Everyone knows that former Massachusetts Gov. Mitt Romney had a very bad Saturday night. Losing South Carolina's primary by 12 points should qualify as a profound wake-up call to his campaign. But, as former House Speaker Newt Gingrich's Palmetto State comeback clearly demonstrated, great challenges sometimes provide great opportunities. Romney, who stumbled over and has not yet recovered from his tax return brouhaha, should use this as a chance to embrace dramatic tax reform. As a committed advocate of transforming the tax code, Romney would be in a much stronger position to answer critics clamoring for his own tax filings. After all, the current code is bizarrely constructed and filled with provisions that distort economic decision-making.
Romney doesn't have to stitch a plan together. While not perfect, former candidate and Romney supporter Jon Huntsman's plan is far superior to Romney's current approach, of which more in a moment. It is dramatic enough to be praiseworthy and shows a commitment to neutrality, simplicity, and economic growth. As espoused by the nonpartisan Tax Foundation, these principles should be compass points for Romney since his strong suit is supposed to be getting the U.S. economy back on track.
Ironically, it is probably Romney's wealth that has made him less comfortable addressing tax reform. In this instance, Huntsman had better instincts. Instead of a Romney-esque, vaguely apologetic approach to his family's success, Huntsman focused on tax policy that would bring prosperity to more Americans.
Romney's current plan advocates making permanent the "Bush" tax cuts, lowering the corporate rate to 25 percent, eliminating the estate tax, allowing for 100 percent expensing, and moving to a territorial tax system to improve overall U.S. competitiveness globally. All of these are definite improvements, but, as the Tax Foundation points out, his plan has no fundamental reform for individual taxpayers. Succinctly, it doesn't do much to remove special interest provisions in the current code.
as a "wipe the slate clean approach" that "knocks out preferential taxation in one fell swoop." The Huntsman plan also reduces the number of tax brackets in half and removes the punitive Alternative Minimum Tax. Huntsman would eliminate capital gains and dividends taxes—probably the most important progrowth component of his plan. He also lowers the corporate tax rate.
But will a late endorsement of tax reform hurt Romney? Not as much as his lame response to the "T" word now. In fact, Romney's failure to advocate real reform of the tax code is a weakness Gingrich will exploit. Right now, Gingrich has less vulnerability and a better approach on this issue. Gingrich, who evokes Thatcher more than Reagan and Churchill more than Thatcher, isn't one to flinch at this fight. He senses political weakness like a shark scents blood. Gingrich's release of his own tax returns was a maneuver some thought cheap, but it effectively juxtaposed himself and Romney. Unless Romney wants to hear about this all across Florida, he needs to do something Gingrich does instinctively: make the debate about something bigger than this attack. My advice is to make it about transforming our economic future by reforming the U.S. tax code.