Santorum's 20/20 Flat Tax
A totally flat rate combined with credits for low-income Americans.
Former Pennsylvania Sen. Rick Santorum finished second to Mitt Romney in the 2012 GOP presidential race. He’s back for 2016, but finding it much harder to gain traction this time. This week, he joined several other candidates in putting forward his ideas for tax reform. One of the biggest criticisms of Bobby Jindal’s plan is that he would raise taxes on the poor. Santorum answers this in two ways: A totally flat rate instead of Jindal’s three tiers, and a tax credit system that would continue to keep millions of Americans from owing any income tax. Santorum explains the nuts and bolts:
I will submit to Congress a comprehensive Economic Freedom Agenda that will abolish the existing tax code. Under “The 20/20 Flat Tax: A Clear Vision For America,” individuals will pay a simple, low 20% individual rate that will be applied to all streams of income. It eliminates the marriage penalty, death tax and alternative minimum tax. It will treat every American the same. No longer will savings and investment be penalized.
Individuals will receive a $2,750 credit, which will replace the standard deduction and personal exemption. The credit will be refundable and replace the Earned Income Tax Credit. The child tax credit will remain. For low- and middle-income workers, the provision will shield much of their basic wages from federal income taxes. They can keep more of what they earn.
In exchange for the refundable tax credit and low rate, itemized deductions will be eliminated, except for two. Charitable giving in any amount will be fully deductible, to affirm and encourage Americans’ generosity. Mortgage interest—up to $25,000 a year—will also be deductible, as a means of helping low- and middle-income workers buy and maintain their family home without subsidizing millionaires and billionaires.
Businesses too will benefit from a flat 20% tax rate. It will replace the current corporate income-tax rate of 39.1% that is only exceeded by Chad and the United Arab Emirates. An initial 0% tax rate on American manufacturers, phasing up to 20% over two years, will help make America the No. 1 manufacturer in the world again.
There is a healthy debate on the Right about what tax policy should look like. Fair tax, flat tax, progressive tax, credits, deductions — it’s all up for discussion. We don’t think Santorum is going to be the 45th president, but his ideas are a welcome entry.