Bush seeks broad Republican appeal with tax plan

Jeb Bush’s tax plan has something to appeal to most GOP voters, with broad tax rate cuts for supply-side conservatives and a swipe at Wall Street for the more populist-minded.

The GOP contender himself has said that he thinks a full-scale overhaul of the tax code is needed to spur 4 percent economic growth, and an economy that helps the working-class as much as the wealthy.

{mosads}“It’s easy for politicians and academics to go on and on about this ‘new normal’ in America, and how we all might just have to get used to it. They talk as if it is the best our country can do, when in truth it is just the best the progressive liberals can do,” Bush said Wednesday, unveiling his plan in North Carolina.

“My plan works whether you’re on Main Street or Wall Street,” he added. “No special favors.  No special breaks.  Fixing the tax code will take constant attention and effort.”

Broadly speaking, Bush keeps the template from the last successful tax reform effort in 1986, proposing to roll back a number of tax breaks while lowering individual and corporate rates.

But while Bush falls in line with previous Republican proposals on tax reform, he also breaks from GOP orthodoxy in other key areas. Other Republican reformers have also challenged the long-standing GOP concentration on slashing tax rates, and urged the party to focus more on helping families.

Bush’s plan drew praise from some business-friendly circles on the right, like Americans for Tax Reform – the group started by anti-tax activist Grover Norquist, who has sparred with Bush in the past.

ATR said the only bad part of Bush’s plan was the proposal to roll back the so-called carried interest provision, which will essentially tax private equity and hedge fund managers at ordinary income rates.

Businessman Donald Trump, the GOP front-runner, has suggested that Wall Street-types don’t pay enough in taxes, a break from traditional Republican thinking.

But Bush’s plan also didn’t excite supply-siders as much as rivals like Sen. Rand Paul (R-Ky.), who unveiled a flat tax plan earlier this year. Bush’s plan “doesn’t go far enough,” tweeted Steve Forbes, the father of the flat tax.

And while Bush proposes expanding incentives for the working poor, liberal analysts still weren’t very impressed, saying the former Florida governor’s plan still amounted to a windfall for the wealthy. Scrapping the carried interest provision, liberals say, doesn’t carry the same weight when paired with a sharp reduction in the top individual rate.

Here’s some areas where Bush’s plan embraces or departs from previous Republican proposals:

— Bush proposes reducing the top individual rate to 28 percent – the same as under tax reforms enacted by President Reagan, and the level proposed by 2012 GOP nominee Mitt Romney. Bush would also implement a 10 percent and a 25 percent bracket. Republicans on Capitol Hill previously have called for a top individual rate of 25 percent.

But another of Bush’s rivals, Sen. Marco Rubio (R-Fla.), has called for a top individual rate of 35 percent, as part of a plan aimed more at families than supply-siders. Democrats have shown no interest in reducing the current top rate of almost 40 percent, something they just won in the fiscal cliff deal at the start of 2013.

—  The former Florida governor says his plan – which includes practically doubling the standard deduction – would mean that roughly 15 million poor families would no longer owe the federal government income taxes. Romney famously got in trouble in the 2012 campaign for deriding the “47 percent” who didn’t pay income taxes as automatic voters for President Obama.

— Bush would do nothing to the deduction for charitable contributions, one of the largest tax breaks in the entire code. But he also proposes capping other deductions at 2 percent of a taxpayer’s adjusted gross income, an idea that Romney floated as well in 2012 and that would sharply reduce the benefit of the tax break for home mortgage interest. Bush further calls for completely scrapping the deduction for state and local taxes, a policy he says forces low-tax states to subsidize high-tax places like New York, New Jersey and California.

Former House Ways and Means Chairman Dave Camp (R-Mich.) proposed scaling back the mortgage interest deduction and for repealing the state and local deduction in his 2014 tax reform plan. But Camp’s plan likely wouldn’t reduce the benefit of the mortgage interest deduction as much as Bush’s proposal.

— Bush floats reducing the corporate tax rate to 20 percent, from its current 35 percent, while also allowing companies to immediately write off their investments and shielding offshore corporate profits from U.S. taxation. Supply-side conservatives have long called for more generous expensing rules, and criticized Camp for going in the other direction.

Republicans on Capitol Hill have also generally floated a top corporate rate of 25 percent, in line with their top individual rate. That would mean businesses would face the same top rate, whether they pay through the corporate or individual systems.

— Bush would also roll back a 100-year old provision that allows businesses to write off the interest on their debt, a more aggressive posture than other Republicans have taken. Business coalitions have questioned that approach, saying it would imperil Bush’s efforts to spur economic growth.

— Bush has stressed that he wants to reduce deficits, but hasn’t specified what his tax plan’s impact on the federal debt would be. Both Camp and Romney sought to make sure that their plans were revenue-neutral. But liberal analysts, pointing to the broad rate reductions and the generous write-off rules for business, believe Bush’s plan would undoubtedly add to the deficit.