Rand Paul's Flat And Fair Tax: Even Better Than Reagan Plan

[Brian4Liberty]

Rand Paul's Flat And Fair Tax: Even Better Than Reagan Plan
BY STEPHEN MOORE - 06/24/2015

Overnight, Rand Paul changed the dynamics of the Republican presidential race when he released his "Fair and Flat" tax plan a week ago.

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 cleanup 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% and business taxes from 35% down to a flat 14.5%, can only be described as explosively pro-growth and pro-jobs.

The 14.5% tax would apply to wages, salaries, capital gains, rents and dividend income. It 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 nations with the highest income tax rates in the world to having one of the lowest. It 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 U.S. for sale, a 14.5% 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.
...
Perhaps the strongest case for the Fair and Flat tax is that it eliminates all of the special interest loopholes and carve-outs in the tax code.

Tax lobbyists in Washington would become an endangered species — and it couldn't happen to a nicer group of people. The richest 1% get the preponderance of the tax write-offs, so getting rid of the big deductions would increase their taxable income while lowering the rate.
...
More: http://news.investors.com/ibd-editor...me-changer.htm

[fisharmor]

Ok, so since this has been in multiple threads here now, maybe we can actually READ the plan? Get more details?

I'm pretty convinced that in the end I personally will end up paying a $#@! ton more taxes than I do now under Rand's plan, but I can't verify it.

So I can't support it yet.

[euphemia]

Actually our taxes would be way less than they are now. We took a huge hit on income last year, and I don't think we would pay much of anything, depending how much the minimum exemption is.

[r3volution 3.0]

Ok, so since this has been in multiple threads here now, maybe we can actually READ the plan? Get more details?

I'm pretty convinced that in the end I personally will end up paying a $#@! ton more taxes than I do now under Rand's plan, but I can't verify it.

So I can't support it yet.

Based on what?

A $50,000 standard deduction for all personal income (wages and investment), with 14.5% on everything after that....

Unless you have some obscenely gigantic deductions/credits at present, I don't think it's mathematically possible for you to end up paying more under Rand's plan.

[FreedomProsperityPeace]

I'm surprised to see Moore coming out and enthusiastically supporting Rand's plan. Despite playing a fiscal conservative many places on TV, he always seems to back establishment interests.

I missed this part: "I spent the last several months helping design this plan with Sen. Paul." Well, that's very interesting.

[euphemia]

I think it will be interesting to see what happens when China discovers they will have to pay 14.5% on anything they send in here.

[Foreigner]

Based on what?

A $50,000 standard deduction for all personal income (wages and investment), with 14.5% on everything after that....

Unless you have some obscenely gigantic deductions/credits at present, I don't think it's mathematically possible for you to end up paying more under Rand's plan.

I think all individuals will pay less. Some large corporations will end up paying more. All the super-rich will pay less individual tax, but with the buisness-tax taxing all their activity in the US, some of them will de-facto contribute more through making irrelevant their current off-shoring of wealth and loop-hole exploitation of the current tax regime.

I think it will be interesting to see what happens when China discovers they will have to pay 14.5% on anything they send in here.

Doesn't work like that. The Chinese are investing like mad, and since investments are exempt from taxation under Rand's plan, they will not be impacted. (That's good, because the US needs foreign investments, and nobody got more capital then the Chinese) They will, however, exchange their current corporate taxes for the buisness tax. If their current profit to revenue ratio is high, they will pay less, and if they have huge revenues, but a small operating profit, they will probably pay more.

Also, Rand's plan will probably decrease consumption in the short run, (will increase again later as the economy grows) as savings and investments become much more profitable. One thing that's slightly bad, is that prices could go up as parts of the cost of the buisness tax will be pushed on to the consumers. But US companies will sell a lot more of their stuff abroad, become more competetive, ending the unhealthy imbalance that exists today whereby imports are much greater than exports. Over time, unemployment should go down, wages up, leaving americans able to spend more, or reduce their debts.(which will increase their future spending power even more)

Huge net win! I wish somebody in Europe would come up with more proposials like these, because we truly are $#@!ed economically.

