Observations from the Republican Debate

October 10, 2007

Last night’s Republican Presidential Debate focused mainly on economic issues, and “low taxes” was a theme of most of the candidates. Here are some of the good points made and not-so-good or incorrect statements made. You can view the entire debate transcript via the WSJ here.

The good:

McCain on tax reform: “Should we reform our tax code, which is completely broken, which no one understands, no living American understands? Absolutely, we should fix our tax code. And we should fix it immediately. And we should have Congress either vote up or down on a freer, fairer, simpler tax code.”

Brownback on the current state of the U.S. tax system: “People don’t understand it, it’s manipulative, it’s Washington trying to direct people’s lives.”

McCain on ethanol subsidies: “But I still don’t support the subsidies. And I don’t think we need them. And I think we ought to have sugar cane-based ethanol into this country. And I don’t think that subsidies are the answer…”

Tancredo on what really drives the federal budget: “Now, you can cut the entire budget, the discretionary budget. You could cut the whole thing out and only come close — well, you’d cut the deficit pretty significantly. But, frankly, you really want to do without funding for the armed services? And that’s exactly what we’re talking about in the discretionary side. It’s about $700 billion out of the $3 trillion budget. If you want to control federal spending you must look at Social Security and Medicare.”

Giuliani on corporate taxes: “Well, I explain it based on some of the mistakes that we make; when we over-regulate, we over-tax. Our corporate tax rate is the second highest in the world. The president of France wants to lower the corporate tax rate. Everybody around the world wants to lower corporate tax rates…”

Paul on overall tax & spending: “So, if we want a prosperous economy here, we have to change these policies and we can’t be bailing out farmers and subsidizing ethanol — this is just the wrong way to go. The taxpayers pay for the subsidies…”

The bad:

Huckabee on ethanol and his implicit support for central planning: “But the accelerated pace at which we get there is critical for national security, as well as for our own economic interest. The fact is, we keep talking about 15-, 20-, 30-year plans; that’s nonsense. If we don’t start saying we’ll do this within a decade, we’re never, ever going to get there. And we need to approach it the same way that a car does at the Nascar pit-stop — you rush in, you get it done because you have to.”

Huckabee is basically saying that even though ethanol may not be the most efficient way of producing energy, the government should make it “efficient” through distorting taxation on others to fund ethanol subsidies.

Romney on agriculture supports: “I believe in domestic supports for our agriculture industry.”

Brownback on the overall tax burden: “Because, clearly, the last thing we need to do is raise taxes in this country. Currently, the country now, the average citizen works until the first part, the middle of May, just to pay their taxes. We’re taxed to the max.”

While Brownback may feel that taxes are too high, few people pay as high a tax rate currently as 37.5 percent, which would indicate the middle of May. Tax Freedom Day in the United States, which is the nation’s average tax rate, was actually estimated to be April 30th this year. In fact, TFD has never been later than May 5th.

Brownback on optional flat tax: “So I put forward a proposal of an optional flat tax. And putting that on the table, saying, “OK, you can pick this — if you want to stay in the code, go ahead, God bless you. But here’s an optional flat tax.”

While this may sound good in theory and the flat tax system has some positives, this proposal doesn’t make the system simpler. Every person would still calculate his/her tax burden under both systems. Furthermore, you would have to cut spending as this would no doubt lower revenue.

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