Fred Thompson has come out with the most detailed tax reform package of any of the major Republican presidential candidates. In short, Thompson would extend the Bush tax cuts on income and investment set to expire at the end of 2010, cut the corporate tax rate to no more than 27 percent, eliminate the alternative minimum tax and the estate tax, and allow Americans to opt into a simpler, flat tax system. But it all sounds kind of pricey to the folks over at Bloomberg News: "Republican presidential candidate Fred Thompson proposed sweeping tax reductions, including extending President George W. Bush's cuts, that would cost $400 billion a year by 2012 and more than $3 trillion over 10 years."
My take: That sort of "static" analysis assumes taxes have no impact on economic growth. If the tax cut boosts growth, then the so-called lost revenue won't be anywhere near $400 billion a year. Plus, as the Thompson campaign notes, the candidate has also proposed a fix to Social Security, a far larger fiscal issue than the annual budget deficit.
Yet voters are in a foul mood and will most likely be skeptical of any and all talk of tax cuts from candidates who don't also seem as equally gung-ho to cut spending. Of course, talk of cutting programs can be used to bash a candidate, so it was pretty savvy of Mitt Romney to propose capping government, nondefense discretionary spending at the rate of inflation minus 1 percent and leaving the fine details to later. But if 2006 should have taught Republicans anything, it's that GOP voters, at least, are worried about spending just as much as they crave lower taxes.