Fred Thompson on Tax Reform Former Republican Senator (TN)

Tax cuts raise revenues; so much for the experts

GIULIANI: Well, the reality is that some tax cuts d add to revenues. Other tax cuts don’t add to revenues. It depends on the tax cut. If it is anti-competitive, you’re actually going to get more revenues from that tax cut.

THOMPSON: I need to defend Rudy a little bit on his tax plan, because it looks an awful lot like the one I put out a couple of months ago. The government never loses as much revenue as the experts say we’re going to. With the ‘01 and ‘03 tax cuts in place, we received more revenue into the government in one day in April of this year than ever before in the history of the country. So much for the experts, as far as that’s concerned. It does stimulate growth and it’s overall beneficial for the economy.

Preserve the tax cuts of 2001 and 2003

Two options: file as you do now, or flatter two-rate plan

A: Yep. It’s maintaining the tax cuts that we had in 2001 & 2003. It’s eliminating the death penalty. It’s reducing the corporate tax rate. We have the second-highest corporate tax rate among our competing partners. It’s hurting us competitively. We’re probably losing revenue from it. We have several other provisions in it, but another major one is an adoption, basically, of the approach that the House Republican study group has that would give taxpayers an option of continuing to file the way they do now or filing under a flatter plan where you only have two rates, but no exemptions past the personal exemption and no deductions. So give that a try. And it would be a major move toward tax reform, which I think is greatly needed.

Index the AMT for now; repeal it eventually

A: Eventually.

Q: Because there’s no indexing, there’s concern that middle class families who weren’t supposed to fall under the AMT are now being hit, but you’re going to repeal it for rich people as well. Why repeal it for everyone?

A: Well, it was a tax that never was supposed to be imposed on anybody except about 155 taxpayers, and now we’re seeing about 23 million taxpayers. At the current rate, the AMT will be collecting more tax revenue than the regular tax system. So what we’re saying is that let’s index it from year to year until we get a handle on spending, and then we’ll eliminate it. [Otherwise] taxes are going to be high without anybody having to do anything-- the automatic AMT increase would include millions of people who were not originally intended to be covered, income tax rates going up substantially for just about everybody in America. And that’s bad for the economy.

FactCheck: Top 40% do pay 99% of income tax, but not FICA

We’ve never heard Clinton say any such thing, and it would be false if she did. It’s true that the US taxes the affluent more than those who earn little, and also true that Clinton proposes to ask upper-income earners to pay a greater share. However, Thompson’s “about 99%” figure [is wrong according to the CBO]. The share of all federal taxes (including income taxes, excise taxes and payroll taxes) borne by the most affluent 40% of Americans in 2004 was actually 84.7%.

Thompson was probably referring only to the federal individual income tax, and omitting payroll taxes, which fall more heavily on lower-income workers, as well as excise taxes and corporate income taxes. CBO figures show 99.1% of the federal individual income tax was paid by the most affluent 40% in 2004.

Phase out the AMT; lower taxes grow the economy

A: Well, in the first place, I don’t buy the concept that any reduction in taxes is lost revenue to the government. The taxpayers haven’t lost it. It’s in their pocket. We shouldn’t confuse the wealth of government with the wealth of nations. As you pointed out, the AMT was designed to target the rich guy. And when the Democrats start targeting the rich guy, if you’re a middle-class guy you ought to run because you’re going to get hit. We’re going to have to look at this as part of a total picture. Generally speaking, lower tax rates grow the economy. It’s been proven in the ‘20s, it was proven during the Kennedy administration, proven during the Reagan administration and again during this administration. I would apply that same principle to the AMT. It ought to be phased out.

Tax code is broken: dissolve the IRS as we know it

• Fundamental tax reform built on the principles of simplicity, fairness, and growth
• A new tax code that gets the government out of our citizens’ pocketbooks, while enhancing US competitiveness abroad
• Dissolution of the IRS as we know it.

Tax code hopelessly out of date & makes us less competitive

Progressive tax redistributes wealth without helping economy

Thompson says, “We need to reject taxes that punish rather than reward success. Those who say they want a ”more progressive“ tax system should be asked one question: Are you really interested in tax rates that benefit the economy and raise revenue--or are you interested in redistributing income for political reasons?”

Taxes burden production; keep rates as low as possible

Tax cuts stimulate the economy

In fact, Treasury statistics show that tax revenues have soared and the budget deficit has been shrinking faster than even the optimists projected. Since the first tax cuts were passed, when I was in the Senate, the budget deficit has been cut in half.

Critics claimed that across-the-board tax cuts were some sort of gift to the rich but, on the contrary, the wealthy are paying a greater percentage of the national bill than ever before. The richest 1% of Americans now pays 35% of all income taxes. The top 10% pay more taxes than the bottom 60%. Because of lower rates, money is being invested in our economy instead of being sheltered from the taxman

Voted NO on reducing marriage penalty instead of cutting top tax rates.

Voted NO on increasing tax deductions for college tuition.

Voted YES on eliminating the 'marriage penalty'.

Voted YES on across-the-board spending cut.

Voted YES on requiring super-majority for raising taxes.

Member of the Congressional Flat Tax Caucus.

"Our current income tax system is broken. It is complex; unfair; inhibits saving, investment and job creation; imposes a heavy burden on families; and undermines the integrity of the Democratic process. It cannot be repaired by any tinkering or fine-tuning. It must be completely repealed and replaced."

THE FLAT TAX:
• It is SIMPLER--the flat tax will save taxpayers time and money
• It is FAIRER--The flat tax will treat everyone the same
• It is PRO-GROWTH--the flat tax will stimulate economic growth