Gingrich Tax Plan Falls Flat

The Tax Policy Center has released an analysis of Presidential Hopeful Newt Gingrich‘s stab at reforming the Federal Tax Code.  While not quite as absurd as Herman Cain’s much maligned 9-9-9 plan, it isn’t far behind.  The plan essentially allows taxpayers to elect to pay taxes under an alternate “flat” 15% tax while retaining a number of the deductions such as the mortgage interest deduction as well as a standard exemption of $12k per individual and dependent.  It goes further to eliminate capital gains, interest, and dividend taxes.  It would also cut the corporate rate to 12.5% and allow corporations to immediately expense any capital expenditures (there is not much detail on how broad this exactly applies).  The short summary of all such changes is that it vastly cuts revenues over the next decade:

The Gingrich plan would reduce federal tax revenues dramatically. TPC estimates that on a static basis, the Gingrich plan would lower federal tax liability by $1.28 trillion in calendar year 2015 compared with current law, roughly a 35 percent cut in total projected revenue. Relative to a current policy baseline, the reduction in liability would be roughly $850 billion in calendar year 2015. If taxpayers were required to file under the flat tax option (that is, they could not opt to remain under current tax law), revenues in 2015 would fall by about $1.25 trillion relative to a current law baseline and by about $830 billion relative to a current policy baseline.

There doesn’t appear to be much of a strategy behind how such a giant estimated reduction in revenue would succeed without bankrupting the government in its current form, but I suppose those are minor details to be worked out further down the road.  I wonder how long until a candidate proposes a serious (read: realistic) plan for reform.  Until then, we can poke at the inadequate proposals before us.