More on the ‘Room to Grow,’ reform conservative tax plan

In the “Room to Grow,” policy book, a chapter by Robert Stein advocates for a sharp expansion in the child tax credit. Some on the right have criticized the idea, particularly for what it isn’t than what it is. They nick Stein for not pushing high-end marginal rate cuts or business tax cuts. Now that chapter was based on an essay in National Affairs where Stein does offer a broader plan. (And, for the record, many reform conservatives have been talking about broader tax reform, including moving the code to a consumption tax and corporate tax reform.) I discussed Stein’s plan in a podcast earlier this year. You can read the whole transcript here, but I wanted to focus on Stein’s other tax ideas.

And there were also some other tax cuts mentioned in the essay, I think, the corporate rate or something. 

Yeah, the plan in National Affairs – and Senator Lee hasn’t really touched on the corporate side yet and the capital gains and dividend side yet — would also move to greater expensing of plant equipment and the double taxation of capital gains and dividends, basically adopting the old plan by Glenn Hubbard that he developed in the early 1990s to reduce taxes on capital investment.

So you know, in the end, somebody has to pay more and that will be high labor income, you know, people who make a lot of labor income, who aren’t investing, aren’t raising kids are going to pay more.  Parents will pay less.  And investors will pay less as well.

But for the money this would cost, why not just lower marginal tax rates?

Well, if you’re talking about lowering the top marginal tax rate, good luck.  I mean, our society seems to have an appetite for a rate that’s clearly above 28 percent and maybe below 40.  So I think it would be very difficult to get it below 35 in any circumstance.

Indeed, the big tax reform plan from House Ways and Means Chairman Dave Camp only managed to reduce the top rate to 35%. From the WaPo:

But the tax system would be dramatically simpler, with seven existing brackets collapsed into just two, set at 10 percent and 25 percent. In addition, the plan would impose a 10 percent surtax on certain types of earned income over roughly $450,000 a year. The surtax would hit many salaried professionals, such as attorneys and accountants, while dodging farmers and manufacturers — as well as the super-rich, whose income often is derived primarily from interest and investments.

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