Fred Thompson on Tax Reform

Former Republican Senator (TN)

Tax cuts raise revenues; so much for the experts

Q: [to Giuliani]: You have been running ads that say reducing taxes actually will increase revenues. Experts say that tax cuts add to the deficit, they don’t reduce it. Do you stand by your statement?

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.

Source: 2008 GOP debate in S.C. sponsored by Fox News Jan 10, 2008

Preserve the tax cuts of 2001 and 2003

Five percent of Americans pay over half the income taxes in this country. 40 percent of Americans pay no income taxes at all. I think we need to concentrate on preserving the tax cuts of ‘01 and ‘03. That’s going to be a monumental battle that’s going to be coming at the end of 2010.
Source: 2007 Des Moines Register Republican Debate Dec 12, 2007

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

Q: Your campaign tells us you have a new tax plan you want to unveil today. What is it?

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.

Source: Fox News Sunday: 2007 “Choosing the President” interviews Nov 25, 2007

Index the AMT for now; repeal it eventually

Q: Your new tax plan would repeal the alternative minimum tax?

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.

Source: Fox News Sunday: 2007 “Choosing the President” interviews Nov 25, 2007

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

Thompson exaggerated when he claimed the most affluent bear almost the entire federal tax burden. Thompson said, “Hillary basically says that, you know, 40% of the people pay about 99% of the taxes. Why not 30% of the people?”

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.

Source: FactCheck.org on 2007 GOP primary debate in Orlando Oct 21, 2007

Phase out the AMT; lower taxes grow the economy

Q: The Alternative Minimum Tax is about to hit 20 million people. It was meant to make sure rich people paid taxes but now, it’s moving down because of inflation. How do you deal with the lost revenue if the AMT is reduced?

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.

Source: 2007 Republican debate in Dearborn, Michigan Oct 9, 2007

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

The US tax code is broken and a burden on US taxpayers and businesses, large & small. Today’s tax code is particularly hostile to savings & investment, and it shows. To make matters worse, its complexity is a drag on our productivity and economic growth. Moreover, taxpayers spend billions of dollars & untold hours each year filling out complicated tax returns, just so they can send more money to Washington, much of it for wasteful programs & the pet projects of special interests. We need lower taxes, & we need to let taxpayers keep more of their hard-earned dollars--they know best where & how to spend them. And we need to make the system simpler & fairer for all. To ensure America’s long term prosperity & economic security, I am committed to:
Source: Campaign website, www.Fred08.com, “Issues” Sep 20, 2007

Tax code hopelessly out of date & makes us less competitive

We have a tax code that’s hopelessly out of date and out of step for our times now, punishes the things that we say that we want more of and makes us less competitive in the world.
Source: Fox News “Hannity & Colmes” interview Jun 6, 2007

Progressive tax redistributes wealth without helping economy

While serving in the US Senate, Fred Thompson was a consistent proponent for lower taxes and a more simplified tax system. He hasn’t changed his mind.

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?”

Source: The Fred Factor, by Steve Gill, p.166-169 Jun 3, 2007

Taxes burden production; keep rates as low as possible

Taxes are necessary. But they don’t make the country any better off. At best they simply move money from the private sector to the government. But taxes are also a burden on production, because they discourage people from investing & taking risks. Some economists have calculated that today each additional $1 collected by the government, by raising income-tax rates, makes the private sector as much as $2 worse off. To me this means one simple thing: tax rates should be as low as possible.
Source: Speech to Lincoln Club Annual Dinner, Orange County CA May 4, 2007

Tax cuts stimulate the economy

There is reason to smile this tax season. The results of the experiment that began when Congress passed a series of tax-rate cuts in 2001 & 2003 are in. Supporters of those cuts said they would stimulate the economy. Opponents predicted ever-increasing budget deficits and national bankruptcy unless tax rates were increased, especially on the wealthy.

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

Source: Fred Thompson editorial in The Wall Street Journal Apr 14, 2007

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

Vote to expand the standard deduction and 15% income tax bracket for couples. The elimination of the "marriage penalty" tax would be offset by reducing the marginal tax rate reductions for the top two rate bracket
Reference: Bill HR 1836 ; vote number 2001-112 on May 17, 2001

Voted NO on increasing tax deductions for college tuition.

Vote to increase the tax deduction for college tuition costs from $5,000 to $12,000 and increase the tax credit on student loan interest from $500 to $1,000. The expense would be offset by limiting the cut in the top estate tax rate to 53%.
Reference: Bill HR 1836 ; vote number 2001-114 on May 17, 2001

Voted YES on eliminating the 'marriage penalty'.

Vote on a bill that would reduce taxes on married couples by increasing their standard deduction to twice that of single taxpayers and raise the income limits on both the 15 percent and 28 percent tax brackets for married couples to twice that of singles
Reference: Bill HR.4810 ; vote number 2000-215 on Jul 18, 2000

Voted YES on across-the-board spending cut.

The Nickles (R-OK) Amdendment would express the sense of the Senate that Congress should adopt an across-the-board cut in all discretionary funding, to prevent the plundering of the Social Security Trust Fund
Status: Amdt. Agreed to Y)54; N)46
Reference: Nickles Amdt #1889; Bill S. 1650 ; vote number 1999-313 on Oct 6, 1999

Voted YES on requiring super-majority for raising taxes.

Senator Kyl (R-AZ) offered an amendment to the 1999 budget resolution to express the sense of the Senate on support for a Constitutional amendment requiring a supermajority to pass tax increases.
Status: Amdt Agreed to Y)50; N)48; NV)2
Reference: Kyl Amdt #2221; Bill S Con Res 86 ; vote number 1998-71 on Apr 2, 1998

Member of the Congressional Flat Tax Caucus.

Thompson is a member 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."

Source: Flat Tax Caucus website 07-FTC0 on Nov 6, 2007

Other candidates on Tax Reform: Fred Thompson on other issues:
GOP: Sen.John McCain
GOP V.P.: Gov.Sarah Palin
Democrat: Sen.Barack Obama
Dem.V.P.: Sen.Joe Biden

Third Parties:
Constitution: Chuck Baldwin
Libertarian: Rep.Bob Barr
Constitution: Amb.Alan Keyes
Liberation: Gloria La Riva
Green: Rep.Cynthia McKinney
Socialist: Brian Moore
Independent: Ralph Nader
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Page last updated: Feb 08, 2010