Jeb Bush on Wednesday rolled out his plan for unleashing 4% economic growth by overhauling the tax code.
It has some issues.
Let’s start with the tax proposal itself. Bush’s proposed overhaul would cut from seven to three the number of tax brackets on the individual side. In the process, Bush wrote in a Wall Street Journal op-ed, he would lower individual rates while doubling the standard deduction in order to scrub 15 million lower-income Americans from the income tax rolls entirely. Compare that to Mitt Romney’s 2012 complaint about the 47% of Americans who pay no income tax, and Bush’s plan looks progressive.
The former Florida governor proposes to pay for the lower rates by capping or eliminating deductions that benefit the wealthy, with the exception of the break for charitable giving. That includes taxing carried interest as ordinary income, a shot at investment managers that have helped stock Bush’s campaign coffers. And he would largely zero out the ability for businesses to deduct interest on debt.
But the Republican presidential candidate also calls for a bunch of costly tax cuts, including some that would disproportionately benefit upper-income earners. He’d slash the rate on interest income for both individuals and businesses and end the estate tax. Bush also proposes cutting the top corporate rate aggressively, from 35% to 20%, while allowing companies to immediately write off any new capital spending. And he wants to force home some $2 trillion in corporate profits held abroad by imposing a one-time tax of 8.75% on that stash — a steep discount — as part of a transition to a territorial tax system.
What would all these shakeups cost once the dust settles? We don’t know. Which isn’t to say the math behind Bush’s plan doesn’t add up. Rather, he doesn’t provide enough specifics to complete the exercise. “At this stage, both the revenue and distributional consequences of Bush’s proposal are unclear,” economist William Gale writes. “My strong sense, having read the documents the campaign provided publicly, is that it would love revenue, perhaps substantial amounts (at least, in the absence of heroic growth assumptions) and would be regressive relative to the current system.” The campaign didn’t respond to a Fortune request for more information.
Some larger questions hang over the proposal — both related to Bush’s stated purpose of roughly doubling economic growth to 4%. The first is whether such growth is possible, to say nothing of whether it can be achieved by pulling policy levers. Economists largely believe it isn’t so it can’t. The second is whether policymakers should be chasing higher growth as the greatest good. A survey of Harvard Business School alumni released Wednesday found a striking two-thirds of respondents place a higher priority on tackling “rising inequality, middle-class stagnation, rising poverty, or limited economic mobility” before focusing on boosting growth.
