The 1 Huge Thing Missing From the GOP Tax Plans So Far
(This post originally appeared on Inc.)
So far, four Republican candidates have released details of their tax plans. And yet all four are missing something – as Donald Trump would put it – HUGE.
Among many ideas, Jeb Bush wants to lower tax rates across the board for both individuals and corporations as well as cut back the capital gains rate. He plans a “holiday” for companies who repatriate their foreign cash back to the U.S. and to give businesses the opportunity to write off equipment at the time of purchase, rather than depreciate. Trump also has many ideas. Although he doesn’t propose the equipment deduction, his plan is somewhat similar to Bush’s with even lower rates for individuals and corporations and capital gains, including a 15% pass-through rate for those of that are S-Corps and proprietorships. Rubio’s plan is to lower rates for individuals and corporations–including pass-throughs (but not as much as Trump and Bush) and to eliminate the capital gains rate altogether. Like Bush, he proposes to expense capital equipment. Rand Paul wants a flat tax.
All of these candidates want to do away with the alternative minimum tax and estate taxes too. They all propose changes to deductions. They all promise to get rid of loopholes, of course. And yet, they’re all missing something. Something that makes business owners like me scratch our heads. Something huge. They’re missing an entire side of the income statement. The expense side.
Taxes are how the government raises revenues and pays its bills. We need to pay our taxes so that the government can operate. Through their tax plans, each candidate is offering us, the voters and their customers, their price for services. And it is up to us, their customers, to determine if that price is fair. But the government is our government too. And we can’t determine if that price is fair if we don’t know the entire picture. Will the money raised through these tax plans be enough to pay the government’s bills? Reduce our annual half-a-trillion dollar deficits? Make a dent towards paying down our national debt? Hey, your guess is as good as mine. And we don’t like to guess.
Each of the Presidential candidates are promising to “reduce waste” from government spending and “eliminate loopholes.” They say their plans will be revenue neutral. They vow to simplify the tax code. They all say that their plans will “create growth” from which, I’m assuming, extra revenues will somehow pay down our government’s runaway expenses that are promised to be analyzed, scrutinized, reduced and cut altogether. “There is so much waste in government that I believe that when I get in there we will be able to cut tremendous amounts,” Trump promises. From his lips to God’s ears.
Economists are doing their best to fill in the blanks. Some say that Bush’s tax plan would cost $3.4 trillion over ten years and Trump’s would cost more than $12 trillion. A Forbes writer is concerned that Rubio’s tax plan would take too much social engineering. Many think that Paul’s plan is just too radical. And business owners like me? We can’t determine if these plans are reasonable or not because we don’t have the entire plan. How can anyone determine if the revenues raised will cover the government’s expenses when no details are given about expenses?
When we spend money it’s to make money. We buy a piece of equipment only after determining its return on investment. We hire a new employee only after extrapolating how much time she’ll save us or how many more customers can be served. We invest in technology only after we see how much more work can be accomplished because of it. Business owners need to see both sides of the P&L. We need to budget revenues. And we need to budget expenses. And that’s how we understand whether the P&L make sense.
And unfortunately right now we’ve only seen the revenue side from the Republican candidates. What about the expense side? How do we know if the tax revenues proposed are sufficient? What expenses will be cut? How accurate are their growth assumptions? And why do we have to rely on economists and pundits from both the right and left to try and give us these answers? Why don’t the candidates provide these numbers for us?
So which tax plan is better? I don’t know a single business owner who can accurately answer that question. We are still missing too much information.