Yesterday, former New York City mayor and GOP presidential candidate Rudy Giuliani unveiled his plan for taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. reform and relief. It’s built largely on the ideals that Giuliani has espoused throughout the campaign but never fleshed out in any detail.
The highlights of the plan:
- cut the corporate tax rate to 25% from 35%
- make the Bush tax cuts permanent
- lower the capital gains and dividends rate to 10% from 15%
- add an opt-in, simpler tax system — the “Fair and Simple Tax (FAST).” It would save many deductions (mortgage interest, charitable donation, state and local taxes paid and child tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. ). It would have 3 rates: 10% on first $40,000; 15% on $40,000-$150,000; 30% on income over $150,000.
- index the AMT to inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. (short-run) and then eliminate it (long-run)
- eliminate the estate (death) tax
- index capital gains for inflation
- re-instate the research and development tax credit
- implement Giuliani’s proposed healthcare deduction
We’re still digging through the details (finally, candidates offering details!), but one thing that immediately jumped out at us was the dramatic cut in the corporate tax rate. As we’ve pointed out time and time again, this is a critical move for American competitiveness moving forward. The U.S. currently has the world’s second-highest corporate tax rate, meaning investments and jobs that should be coming to America are not.
Giuliani joins a growing list of politicians that support corporate tax reform. Fellow GOP candidate Fred Thompson’s tax plan includes a big corporate rate cut, and Mitt Romney has also called for lower corporate tax rates. Congressman Charlie Rangel (D-NY) proposed a corporate rate cut in his “mother of all tax reforms” legislation. And Treasury Secretary Hank Paulson has been a tireless advocate for dropping the corporate rate.
Check back soon for more detailed analysis of the Giuliani plan, but our kudos to him for understanding the importance of lowering the corporate tax rate.
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