[r3volution 3.0]

Some large corporations will end up paying more. All the super-rich will pay less individual tax, but with the buisness-tax taxing all their activity in the US, some of them will de-facto contribute more through making irrelevant their current off-shoring of wealth and loop-hole exploitation of the current tax regime.

That's probably true; I can't really say anything intelligent on corporate tax, much more complex than individual...

[jkr]

sounds like an improvement...now how will they guarantee they wont mis-allocate those funds and do the same $#@!?

i want to know what i am being extorted for...

[euphemia]

Doesn't work like that. The Chinese are investing like mad, and since investments are exempt from taxation under Rand's plan, they will not be impacted. (That's good, because the US needs foreign investments, and nobody got more capital then the Chinese) They will, however, exchange their current corporate taxes for the buisness tax. If their current profit to revenue ratio is high, they will pay less, and if they have huge revenues, but a small operating profit, they will probably pay more.

According to the article, anything not produced here, but brought in for sale will incur the 14.5% tax.

[Crashland]

As I understand it, the $50,000 does not apply for an individual. It would be $15,000 standard deduction per filer and then $5,000 deduction per dependent and $5k personal exemption, or something like that, which happens to add up to $50,000 for a family of four. Single person with no kids would get a $20k deduction. Someone correct me if I'm wrong, I only heard from secondary source and am too lazy to actually look it up at the moment.

[Foreigner]

According to the article, anything not produced here, but brought in for sale will incur the 14.5% tax.

Yes, of course, otherwise the plan would leave American businesses hugely disadvantaged.

To compare, in Norway, and most of Europe (although the rate vary) anything brought into the country will incur a 25% tax. Both goods for consumption, and capital for productive investment.

[r3volution 3.0]

As I understand it, the $50,000 does not apply for an individual. It would be $15,000 standard deduction per filer and then $5,000 deduction per dependent and $5k personal exemption, or something like that, which happens to add up to $50,000 for a family of four. Single person with no kids would get a $20k deduction. Someone correct me if I'm wrong, I only heard from secondary source and am too lazy to actually look it up at the moment.

You're right about $50K being for a family of four, couldn't find the details otherwise, but let's assume your information is correct.

***Some Comparisons (quick math, someone correct me if I'm wrong)***

Single filer, standard deduction, one exemption

Current:
--standard deduction + personal exemption for single filer = $10,150
--current income tax rate schedule
--current payroll tax rate schedule

Rand's Plan:
--standard deduction = $15,000
--flat 14.5% income tax
--no payroll tax

Comparison for someone earning $15,000:
--Current = $470 income + $1147.50 payroll = $1617.50 (10.7% effective rate)
--Rand = $0 (0% effective rate)

Comparison for someone earning $20,000:
--Current = $994 income + $1530 payroll = $2524 ($12.6% effective rate)
--Rand's Plan = $725 (3.6% effective rate)

Comparison for someone earning $25,000
--Current = $1744 income + $1912.5 payroll = $3656.5 (14.6% effective rate)
--Rand's Plan = $1450 (5.8% effective rate)

...at this level of income, the effective rate under the current system (14.6%) exceeds the maximum possible effective rate under Rand's plan (14.5%).

So, a single filer w/ one exemption cannot possibly pay more under Rand's system than he does now, and will actually pay much much less.

....I'm too lazy to do the math for other filing statuses, but it looks like it's going to be similar.

N.B. This is all a bit premature, since we don't have the full plan yet, but I'm really liking what I see so far.

[fisharmor]

Yeah everyone who posted after me all had a lot of "I think" and "probably" in their posts.
All I'm saying is that before I dismount and smoke a cigarette over this I want to read something.

[r3volution 3.0]

Yeah everyone who posted after me all had a lot of "I think" and "probably" in their posts.
All I'm saying is that before I dismount and smoke a cigarette over this I want to read something.

We have some information.

That information suggests that this will be a gigantic tax for for virtually everyone.

If you want to remain agnostic till we get the full plan, alright, nothing wrong with that.

...but I don't understand why you're expecting it to be a bad deal, when the only evidence we have suggests otherwise.

...not to mention the known economic views of the person whose plan it is.

