Rick Santorum’s Tax Plan

By :: January 3rd, 2012

With Rick Santorum surging in Iowa, it is a good time to take a look at his tax agenda. While his revenue plan has received almost no attention, it plays a  major role in his “faith, family and freedom” campaign. His playbook: lower rates for individuals and corporations, substantially cut taxes on capital, and increase the personal exemption for dependent children.

The Tax Policy Center has not yet formally modeled the former Pennsylvania senator’s tax platform. However, because it cuts rates significantly but does not eliminate tax preferences—and even expands a few—it would very likely add trillions of dollars to the federal deficit.  Looked at from that prism, it is not so different from the ideas raised by most of his GOP rivals.

Like other Republican tax planks, Santorum’s would benefit corporations and high-income individuals. No surprise there. But unlike his rivals, he’d also cut taxes for many families with children.

Santorum is no bleeding heart, however. Even as he’d cut their taxes, he’d shred direct government spending for programs aimed at assisting these same households. As part of his plan to cut federal spending by $5 trillion over five years, he’d immediately slash many domestic programs to 2008 levels, and freeze for five years spending for social programs such as Medicaid, housing subsidies, food stamps, education, and job training.

Interestingly, by using tax expenditures to support these families, Santorum would likely add significantly to the number of households that pay no income tax. This is anathema to current Republican orthodoxy, although not something that would trouble Milton Friedman.

Specifically, Santorum would:

  • Replace the current individual rate structure with just two rates—10 and 28 percent
  • Lower rates on capital gains and dividends to 12 percent
  • Triple the personal exemption for dependent children and keep the refundable earned income and child tax credits
  • Retain tax preferences for charitable giving, mortgage interest, health care, and retirement savings
  • Repeal the Alternative Minimum Tax
  • Cut the corporate rate in half to 17.5 percent. Manufacturers would pay no income tax
  • Allow full expensing for capital investment
  • Increase the R&D tax credit to 20 percent
  • Allow multinationals to bring foreign earnings back to the U.S. at a 5.25 percent tax rate but at a zero rate if they used the funds to buy “manufacturer’s equipment”

Santorum’s plan cleverly melds the interests of social conservatives and business. This should play well in future GOP primaries. If he somehow gets the nomination, he’ll still have to explain the huge hole he’d blow in the budget. But I don’t suppose he’s much worried about that now.

 

 

27Comments

  1. Michael Bindner  ::  5:20 pm on January 3rd, 2012:

    I am still troubled that you wait until he has supporters to score his plan. In the pursuit of both truth and solutions, any good idea – and bad idea – should be scored – especially if it gives good solutions more exposure than they would otherwise get. While it is true that Santorum likely won’t win the nomination and certainly not the general election, his ideas should still be scored because they add to the debate.

    I agree with his approach of funding families more through the tax code, although the exemption for children and EITC should be merged to a larger refundable Child Tax Credit. Generally, his plan for more tax benefits for families is in line with his pro-life beliefs.

    It seems that some of his proposals, like the expensing of equipment right away, might work as a transition to consumption taxes. A good consumption tax regimine combined with a surtax on high income might not be as much of a revenue loser, especially if the Democrats retain enough power in the Senate to force concessions and the anti-compromise/anti-fact members of the Tea Party are banished from Congress by the voters.

  2. Brian Dell  ::  2:59 am on January 4th, 2012:

    I look forward to a post about Jon Huntsman’s plans heading into the New Hampshire primary.

  3. Tax Policy Center Says Santorum’s Tax Plan Would Add Trillions of Debt  ::  3:39 pm on January 4th, 2012:

    […] Tax Policy Center provides an analysis of Rick Santorum’s tax plan, which they say will “very likely add trillions of dollars to the federal deficit” […]

  4. Chart of the day « occasional links & commentary  ::  9:15 am on January 6th, 2012:

    […] its formal analysis of Mitt Romney’s tax plan (which is discussed by Linda Beale) and provided a preliminary analysis of the tax agenda of flavor-of-the-day Rick […]

  5. Weekly News Round-Up: January 6, 2012 | Tax Credit for Working Families  ::  11:39 am on January 6th, 2012:

    […] tax reductions, including the expanded Child Tax Credit and Earned Income Tax Credit. (Tax Vox 1, […]

  6. My Freedom Press » Blog Archive » Romney’s tax plan saves top 1 percent $82,000  ::  11:52 pm on January 6th, 2012:

    […] Tax Policy Center hasn’t modeled Rick Santorum’s tax plan yet, but Howard Gleckman did take a first look. “Like other Republican tax planks, Santorum’s would benefit corporations and high-income […]

  7. Republican tax plans to date in one convenient graphic « Real-World Economics Review Blog  ::  10:45 am on January 8th, 2012:

    […] its formal analysis of Mitt Romney’s tax plan (which is discussed by Linda Beale) and provided a preliminary analysis of the tax agenda of flavor-of-the-day Rick […]

  8. Joe Betz  ::  1:53 pm on January 8th, 2012:

    If his plan were passed in its entirety it could conceiveably pay for itself over time and reduce the deficit through increased industrial and economic activity. His plan is the only one I’ve seen that addresses the important aspect of increasing industrial output, without which our economy will continue to languish.

  9. Two Weekend Debates And New Economy Figures | تداول | TADAWUL  ::  10:44 am on January 12th, 2012:

    […] TaxVox: Rick Santorum’s Tax Plan […]

  10. Setting the Record Straight on Santorum and the Child Tax Credit | Tax Credits for Working Families  ::  2:08 pm on January 12th, 2012:

    […] Tax Credit. The campaign website is silent about his Child Tax Credit proposal, while AEI and the Tax Policy Center indicate that he will retain both the Earned Income Tax Credit and Child Tax Credit. If you’ve […]

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