentucky Senator (and fellow GOP candidate) Rand Paul released his own tax reform plan. Governor Bush's campaign says The Reform and Growth Act is aimed at reducing the "mind-numbing complexity" of the current tax code, and creating a system that is "simpler, fairer, and can jumpstart economic growth." It addresses both personal income and corporate taxation and contains a number of policies that would make compliance easier and lower tax rates.
The main components of the plan include:
- Reducing personal income tax rates & the number of brackets. Personal income would be taxed at either 10, 25, or 28 percent, rather than one of the seven different brackets under the current system. The standard deduction is increased by $5,000 for individual filers and $10,000 for joint filers, and those who earn less than $15,300 (single) or $30,600 (married) would not owe income taxes. The plan eliminates the "death tax" on estates.
- Eliminating and capping itemized deductions. Governor Bush's proposal would eliminate the state and local tax deduction, do away with the personal Alternative Minimum Tax, and cap the tax value of deductions at two percent of adjusted gross income. The charitable contribution deduction, however, would remain as it is constituted under current law.
- Reducing business tax rates. The highest corporate tax rate would be lowered from 35 percent to 20 percent, and the top pass-through rate would fall from 39.6 percent to 28 percent. The Governor's plan would also do away with the present "worldwide taxation" scheme as well as repeal several business deductions and credits. Some of the items targeted for repeal are unspecified in the information the Bush campaign provided today, and would be important to any full evaluation of the overall impact of the Governor's blueprint.
- Expanding the Earned Income Tax Credit. Bush's tax reform plan would double the size of the EITC for childless workers, "offer[ing] a potent supplement to work for those who might otherwise suffer from the employment-dampening effects of mandated, minimum wages." It is similar to a proposal offered by President Obama in his FY 2016 budget, which would have increased federal spending by $5.642 billion per year ($28.206 billion over five years).
- Allowing businesses to write-off capital investments. Rather than conform to the existing system of complicated depreciation schedules, businesses could expense any new capital investments (such as software or machinery) that increase productivity.
- Changing how investment income is treated. Bush's plan eliminates the 3.8 percent investment income tax on some filers' capital gains and dividends earnings. It also taxes "carried interest" as ordinary income subject to a higher 28 percent rate (a policy that has also been proposed by Hillary Clinton, Bernie Sanders, and Donald Trump).