[euphemia]

I'm just saying that compared to what we paid last year, and with our lower income this year, we would pay practically nothing, even with no deductions, if 14.5% is the rate.

[fisharmor]

We have some information.

That information suggests that this will be a gigantic tax for for virtually everyone.

If you want to remain agnostic till we get the full plan, alright, nothing wrong with that.

...but I don't understand why you're expecting it to be a bad deal, when the only evidence we have suggests otherwise.

...not to mention the known economic views of the person whose plan it is.

Taxes aren't rocket science. You go to turbotax.com, you fill in a bunch of paperwork, and you pay $20.
ISSUE #1: I haven't seen anything saying I'm not still going to have to do this. At least the keeping-every-damned-piece-of-paper-so-I-can-file-taxes part.

Last year I paid $3743 in federal taxes. 14.5% of my 2014 income minus $50k is $4446. So out of the gate, I pay about an extra $700 under Rand's plan.
ISSUE #2: Nothing is known for sure about deductions.
The initial thread on this mentioned a mortgage deduction. Is it identical? Is it for primary residence only?
Nothing has been mentioned about medical deductions. Do I not get medical deductions? Does anyone recognize that in the short term, most middle-aged and elderly people are going to take a medieval spanking on their taxes for this one reason? Most years since I started my career I've had thousands upon thousands of dollars tax exempt because of my health plan. Sure it'll work out in the end as costs fall but in the short term it's gonna hurt a lot of people, and it's gonna hurt a lot.
Nothing has been mentioned about dependent deductions. I only have three dependents and I'd be out $700, partly because of this. What about families with four or more kids?


There are only two possibilities here:
1) None of those deductions are going to apply and I (and you, and pretty much everyone reading this) is going to pay MORE in taxes, or
2) All of those deductions are going to apply, nobody is going to pay much of anything, and Rand is blowing smoke about it being a revolutionary move that is going to scrap the complicated system.

Since his stated goal was to scrap the complexity of the tax code, I have to believe that I'm not going to get those deductions and that his plan represents a net tax increase for most of us.

[EBounding]

Last year I paid $3743 in federal taxes.

Does that include FICA? I'm trying to figure this out too.

[Wilf]

Taxes aren't rocket science. You go to turbotax.com, you fill in a bunch of paperwork, and you pay $20.
ISSUE #1: I haven't seen anything saying I'm not still going to have to do this. At least the keeping-every-damned-piece-of-paper-so-I-can-file-taxes part.

Last year I paid $3743 in federal taxes. 14.5% of my 2014 income minus $50k is $4446. So out of the gate, I pay about an extra $700 under Rand's plan.
ISSUE #2: Nothing is known for sure about deductions.
The initial thread on this mentioned a mortgage deduction. Is it identical? Is it for primary residence only?
Nothing has been mentioned about medical deductions. Do I not get medical deductions? Does anyone recognize that in the short term, most middle-aged and elderly people are going to take a medieval spanking on their taxes for this one reason? Most years since I started my career I've had thousands upon thousands of dollars tax exempt because of my health plan. Sure it'll work out in the end as costs fall but in the short term it's gonna hurt a lot of people, and it's gonna hurt a lot.
Nothing has been mentioned about dependent deductions. I only have three dependents and I'd be out $700, partly because of this. What about families with four or more kids?


There are only two possibilities here:
1) None of those deductions are going to apply and I (and you, and pretty much everyone reading this) is going to pay MORE in taxes, or
2) All of those deductions are going to apply, nobody is going to pay much of anything, and Rand is blowing smoke about it being a revolutionary move that is going to scrap the complicated system.

Since his stated goal was to scrap the complexity of the tax code, I have to believe that I'm not going to get those deductions and that his plan represents a net tax increase for most of us.

There is a couple of things that chould happen,
1) check this link https://www.randpaul.com/rand-pauls-...flat-tax-op-ed
or
2) Be patient and wait for more details to be release since he is trying to built hype by through realeasing small amount of information

If he released his entire plan in detials than every candidate will try to find something to attack on

Also consider that this tax code is very populists since he is trying to appease as many people as possible

[fisharmor]

Does that include FICA? I'm trying to figure this out too.

