Kudlow Quizzes Gingrich on Tax Foundation Grade

December 30, 2011

Earlier this month, we reviewed the Republican presidential candidates' tax plans and issued grades. (To review the plans themselves, check out our interactive tool.) Last night, CNBC anchor Larry Kudlow quizzed candidate Newt Gingrich about his Tax Foundation grade:

KUDLOW: Last night on the show, Mitt Romney's top policy research guy attacked your 15 percent flat tax plan. He said it's way too complex. He said it's totally political. He said it is not going to grow the economy. What's your response to this Romney attack on your plan?

Rep. GINGRICH: Well, first of all, the flat tax part of it, for individuals, is one that Steve Forbes has helped develop over a 20-year period and is modeled, as you know, what Hong Kong has been doing for a generation. In Hong Kong, you either can keep the current tax code with all of its deductions or go to a single page. You put down the amount you earn, the number of dependants and you pay 15 percent. Now, we think the American people should be allowed to choose which of those two they want. But I would say that the zero capital gains, 12 1/2 percent corporate tax rate, 100 percent expensing for all new equipment so it could be written off by a farmer, a doctor, a factory, a business in one year, abolishing the death tax permanently, those are the real drivers of economic growth. When you combine them with deregulation by repealing Obamacare, repealing Dodd-Frank, repealing Sarbanes-Oxley, replacing the Environmental Protection Agency with a brand-new, commonsense environmental solutions agency, and modernizing the Food and Drug Administration so we can move knowledge from the laboratory to the patient faster so that we can lead the world market in medical supplies, which is the biggest part of the world market in the future, all those things combined together with an American energy plan, we should be able to create millions of new jobs very rapidly.

KUDLOW: But let me come back to this criticism that your plan is actually rather complex because, sir, the Tax Foundation, the nonpartisan Tax Foundation, makes a similar critique. They give your plan a C plus. Huntsman gets the best marks for his modified flat tax. He gets a B plus. Now, Romney gets lower than you. Romney doesn't have a tax plan, he gets a C. But, look, here's the Tax Foundation criticism. You keep a lot of the deductions. You keep the home mortgage interest deduction, you keep the charitable deduction, you keep the earned income tax credit. You keep most of the business tax credits, and you have a $12,000 per person family standard deduction. In other words, you're not really broadening the base. The bottom half of the income scale will still pay virtually no taxes. And the flat tax option you've proposed doesn't kick in for several years. How do you react to those criticisms of your plan?

Rep. GINGRICH: Well, first of all, I'm not in the business of raising taxes. So the fact that you just pointed out--you're right, I'm not going to go out and try to raise taxes on the bottom half of the income ladder. What I'm want to try to do is create enough jobs that the bottom half of the income ladder rises in income and as they rise in income, they'll pay more taxes. I'm very committed to having people have an opportunity to climb the ladder of success once again. If you go back and look at the Reagan years, as you'll remember because you lived through them, the fact is that the bottom part of American life was dramatically better off at the end of the Reagan years. If you look at the impact of our welfare reform when I was speaker, two out of three people went to work or went to school. We had the lowest rate of child poverty in American history by the end of that period because their parents were learning how to work and learning how to create a job. My goal is to have everybody at work, and that's the best thing you can do, I think, is to have everybody have a paycheck rather than a food stamp. And that, in my mind, will then move them into paying taxes as they rise in income.

See the full interview here.

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