Fred Thompson's Shiny New Tax Plan

A lot to like here:

WASHINGTON - Republican presidential hopeful Fred Thompson proposed an income tax plan Sunday that would allow Americans to choose a simplified system with only two rates: 10 percent and 25 percent.

Thompson's proposal, announced on "Fox News Sunday," would allow filers to remain under the current, complex tax code or use the flat tax rates.

From the Fred08 site, here's the whole thing:

1. Permanently Extend the 2001 and 2003 Tax Cuts. Tax relief enacted in 2001 and 2003 has proved critical to generating a strong economy that has experienced growth despite the war on terror, the collapse in the housing market, and other economic challenges over the last six years. Unless action is taken, every American taxpayer will see a massive tax increase after December 31, 2010. Allowing this tax hike will impose an enormous financial burden on American families, slow economic growth, cost America jobs, and make it more difficult to address the country's long-term budget, economic, and security challenges. The Thompson plan ensures the following:

• Reduced individual income tax rates, saving every tax-paying family a minimum of $600.
• Preserving the $1000 child tax credit, which was doubled from $500 per child.
• Protecting Marriage penalty relief.
• Retaining Education tax incentives, including Coverdell Education Savings Accounts, 529 college savingsplans, and deductions for higher education expenses.
• Reduced tax rates on capital gains and qualified dividends.
• Increased expensing of investment for small businesses.

2. Permanently Repeal the Death Tax. Current law provides death tax relief, but only through 2010. The death tax is inherently unfair. Under the Thompson Plan, the death tax would be permanently repealed, thus protecting millions of American families, including small business owners and family farmers, from double taxation at rates ranging as high as 55 percent.

3. Repeal the Alternative Minimum Tax. The AMT is a separate tax system that was intended to ensure that a few high income Americans could not use deductions and credits to eliminate their tax liability. However, because the AMT is not indexed to inflation, it is penalizing Americans it was never intended to affect. While in the U.S. Senate, Fred Thompson authored legislation that would have repealed the AMT. Consistent with that earlier proposal, the Thompson plan will eliminate the AMT as part of broader tax and spending reform. Until comprehensive reform is feasible, the Thompson plan would index the exemption amounts annually so that millions of middle class families will not become subject to this tax.

4. Reduce the Corporate Tax Rate. The United States has one of the highest rates of tax on businesses of the industrialized nations, second only to Japan. Even Japan is currently considering reducing its corporate tax rate. Economic studies suggest that the U.S. Treasury is actually losing tax revenue by keeping the corporate tax rate so high. In order to increase the competitiveness of U.S. companies in the global marketplace, the Thompson plan would reduce the U.S. top corporate tax rate (including the corporate capital gains tax rate) from 35 percent to no more than 27 percent, which is the approximate average of the world's leading economies—the nations of the Organization on Economic Cooperation and Development. This tax reduction will promote U.S. competitiveness, encourage companies to keep their operations (and jobs) in the U.S., and spur continued economic expansion and growth.

5. Permanently Extend Small Business Expensing. Small businesses create two-thirds of all new jobs in America, and employ nearly 59 million Americans -- more than half of the nation's private-sector workforce. Women own a quarter of all small businesses, minorities are nearing the 20% mark, and Hispanic Americans are opening their own businesses at a rate three times the national average. Current law allows small businesses to write-off purchases of equipment of up to $125,000 per year, rather than depreciating those assets over time. Making expensing of equipment and other small business items permanent will encourage greater investment and growth.

6. Update and Simplify Depreciation Schedules. The current depreciation schedules are outdated and in many cases do not reflect the realistic useful life of an asset. This is particularly true for investments in high technology. For example, computers must be depreciated over three years, even though they become obsolete in half that time. The Thompson plan would simplify and update these schedules to allow American businesses to make the investments they need to compete and create more high-quality jobs.

7. Expand Taxpayer Choice. The Thompson plan would give Americans greater choice about how to pay their federal taxes. This plan is based on a proposal developed by the House of Representatives Republican Study Committee that would provide taxpayers the option of remaining under the current, complex tax code or opting for a simplified, flat tax code. The simplified tax code would contain two tax rates: 10% for joint filers on income of up to $100,000 ($50,000 for singles) and 25% on income above these amounts. The standard deduction would be more than doubled to $25,000 for joint filers and $12,500 for singles. The personal exemption amount would be increased to $3,500. Therefore, a family of 4 would be exempt from income tax on the first $39,000 of income. The simplified tax code would contain no other tax credits or deductions. It would also retain the 15% tax rate on capital gains and dividends. This approach would dramatically simplify taxes for tens of millions of Americans. In addition, the larger standard deduction and personal exemption amounts will still provide significant tax relief to families with children. This proposal would serve as a stepping-stone to fundamental tax reform.

Everyone wins on this plan. It's really going to be hard to beat as the other candidates rush to get their plans out.

The problem I see with this plan is that the liberals will paint it with the same dishonest brush as the Bush tax cuts - "tax cuts for the rich", etc. But any truly fair tax regime would get the same treatment.