I was looking at my 1040 line 22, which AFAIK does not include FICA, medicare, etc. I'd need to dig out my W-2 to be sure but the way the numbers should work out, it should be minus both of those.

But I'm not going to dig out my W-2 because if this is really something they've been working on for months now, then post it online so people like us can vet it. That's one indisputable way the apple has fallen far from the tree: Ron was really good about leaving a paper trail showing what he was doing and why.

[fisharmor]

If he released his entire plan in detials than every candidate will try to find something to attack on

I'm sorry, I momentarily forgot that this is all just a big game.

[r3volution 3.0]

14.5% of my 2014 income minus $50k is $4446.

So you made about $80,662, correct?

Last year I paid $3743 in federal taxes.

Is your income not subject to payroll tax (7.65% combined SS and Medicare), because that alone should have been nearly double the figure you cite.

...I'm also not understanding how you only paid $3743 in personal income tax on $80,662.

...you must introduce me to your accountant.

[EBounding]

Ok, I went through my own 1040 to compare and contrast. From my own calculations, Rand's plan would save me at least $650 $1,900 a year. And that's assuming he eliminates all other tax benefits and deferrals like employer medical premiums, 401k, HSA, etc.

Here's some details about me without giving away my entire financial life:

1) Married, no kids. I assumed that Rand's plan will have the same standard deduction of at least $12,400 for a married couple. I could have assumed that it would be $25K (half of the $50K for family of four) but I went conservative. This is the main detail I'd like to know from Rand.
2) Our household income is under $100K.
3) I took out all exemptions and deductions including contributions for 401k, HSA and medical premiums for Rand's plan. I max out my HSA for the tax benefit each year.
4) No charity or mortgage deduction.
5) I had a tax credit for tuition expenses last year for a few hundred dollars. I'm not going to have tuition expenses any more though.

Summary: Rand's plan looks really good. I was surprised how much better it was since since I get such a big tax benefit from the HSA. He needs to clarify the $50K deduction. If I can subtract the $25K from gross income, the savings goes up to over $2,400.

He needs to provide more details on the $50K deduction, but the most important part of his plan is killing FICA. Unless your tax credits are somehow more than what you pay in FICA each year, this looks like a pretty good deal.

Let me know if you think I'm missing anything.

[fisharmor]

So you made about $80,662, correct?

Is your income not subject to payroll tax (7.65% combined SS and Medicare), because that alone should have been nearly double the figure you cite.

...I'm also not understanding how you only paid $3743 in personal income tax on $80,662.

...you must introduce me to your accountant.

Ok, I'll play the deflect-attention-away-from-Rand's-potentially-$#@!ty-plan-and-focus-on-Fisharmor's-finances game for the moment.

That figure is absolutely correct because that is only personal income tax (as you yourself said), not FICA or Medicare.

As I already stated in a previous post that figure is only box 22 on the 1040 which does not include FICA or Medicare which amount to an additional $6400 I paid. So yeah, I went and dug out my W-2, if only to prove the point that details are important. As a guy who made all of that money by being a guy who can be trusted to track down rounding issues in a software that tracks millionths of a dollar per transaction, I'm getting pretty $#@!ing annoyed at the lack of data.

I've seen ONE article that claimed that we won't have to pay FICA anymore, and nothing about Medicare going away. FICA is by far the biggest hit at $5200. Do I not pay that anymore? The writeup on Rand's site doesn't say anything about that. If I get to keep that money, great - but do I still get SS benefits after I retire?

In that vein, I've been thinking about this statement more:

If he released his entire plan in detials than every candidate will try to find something to attack on

But he already did give every other candidate everything they need to attack him.
Rand wants to get rid of the whole tax code and replace it with 14.5% - this obviously translates into "Rand wants to abolish social security and medicare".
Even if it's not true, he still gets put on the defensive. He gets to spend his air time in debates trying to convince the listeners that what they just got told isn't true, and without the benefit of having the ostensible truth written down.

Does Rand expect a buzz to get created about this? I'd like to help, but I have to see the way the numbers work first, and before I get to see my own numbers work out better, I'm not going to do that.

