WHY I PREFER MY TAX REFORM PLAN MORE THAN RAND PAUL’S

Our 70,000 page tax code “has grown so corrupt, complicated, intrusive and antigrowth that I’ve concluded the system isn’t fixable,” said Sen. Rand Paul, R-KY.

He wants to repeal the whole thing, replace it with a 14.5 percent flat tax on individuals, businesses, capital gains and estates.

In March, Sens. Marco Rubio, R-FL, and Mike Lee, R-UT, proposed a more modest plan that would reduce our current 7 personal income tax rates to 3, with a top rate of 35 percent.

Either would be a vast improvement over the ugly mess we have now. Neither will ever be enacted.

Every conservative reform plan with which I am familiar fails to take into consideration public opinion, or its vulnerability to demagoguery.

Conservative tax reform must make political as well as economic sense. It must be simple and clear. It must anticipate the inevitable distortions of the Democrats and left wing journalists. And it must be made in accordance with what most people believe. If conservatives keep preaching only to the choir, they’ll keep failing.

Sen. Paul’s plan is closer to the mark, but has two grave vulnerabilities:

*It would reduce tax revenue by about $2 trillion over the next 10 years, the Congressional Budget Office estimates. Given our immense public debt, this is not good.

The boost his reform would give to economic growth would narrow the gap, Sen. Paul argues. He’s right. CBO makes no attempt to estimate the economic stimulus lower rates typically provide.

And because so much of the government’s $3.9 trillion budget is spent on programs of dubious merit, $200 billion a year probably could be cut from it without discomfiting anyone other than crony capitalists and superfluous, overpaid bureaucrats. But it’s a hard sell. A conservative reform doesn’t have to be revenue neutral to be politically viable, but it should be close.

*A flat tax is regressive. The rich pay a significantly smaller proportion of their incomes than the middle class. This is political poison. Sen. Paul’s bill has provisions that ameliorate this somewhat, but not by enough to pull the fangs of the demagogues.

Most Americans think “the rich” should pay more, polls indicate. No conservative reform plan that bucks this sentiment will ever become law.

Most in our dumbed down electorate have no idea how much “the rich” pay. The key to politically viable conservative reform is to tax them in a way that makes it crystal clear to Americans they are paying their “fair share.”

That requires 3 tax rates: A basic rate of 15 percent. The top 10 percent of earners would pay 30 percent on all taxable income above the threshold, $112,124 in 2013. The top 1 percent would pay 45 percent on all income above that threshold, $343,927 in 2013.

The same rate structure should apply to business taxes, estate taxes, and capital gains. Payroll taxes, which are regressive and based on an accounting fiction, should be abolished. Social Security and Medicare should be financed through the income tax.

Beyond much more generous personal and dependent exemptions, a refundable tax credit for purchase of health insurance, and tax deferred Health Savings Accounts and Retirement Savings Accounts, there should be no deductions, exemptions and credits in the reformed, expanded income tax. The tax code should be used to raise revenue for the government, period.

This reform would shift the tax burden upward from the middle class to the genuinely wealthy, but not by so much as to do injustice or economic harm. About 95 percent of Americans would pay less. Only the top 2 or 3 percent would pay much more.

The highest rate would be higher than now (39.6 percent), so demagogues couldn’t dismiss it as “tax cuts for the rich.” And it could be made revenue neutral, or close to it, by CBO scoring.

One rate would be better economically than three. But conservatives must stop letting an unattainable “best” get in the way of “very much better.”

Jack Kelly is a former Marine and Green Beret, and was the Deputy Assistant Secretary of the Air Force during the Reagan Administration. He is the national security writer for the Pittsburgh Post-Gazette.