Santorum Advocates Two-Tier Tax System

January 4, 2012 - 12:28 PM
santorum

Republican presidential candidate, former Pennsylvania Sen. Rick Santorum, joined by wife Karen, left, addresses supporters at his Iowa caucus victory party Tuesday, Jan. 3, 2012, in Johnston, Iowa. (AP Photo/Charlie Riedel)

(CNSNews.com) – Rick Santorum’s near-win in Iowa, a farm state, happened despite his support for eliminating federal energy and agriculture subsidies. And in an election year where the economy is center stage, Santorum’s new star power is expected to direct more attention to his economic and fiscal agenda.

The former U.S. senator from Pennsylvania, until now, has been portrayed by the mainstream media as a social conservative. Largely ignored has been Santorum’s sweeping income-tax reform proposal and his plan to trim $5 trillion from the federal budget over the next five years.

Santorum says he wants to simplify the income tax code by establishing two rates, 10 percent and 28 percent. He has described such a reform as more achievable than scrapping the entire tax code for a flat tax.

“I mentioned lowering the rates, 10 and 28 percent, two rates. Why 28 percent? It was good enough for Ronald Reagan and congressional Democrats to support in 1986,” Santorum said on Dec. 27, 2011 in Fort Dodge, Iowa.

“People are going to say, ‘Oh, I want a flat tax of 10 percent.’ Anybody think we can pass a flat tax of 10 percent or 15 percent?” he asked. “There’s just no way, I mean, and it’s hard to make the argument, given the fact that most people are going to end up paying more in taxes when you do that, and the people who are going to get the big tax cuts are in fact folks at the high end.”

Santorum says two distinct tax rates would come with five “very simple, very certain” deductions – for children, charity, pensions, health care and housing.
Those deductions cover “the basics” that most Americans favor, he said.

Santorum also has called for the elimination of the Alternative Minimum Tax and the death tax on large estates. He says he would halve the corporate income tax from 35 percent to 17 percent.

On the fiscal front, Santorum has said that as president, he would commit to cut $5 trillion of federal spending within five years, according to his campaign Web site. Part of this would include cutting non-defense discretionary spending to pre-bailout, pre-stimulus 2008 levels.

Santorum also would “implement Medicare reforms and innovation proposed by Congressman Paul Ryan,” which are meant to reign in costs of the entitlement to keep it sustainable.

Santorum’s Web site also says he would “implement Medicare reforms and innovation proposed by Congressman Paul Ryan and speed up their implementation to control health care costs and improve quality.”

Santorum talked to CNSNews.com about Medicare costs in a January 2011 interview with CNSNews.com Editor in Chief Terry Jeffrey.

“I think we do move toward a private system by having the federal government be simply the payer without having, which we have right now, which is the federal government and the Medicare system is a single payer health-care system by and large, with the exception of Medicare Advantage, which of course the administration is trying to get rid of. But right now Medicare is a government-run healthcare program,” Santorum told CNSNews.com.

“Under a Santorum idea, it would no longer be a government-run healthcare system. It would be a system where the federal government stands in the place where an employer would stand in the place for an employee,” Santorum said.

“And as a result of that you can dial up and dial down the contribution you want to make to it and allow, you know, you can do all sorts of things to be able to save money under that plan much harder to do if it’s a government-run system,” he added.

He would also propose to phase out government sponsored enterprises Fannie Mae and Freddie Mac, the two mortgage giants largely blamed for the housing crisis of 2008.

He wants to phase out government-sponsored enterprises Fannie Mae and Freddie Mac, the two mortgage giants largely blamed for the housing crisis of 2008.

Like most of the other Republican presidential hopefuls, Santorum also has committed to repealing both Obamacare and the Dodd/Frank financial reform laws if he is elected president.

“Barack Obama was right, that health care is a huge cost driver for our businesses and for our government, and that we needed to do something about it. And he did. He made it worse,” Santorum told CNSNews.com in January 2011. “He made it much worse.

“He increased the amount of money going to a portion of the economy that is increasing faster than any other section of the economy with maybe the exception of higher education, which is growing faster. Tuition increases are growing faster than even health care increases,” Santorum said.

“There's a commonality between those two: They both have huge government involvement in both of those areas, and they are driving costs up. So what was Obama's prescription? More government involvement in that area. That's the wrong prescription,” he added.

Santorum continued, “I've said it once, I'll say it again: There's nothing salvageable in the Obamacare bill. Not to say that there aren't maybe one or two ideas that are good ideas, but they are intertwined with a system that doesn't work. So, we can look at some of those ideas, but they have to be done in the context of returning healthcare to individuals and to the private sector, not having government control.”  

Former Mass. Gov. Mitt Romney, who received only eight votes more than Santorum did in Iowa, has proposed maintaining the current Bush-era tax rates on income, interest, dividends and capital gains. Romney also has proposed eliminating the death tax, and his Web site says he would “pursue a conservative overhaul of the tax system over the long term that includes lower, flatter rates on a broader base.”

Romney would cut the corporate tax rate to 25 percent, a smaller cut than Santorum proposed.

Texas Rep. Ron Paul, who finished third in Iowa, supports the complete elimination of income, capital gains, and death taxes. Paul also has pledged to cut federal spending by $1 trillion a year. He says he would not raise the debt ceiling, but he would audit the Federal Reserve and veto any budget that is not balanced.

Former House Speaker Newt Gingrich, who finished fourth in Iowa, plans to continue his campaign. He says he would cut the corporate tax rate to 12.5 percent – an even larger cut than Santorum has proposed.

Gingrich has also proposed a 15 percent “optional flat tax” that would allow Americans to choose either the flat tax or the income tax with various deductions.