And before anyone says anything about my income, that's one income supporting a family in the DC area. I am very squarely in the lower middle class here, just like I would be in New York, Boston, Chicago, or LA. If I hadn't bought a house prior to the boom (and it's smaller than most others here), I wouldn't have been able to, except perhaps at the lowest point of the dip in prices a few years ago.

[fisharmor]

1) Married, no kids. I assumed that Rand's plan will have the same standard deduction of at least $12,400 for a married couple. I could have assumed that it would be $25K (half of the $50K for family of four) but I went conservative. This is the main detail I'd like to know from Rand.

I hadn't considered that, being the breadwinner of a family of exactly four.
Your savings are coming primarily from the fact that the current tax code punishes people who don't have kids (along with people who rent and empty nesters).
There's another easy way to spin it negatively - it would be really easy to take a position that Rand is anti family, since childless people and empty nesters get a huge break and families with children pay more.

[r3volution 3.0]

Ok, I'll play the deflect-attention-away-from-Rand's-potentially-$#@!ty-plan-and-focus-on-Fisharmor's-finances game for the moment.

You brought up your personal finances, not I, and precisely for the purpose of showing that Rand's plan is $#@!ty (which I'm now in the process of showing you it isn't).

That figure is absolutely correct because that is only personal income tax (as you yourself said), not FICA or Medicare.

...still amazed that that's all you're paying in personal income tax, but let's put that aside.

Even paying that little now, you're still going to be paying a lot less total federal tax under Rand's plan.

To wit:

As I already stated in a previous post that figure is only box 22 on the 1040 which does not include FICA or Medicare which amount to an additional $6400 I paid.

So, $3743 in personal income tax + $6400 in payroll tax = $10,143 total under the current system.

Under Rand's plan, assuming that you're a single filer (which I'm guessing you're not based on that extremely low income tax liability?), you'd be paying a grand total of $9521.

So, you'll save $622.

But, if you have dependents or a spouse with whom you're filing jointly, or a mortgage, or give to charity (both of which deductions he's keeping), it could be substantially more.

I've seen ONE article that claimed that we won't have to pay FICA anymore, and nothing about Medicare going away. FICA is by far the biggest hit at $5200. Do I not pay that anymore? The writeup on Rand's site doesn't say anything about that. If I get to keep that money, great - but do I still get SS benefits after I retire?

The 6.2% SS tax and the 1.45% Medicare Tax = Dead, gone, kaput

(my understanding is that the employer contribution will remain)

This has no effect on the SS or Medicare programs.

He probably is going to roll out some kind of reform for both (perhaps raising the retirement age), but I guarantee you he isn't going to be abolishing them.

Even Ron didn't go that far.

I expect that he'll be rolling out a complete budget in the near future, with major spending cuts elsewhere to offset the lost revenue.

...and his projections probably make generous growth assumptions, from the tax reform, regulatory reform, etc.

[RabbitMan]

I'm going to dig it up in a moment, but one of the write ups of Rand's plan has most of the details you were looking for.

Edit: I think this is what I used http://taxfoundation.org/blog/econom...ax-reform-plan

Here are the important bits you guys seem to be getting hung up on:

(A) The deduction: You will receive a $15,000 deduction per filer, plus $5,000 deduction per person. A single individual would thus receive a $20,000 deduction (1 filer [15] + 1 total person [5] ), a married couple would receive a $40,000 deduction (2 filers [15 x 2] + 2 total people [5 x 2]) and a family of four would receive a $50,000 deduction (2 filers [15 x 2] + 4 total people [5 x 4]). You also get a deduction for mortgage interest, and there is the earned income tax credit for lower income brackets as well.

(B) What else to pay: For individuals, that's it. No Medicare and no Social Security. It's all lumped in together with the normal tax. Moreover, in his plan all of the tax revenues must FIRST fully fund Social Security and Medicare. No more raiding those funds--the obligations will always be met.

Let's see what that means for a few test groups:

Joe makes minimum wage in Seattle at $11 an hour, working 38 days a week. Joe makes a total of $20,800 before taxes. Including his contribution to SS and Medicare, he would then pay $1,591, or 7.6% of his income, dropping him down to $19,209. Between standard and personal deductions and his $500 EIC, his effective tax rate ends up at 5%. Not bad.

