> So on Thursday I am announcing an over $2 trillion tax cut

Apparently, Rand Paul thinks he's a dictator, not a Senator: he is proposing, not announcing a tax cut.

> The plan also eliminates the payroll tax on workers and several federal taxes outright, including gift and estate taxes, telephone taxes, and all duties and tariffs. I call this “The Fair and Flat Tax.”

Which is odd, since the proposal is neither fair nor flat.

> The Fair and Flat Tax eliminates payroll taxes, which are seized by the IRS from a worker’s paychecks before a family ever sees the money. This will boost the incentive for employers to hire more workers, and raise after-tax income by at least 15% over 10 years.

Abolishing payroll taxes might be a good idea, though since federal payroll taxes are dedicated levies to support certain programs, one needs to address whether this is abolishing the programs (Social Security and Medicare) or changing their funding source to draw from general revenues. Any evaluation of the proposal to eliminate these taxes is obviously strongly affected by this, which Paul does not address.

Eliminating the employer share of payroll taxes (combined with the minimum wage, which limits the minimum payroll cost before payroll taxes) does increase the incentive to hire workers at the low end of the pay scale, and increase the nominal pay level that employers can offer for employees that they would already be fully incentivized to hire at higher levels; eliminating the employee share has no impact on incentive to hire or nominal wages, but does increase after tax income at any nominal wage level.

The claim that doing this would raise after tax income by "at least 15%" over any time period is in serious need of some justification; certainly, at the low-end of the scale, that seems to be well within the direct effect, but for employees at the higher-end of the wage scale (after the Social Security cap), it would have a much smaller direct effect; so, what does this number really refer to and how is it justified?

> I devised a 21st-century tax code that would establish a 14.5% flat-rate tax applied equally to all personal income, including wages, salaries, dividends, capital gains, rents and interest. All deductions except for a mortgage and charities would be eliminated. The first $50,000 of income for a family of four would not be taxed.

While I like the idea of eliminating distinctions between different sources of income -- particularly capital income subject to reduced capital gains tax, labor income subject to normal income tax plus payroll tax, and miscellaneous income subject to normal income tax but not payroll tax, these sentences also reveal that the proposal is not flat, and also (unless major features related to what is described here exist that are omitted in the description) its also not fair.

Its not flat, but a two-tier progressive tax system, because it has a range with a 0% marginal rate, and a range with a 14.5% marginal rate. That's progressive, not flat.

Its not fair (with the caveat above) because its a progressive system in which income earned over several year period but realized at a particular point is treated the same as income earned in the period realized. This is a fairness issue that is addressed (poorly, to be sure, and a better mechanism is definitely needed) by the existing distinction between other income (including short-term capital gains) and long-term capital gains.

The current system is roughly fair (ignoring the disparate impact of payroll taxes and payroll tax supported programs, just considering income/capital gains taxes) between pure wage earners and those who supplement wages with some long-term capital holdings but who don't have enough long-term capital to structure trades to derive substantial continuous year-over-year income from different batches of long-term holdings, but unfair between both those groups and those who are major capitalists, who are favored over both the other groups.

Rand's proposal (assuming it doesn't have major relevant features that are not described) is roughly fair between workers and large-scale capital holders, but unfair between both those groups and small-scale capital holders, who are disfavored compared to either other group. As such, it is most unfavorable to the group moving out of the laborer category into the capitalist category.

> The left will argue that the plan is a tax cut for the wealthy.

Because it is, enormously.

> But most of the loopholes in the tax code were designed by the rich and politically connected.

As, for that matter, was Rand's plan. The people he refers to helping him right it are both rich and politically connected, as is Rand himself. So what?

Who designed it is a different question than how it distributes tax burden relative to Rand's plan. And while the present system may have been predominantly designed by the "rich and politically connected", and may even excessively favor the rich, Rand's plan is still a tax cut that disproportionately favors the rich.

> Though the rich will pay a lower rate along with everyone else, they won’t have special provisions to avoid paying lower than 14.5%.

The rich won't be able to control legal entities outside US tax jurisdiction that are the actual recipients of income and expend it for the benefit of the owners? Because that's one of the main ways they have of evading tax now -- not being the legal recipient of income. No matter how you structure a tax on income, as long as people can benefit without being the legal recipient of income, they can avoid it. I'll trust claim that you've actually got a plan that eliminates all avenues to evasion when the details of how you plan to do that are subject to scrutiny. Until then, its just puffery.

Also, both the mortgage and charity deductions are tools for evading taxes, particularly the charity deduction. But Paul plans on keeping those. He also addresses only deductions, but not credits -- many credits are popularly seen as loopholes used for evasion by the rich, and other credits are distinctly major tools of aiding those on the lower end of the income distribution, particularly EITC. Is he using sloppy language and meaning deductions and credits when he talks about deductions, or does he plan to leave credits alone preserving the "loopholes" that take that form, or has he just omitted an explanation of how he would handle existing credits?

The handwaving here that the elimination of "tax loopholes" would somehow shift this from the obvious disproportionate pro-wealthy tax burden shift into something more fair needs some quantitative support.

> The immediate question everyone asks is: Won’t this 14.5% tax plan blow a massive hole in the budget deficit?

Well, duh, of course it will.

> Here’s why this plan would balance the budget: We asked the experts at the nonpartisan Tax Foundation to estimate what this plan would mean for jobs, and whether we are raising enough money to fund the government. The analysis is positive news: The plan is an economic steroid injection. Because the Fair and Flat Tax rewards work, saving, investment and small business creation, the Tax Foundation estimates that in 10 years it will increase gross domestic product by about 10%, and create at least 1.4 million new jobs.

While the Tax Foundation is a "non-partisan" right-wing think tank that hasn't ever seen a tax cut for the wealthy that it doesn't like, I'll note that even Rand's claim about the Tax Foundation's findings actually doesn't address deficit/revenue claims at all.

> my plan would actually reduce the national debt by trillions of dollars over time when combined with my package of spending cuts.

Over how much time? And, of course, if your only statement of deficit impact one way or the other is "when combined with my package of spending cuts", I then can't even begin to consider the merits of your tax plan without first having bought into your particular package of spending cuts.