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Rand Paul Wants Internal GOP Debate Over Taxes

Paul proposed a flat tax Thursday. (Bill Clark/CQ Roll Call File Photo)

In unveiling his proposal to slash taxes to a single 14.5 percent marginal rate, Sen. Rand Paul wants a debate over whether the GOP should only seek to simplify the tax code.  

In an interview with CQ Roll Call, the Kentucky Republican said the plan he outlined in an opinion piece published in Thursday's Wall Street Journal should encourage a debate about the amount of money the federal government should take in from tax receipts, upending the existing systems of taxes and tariffs along the way.  

"I think the main thing that we as Republicans need to do a better job on is that most of the Republicans in Washington I think are — have become beaten down by the system and all they are willing to offer is revenue neutral tax reform. And to me that means they're just going to shift the burden around, but they're not going to reduce the overall burden for the private sector," Paul said. "I think that's the debate we need to have within the Republican Party: are we the party that wants to shift the burden around ... or are we the party that actually thinks that you can stimulate the economy and grow the economy by significantly reducing how much revenue comes into Washington and leaving that money in the private sector."  

The presidential candidate's past proposals to balance the federal budget would require significant slashing of federal programs, and his tax plan would be no different, apparently reducing federal revenue by a minimum of $2 trillion over a decade.  

"That's the argument I want to make, and I'd like to make it against Hillary Clinton that jobs are more likely to be created by leaving money in Iowa, leaving money in New Hampshire or Kentucky, as opposed to sending it to Washington," Paul said.  

But Paul insisted that an equitable system could be established with just one marginal tax rate, something that even other Republicans with aggressive conservative tax code overhauls (GOP Sens. Marco Rubio of Florida and Mike Lee of Utah, for instance ) have deemed unworkable. Paul contends his solution would be to wipe out the payroll tax for workers.  

"By getting rid of the payroll — or the worker's tax —that allows everybody to have an income tax cut," Paul said in the interview. "We also protect people at the bottom by also having ... significant exemptions for the parents as well as the kids, so a family with a mother, father and two kids actually doesn't pay any taxes $50,000 or under, income or payroll. So, ours is a significant tax cut for the working class, and we think it is centered around work and the ethic of work, and I think that many are saying that it may be the most pro-growth tax cut ever proposed."  

In addition to setting up the 14.5 percent marginal tax rate for earned and unearned income, Paul wants to upend the current system of collecting tariffs and get rid of most deductions and credits, with a few quite popular exceptions. Specifically, Paul wrote in the Wall Street Journal piece , he wants to preserve forms of the mortgage interest deduction and the charitable contribution deduction.  

"I would ... apply this uniform 14.5% business-activity tax on all companies — down from as high as nearly 40% for small businesses and 35% for corporations. This tax would be levied on revenues minus allowable expenses, such as the purchase of parts, computers and office equipment. All capital purchases would be immediately expensed, ending complicated depreciation schedules," Paul wrote. "The immediate question everyone asks is: Won’t this 14.5% tax plan blow a massive hole in the budget deficit? As a senator, I have proposed balanced budgets and I pledge to balance the budget as president."  

Paul said he consulted with conservatives like Arthur Laffer and Stephen Moore in drafting his plan, as well as with Steve Forbes, who tweeted approvingly Thursday. When Forbes ran for president, he campaigned on a flat tax. Paul is billing his entry into the conservative tax fray as a "Fair and Flat Tax." And yes, he's already trying to raise campaign contributions off it.  

"I'm ready to drive a stake through the heart of the IRS — and trash all 70,000 pages of our federal government's outdated, confusing tax code," Paul wrote in the latest pitch.  

Fellow presidential hopeful Sen. Ted Cruz, R-Texas, has long called for abolishing the Internal Revenue Service through a much simpler tax code, and the Republican National Committee has had a petition on its website with more than 30,000 signatories also calling for getting rid of the agency.  

"Tax collection should be simple, not scandalous," the GOP petition said.

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