Four Hard Questions to Ask About Jeb Bush's Tax Plan
Jeb Bush's tax plan is coming out Wednesday. Expect the usual soaring language about fairness, simplicity and growth that we hear from both parties—and then ignore most of it. In taxes, details are what count most.
So far, Bush's statements on tax policy have placed him squarely in the business-backed center-right of the Republican Party, which favors lower marginal tax rates on individuals and businesses, a broader tax base, lighter taxes on U.S. companies' foreign income and a gradual move toward a consumption tax. His advisers include Glenn Hubbard, the dean of Columbia Business School and a former adviser to both Mitt Romney and President George W. Bush, Jeb's brother.
Will he try to push the envelope? Unveil a surprise? Here are some key benchmarks to use in evaluating the Bush plan.
1. Will he cut taxes?
Bush, the former Florida governor, is refusing to sign Grover Norquist's pledge against tax hikes, more because he opposes pledges than because he wants to raise taxes. Still, in 2012, Bush broke with Republican orthodoxy and said in congressional testimony that he'd accept a budget deal that raised taxes $1 for every $10 of spending cuts. That left conservatives wary, especially because it was the decision of his father, former President George H.W. Bush, to break a read-my-lips pledge that caused a rift in the party and shoved Republicans to the right. But Jeb Bush has made it clear that he isn't seeking a tax increase.
Times have changed. Economically, that 2012 statement came before the fiscal-cliff deal that raised tax rates on high-income households. And politically, it came before Rand Paul and Marco Rubio each proposed multi-trillion-dollar tax cuts—and before Donald Trump started talking about raising taxes on rich hedge-fund managers and cutting middle-class taxes. All of that leaves Bush in a tough spot. It's hard to imagine that he'll try to top Rubio, Paul or Trump. But a restrained tax policy framed for the general election isn't necessarily going to excite Republican primary voters.
2. How deep a rate cut promise will he make?
In 2012, the establishment favorite, Mitt Romney, changed his tax plan in the middle of the primary season under pressure from conservatives. He promised to cut each individual tax rate by 20 percent, which would have put the top tax rate at 28 percent. (It's now 39.6 percent, even higher than it was in 2012.) That promise constrained Romney during the general election against President Barack Obama, and opened him up to attacks. Bush could be in a similar situation. Promise a big rate cut, and you'll cheer the supply-siders and worry the bean-counters. Suggest a half-measure, and you'll get shrugs.
3. How specific will he get on deductions?
There are some really good reasons why tax reform hasn't happened since 1986. It's easy until you get past the platitudes. The more specific you get, the more votes you lose, because there are entrenched interests around every corner. In some cases, those are the special corporate interests politicians like to demonize. Usually, though, they're not.
The most important thing to remember about the individual tax system is that, to paraphrase Pogo, we have met the special interests and they are us. (This is, to be clear, not an original thought, but it's worth repeating repeatedly.) Tax-free employer-sponsored health care, tax-advantaged retirement plans and deductible mortgage interest all feel like inalienable rights to millions of Americans. And it's hard to persuade voters that they'll win from a rate cut they can conceptualize while they lose a specific break they know and benefit from.
4. How growthy is it?
Bush's economic goal is 4 percent annual growth, a difficult -- if not impossible -- task, and taxes are one of the biggest levers Bush has. What will he do? Rubio, for example, proposed immediate expensing for capital investments and no taxes on capital gains, dividends and estates. That's a bold move toward a consumption tax, one that also is regressive and expensive. How much of that will Bush duplicate? Or will he focus on individual and corporate tax rates?
We'll find out Wednesday.