Here comes the Rand plan. Joe's $20,800 has a simple $20,000 standard deduction (1 filer at $15,000 plus 1 total person at $5,000). He also receives the EIC of about $500, leaving only $300 of his income to be taxed at 14.5%. That's a total of $43.50 paid in taxes, or a tax rate of 0.2%. Including SS and Medicare. Normally Joe would keep $19,709, but now he has $20,750. Rand just got this minimum wage worker more than $1,000 back. Maybe it's time for Joe to celebrate at his favorite craft beer pub with the food truck parked outside.

What about Jade who is single at a tech job at Microsoft and earns $80,000 a year? Currently, her personal exemptions reduce her taxable income to $69,700 and she pays $13,280 for all of her many tax brackets, plus $6,120 for SS and Medicare. Since she only has $60,600 left she thinks her tax rate is basically 24%.

Here comes the Rand plan. Jade has a yearly income of $80,000, and due to her $20,000 deduction (1 filer at $15,000 plus 1 total person for $5,000), $60,000 of it is taxable at a 14.5% rate. She is a mobile techie so she rents and doesn't have a home mortgage, and so ends up having to pay $8,700 in taxes, or an effective tax rate of a smidge under 11%. Jade now has almost $11,000 more in her pocket at the end of the year. Maybe it's time to get that mortgage after all?

And it gets even better when you have families.

People can spit on this plan all they want, but there is no way in hell someone can argue that it is bad for everyday workers or would have a minuscule impact on the economy.

[rich34]

Taxes aren't rocket science. You go to turbotax.com, you fill in a bunch of paperwork, and you pay $20.
ISSUE #1: I haven't seen anything saying I'm not still going to have to do this. At least the keeping-every-damned-piece-of-paper-so-I-can-file-taxes part.

Last year I paid $3743 in federal taxes. 14.5% of my 2014 income minus $50k is $4446. So out of the gate, I pay about an extra $700 under Rand's plan.
ISSUE #2: Nothing is known for sure about deductions.
The initial thread on this mentioned a mortgage deduction. Is it identical? Is it for primary residence only?
Nothing has been mentioned about medical deductions. Do I not get medical deductions? Does anyone recognize that in the short term, most middle-aged and elderly people are going to take a medieval spanking on their taxes for this one reason? Most years since I started my career I've had thousands upon thousands of dollars tax exempt because of my health plan. Sure it'll work out in the end as costs fall but in the short term it's gonna hurt a lot of people, and it's gonna hurt a lot.
Nothing has been mentioned about dependent deductions. I only have three dependents and I'd be out $700, partly because of this. What about families with four or more kids?


There are only two possibilities here:
1) None of those deductions are going to apply and I (and you, and pretty much everyone reading this) is going to pay MORE in taxes, or
2) All of those deductions are going to apply, nobody is going to pay much of anything, and Rand is blowing smoke about it being a revolutionary move that is going to scrap the complicated system.

Since his stated goal was to scrap the complexity of the tax code, I have to believe that I'm not going to get those deductions and that his plan represents a net tax increase for most of us.

I understand what you're saying, but did you factor in how much more you'll be taking home each pay check? Just guessing, but you should be taking home more than a hundred dollars a paycheck throughout the year. So if you get paid bi-weekly and there's 24 pay periods in a year thats over 2400. So no you wouldn't be paying more. And I'm betting your take home on paychecks would actually be well over a 100 dollars so that 2400 number could be close to 3,000 additional take home throughout the year. There's no way you're paying more.

[rich34]

You brought up your personal finances, not I, and precisely for the purpose of showing that Rand's plan is $#@!ty (which I'm now in the process of showing you it isn't).



...still amazed that that's all you're paying in personal income tax, but let's put that aside.

Even paying that little now, you're still going to be paying a lot less total federal tax under Rand's plan.

To wit:



So, $3743 in personal income tax + $6400 in payroll tax = $10,143 total under the current system.

Under Rand's plan, assuming that you're a single filer (which I'm guessing you're not based on that extremely low income tax liability?), you'd be paying a grand total of $9521.

