Fact Checker: Jeb Bush’s tax plan

Introduction

'Jeb Bush's proposed tax cuts for the wealthiest could have saved Jeb Bush $841,643.”

Bush could buy 60,160 medium Casey's taco pizzas with his tax cut.

Source of claims: The first came from the Democratic National Committee; the second followed from the Iowa Democratic Party.

Analysis

Jeb Bush, former Florida governor and GOP presidential candidate, released a tax proposal last month he says would grow the economy by 4 percent and create 19 million jobs. The plan would reduce the number of tax brackets and cap the highest at 28 percent, as well as close some loopholes and lower the corporate tax rate.

The Democratic National Committee claims Bush's tax plan would save the wealthiest in the country big bucks. Specifically, the plan could have saved Bush $841,643 if applied to his 2013 tax return, the DNC claims. As a follow-up, the Iowa Democratic Party issued a list of things Bush could buy in Iowa with the tax cut.

In June, Bush released 33 years of tax returns, among the largest number disclosed by any presidential candidate in modern years. Bush, son of former President George H.W. Bush and brother of former President George W. Bush, has run a small political consulting firm since he left the governor's office in 2007.

The DNC didn't respond to our requests to find out exactly how it arrived at the $841,643 figure. But its factivists.democrats.org website lists the following steps:

' 'First, calculate Jeb Bush's 2013 income (business income, real estate, wages and other income) at his proposed 28 percent rate.

' 'Second, calculate Jeb Bush's 2013 investment income (interest, dividends, capital gains) at his proposed 20 percent rate.

' 'Add those together - be sure to subtract any applicable deductions and foreign tax credits. And voila! Jeb Bush's tax plan saves Jeb Bush an estimated $800,000.”

In an interview with Fact Checker, however, Iowa State University economist David Swenson said it's not that simple. It's a misnomer that all of a person's income is taxed at the same level.

Of Bush's $7,217,784 in taxable income in 2013, the first $17,850 was taxed at 10 percent, Swenson said. The next $54,650 at 15 percent, the next $73,900 at 25 percent and the next $76,650 at 28 percent. The rest of Bush's 2013 income was taxed, incrementally, at rates that average 36.9 percent, according to Swenson.

Bush's capital gains of $662,148 in 2013 were likely taxed at 23.8 percent, Swenson said, which would have cost him about $157,591. In total, Bush paid $2,920,698 in taxes in 2013.

Under Bush's proposal, all of his income from $223,050 to $7.2 million - which is $6,994,734 - would be taxed at 28 percent. This would make the tax on the last increment about $1,958,525, Swenson said.

The Bush tax plan also would cut taxes on capital gains to 20 percent, which would have saved Bush about $25,000 in 2013.

In total, Bush would have paid $2,090,955 if his plan was applied to 2013 - $829,743 less than under the current tax code.

To get a second opinion, we checked with a local CPA who said Swenson's analysis looked right. But a deeper analysis, he said, would include whether Bush wants to change the self-employment tax or so-called Medicare tax.

Now let's get to the fun part. The Iowa Democratic Party sent an email Oct. 8 asking 'What could Jeb Bush buy in Iowa with the $840,000 tax cut he gives himself?”

The Democrats picked some quintessential Iowa purchases, including 76,513 tickets to the Iowa State Fair, 60,160 medium Casey's taco pizzas and 2,130 general-admission Hawkeye season football tickets. They were right that each of those bulk purchases would cost under $841,643.

The Democrats also claim that Bush could pay a year of tuition for 124 Iowa students attending Iowa State University. While in-state tuition for most ISU undergrads costs $6,748 this year, we note that engineering students pay more - $8,947. So $841,643 could pay a year of tuition for 94 engineering students.

The Iowa Democratic Party claims about what Bush's hypothetical tax cut could buy in Iowa are based on the DNC's calculation that Bush's tax proposal could have saved him $841,643 in 2013. Swenson's analysis lowers that to $829,743. Still a lot of money, but about 800 fewer Casey's taco pizzas.

Conclusion

The point of the DNC's claim about Bush's tax proposal is that it would benefit rich people. That claim seems to be true, at least for Bush.

Of course, Bush wouldn't profit from his proposed tax changes more than another similarly-positioned wealthy American. His plan also has some benefits for lower-income Americans that include doubling the earned income tax credit for childless workers and increasing the number of families who pay no income tax.

The DNC analysis is slightly higher than what we reached with Swenson's help, but close enough for a B grade. The same stands for the Iowa Democrats, who listed what Bush could buy in Iowa with his tax break.

Criteria

The Fact Checker team checks statements made by an Iowa political candidate/office holder or a national candidate/office holder about Iowa, or in advertisements that appear in our market. Claims must be independently verifiable. We give statements grades from A to F based on accuracy and context.

If you spot a claim you think needs checking, email us at factchecker@thegazette.com.

This Fact Checker was researched and written by Erin Jordan.