Mitt Romney's decisive victory in New Hampshire Tuesday pushes the Republican primary closer to its finale. While the race isn't over, the GOP doesn't tend to like surprise endings. With the tax cuts put in place by President George W. Bush expiring at the end of this year, tax reform is more important than ever. The former Massachusetts governor ought to cement his lead by refining his platform with the best ideas from his competitors.
All the candidates say they want a flatter code, fewer brackets and lower overall rates, but former House Speaker Newt Gingrich led the field with the idea of giving people the option of choosing a 15 percent flat tax instead of the current convoluted system. Texas Gov. Rick Perry also supports an opt-in system at 20 percent. Both would keep popular deductions for mortgages and charity.
Alternatively, former Utah Gov. Jon Huntsman proposes to eliminate all deductions and credits so he can slim the system to three brackets at much lower rates of 8 percent, 14 percent and 23 percent.
When the Bush rates expire, the capital-gains levy will jump from 15 to 20 percent and qualified dividends will be taxed at marginal rates of up to 39.6 percent. Mr. Romney only offers relief for families with a combined income below $200,000. Everyone else would pay 15 percent.
Grover Norquist of Americans for Tax Reform says the two-bracket model is a mistake: "He's trying to avoid people saying he's too nice to rich people, but once you get elected, it serves no purpose." Mr. Gingrich, Mr. Huntsman, Mr. Perry and Rep. Ron Paul have the right idea in eliminating these anti-growth taxes.
At 35 percent, the U.S. corporate tax rate is the highest in the world, encouraging investors and businesses to head overseas. Mr. Romney proposes a 25 percent rate that matches the average rate for developed countries. While an improvement, we'd still be at a disadvantage considering that doesn't take into account the average 4 percent state tax. To be competitive, the federal rate must be under 20 percent, as proposed by Mr. Gingrich, Mr. Paul, Mr. Perry and former Sen. Rick Santorum.
Mr. Norquist points out Mr. Romney's tax plan creates a 10-point spread on the top rates for individual and corporate taxes. "Most small businesses - 20 million of them - pay the personal income tax rate," he explained. "So under this plan, you'd have General Motors paying 25 percent and Sam the plumbing company paying 35 percent." They both ought to be lowered to the same level.
Businesses also need a spur to invest. Mr. Romney and Mr. Huntsman are the only ones in the Republican field who don't support full percent business expensing, which allows companies to deduct the full amount of purchases in the first year. "It's such an obvious overlook. I presume he will fix this during the campaign," said Mr. Norquist.
President Obama says he will let taxes go up at the end of 2012. Americans can stop this by electing a president who will make a retroactive fix the first order of business. Mr. Romney needs to make this guarantee before the primaries are over.
Emily Miller is a senior editor for the Opinion pages at The Washington Times.
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