So, you'll save $622.

But, if you have dependents or a spouse with whom you're filing jointly, or a mortgage, or give to charity (both of which deductions he's keeping), it could be substantially more.



The 6.2% SS tax and the 1.45% Medicare Tax = Dead, gone, kaput

(my understanding is that the employer contribution will remain)

This has no effect on the SS or Medicare programs.

He probably is going to roll out some kind of reform for both (perhaps raising the retirement age), but I guarantee you he isn't going to be abolishing them.

Even Ron didn't go that far.

I expect that he'll be rolling out a complete budget in the near future, with major spending cuts elsewhere to offset the lost revenue.

...and his projections probably make generous growth assumptions, from the tax reform, regulatory reform, etc.

FICA would be gone, and yes you'll still get social security because that will be covered under what the businesses will have to pay for. The reason I said above he'd be getting paid an additional 100 dollars a paycheck is due to fica being gone, plus the lower tax rate which then would equal a much greater take home pay for each pay check. I'd say once it's averaged out given the particular scenario you'd be paying way less in taxes.

[r3volution 3.0]

I'm going to dig it up in a moment, but one of the write ups of Rand's plan has most of the details you were looking for.

Edit: I think this is what I used http://taxfoundation.org/blog/econom...ax-reform-plan

Here are the important bits you guys seem to be getting hung up on:

(A) The deduction: You will receive a $15,000 deduction per filer, plus $5,000 deduction per person. A single individual would thus receive a $20,000 deduction (1 filer [15] + 1 total person [5] ), a married couple would receive a $40,000 deduction (2 filers [15 x 2] + 2 total people [5 x 2]) and a family of four would receive a $50,000 deduction (2 filers [15 x 2] + 4 total people [5 x 4]). You also get a deduction for mortgage interest, and there is the earned income tax credit for lower income brackets as well.

(B) What else to pay: For individuals, that's it. No Medicare and no Social Security. It's all lumped in together with the normal tax. Moreover, in his plan all of the tax revenues must FIRST fully fund Social Security and Medicare. No more raiding those funds--the obligations will always be met.

Let's see what that means for a few test groups:

Joe makes minimum wage in Seattle at $11 an hour, working 38 days a week. Joe makes a total of $20,800 before taxes. Including his contribution to SS and Medicare, he would then pay $1,591, or 7.6% of his income, dropping him down to $19,209. Between standard and personal deductions and his $500 EIC, his effective tax rate ends up at 5%. Not bad.

Here comes the Rand plan. Joe's $20,800 has a simple $20,000 standard deduction (1 filer at $15,000 plus 1 total person at $5,000). He also receives the EIC of about $500, leaving only $300 of his income to be taxed at 14.5%. That's a total of $43.50 paid in taxes, or a tax rate of 0.2%. Including SS and Medicare. Normally Joe would keep $19,709, but now he has $20,750. Rand just got this minimum wage worker more than $1,000 back. Maybe it's time for Joe to celebrate at his favorite craft beer pub with the food truck parked outside.

What about Jade who is single at a tech job at Microsoft and earns $80,000 a year? Currently, her personal exemptions reduce her taxable income to $69,700 and she pays $13,280 for all of her many tax brackets, plus $6,120 for SS and Medicare. Since she only has $60,600 left she thinks her tax rate is basically 24%.

Here comes the Rand plan. Jade has a yearly income of $80,000, and due to her $20,000 deduction (1 filer at $15,000 plus 1 total person for $5,000), $60,000 of it is taxable at a 14.5% rate. She is a mobile techie so she rents and doesn't have a home mortgage, and so ends up having to pay $8,700 in taxes, or an effective tax rate of a smidge under 11%. Jade now has almost $11,000 more in her pocket at the end of the year. Maybe it's time to get that mortgage after all?

And it gets even better when you have families.

People can spit on this plan all they want, but there is no way in hell someone can argue that it is bad for everyday workers or would have a minuscule impact on the economy.

Thanks for posting.

That's even better than I was assuming in my estimate above.

...Fishy is going to need another mattress to store all the cheddar he'll be saving.