The tax reform plans of the five remaining presidential candidates tell us a lot about our outdated federal tax system, which was designed for the industrial economy of the last century. All five candidates promise reform, but their plans just tinker around the edges. None of the five addresses the major reasons the federal tax system imposes far more economic pain than necessary on most Americans.

Despite enormous differences in their proposals, the final five all cling to the existing system, which was adopted in four major pieces between 1909 and 1924 – an era of big American factories churning out manufactured goods, not the global services economy of today.

Each candidate’s plans would throw more sand into the well-worn gears of our industrial-era tax system, rather than adapt to the economics of the digital age and knowledge economy. None of them addresses the biggest single problem of the current system.

For perspective, federal taxes this year will total more than $3.6 trillion, a half trillion less than the $4.1 trillion Congress will spend. Annual deficits will continue as Americans, through their lawmakers, demand more government services than they are willing to pay for.

This year the individual income tax will raise about $1.8 trillion, more than four times as much as the corporate income tax (about $419 billion). (For details, see America's Missing $15 Billion in Corporate Taxes.) Payroll taxes for Social Security, Medicare, unemployment and some small safety net programs will generate about $1.1 trillion more. The rest of the money will come from gift and estate taxes and excise taxes, like that little federal levy on replacement tires for cars and trucks.

Let’s Look First at the Republicans.

Donald Trump would increase the amount of untaxed income from $20,600 last year to $50,000 for a married couple (half those sums for singles). He would lower the top tax bracket, currently 39.6%, to 25%, while eliminating nearly all income tax deductions except for mortgage interest and charitable contributions.

Trump would also eliminate the federal estate tax and gift taxes, allowing the very wealthy to pass unlimited sums to their children.

Trump says his tax plan would spur so much economic growth everybody would be overjoyed. But if tax cuts produced such growth we would be swimming in jobs and prosperity, as even the staid Economist magazine acknowledged.

Without the gift tax, federal revenues would plummet, something conservative Republicans figured out in 1924 when they sponsored that levy as a backstop to the income tax.

The George W. Bush tax plan is instructive. Bush kept his plan details secret until after he was sworn in. A week after he took office, I discovered buried in the actual legislation a stealth tax cut for wealthy Americans enabled by repeal of the gift tax. The administration quietly dropped this part of its package after my front page New York Times article, which quoted a master of legal tax avoidance who had the same insight. Congress later valued the abandoned policy at $252 billion in just the first 10 years.

Trump’s plan, likewise, would slash tax receipts. Over the first 10 years federal revenues would fall $9.5 trillion, according to the Tax Policy Center – and about $12 trillion, according to the Tax Foundation.

In other words, while Trump rails about the size of the federal debt, his tax plan would make it grow like weeds in spring.

Ted Cruz would impose a flat 10% percent levy on all incomes, ignoring the fact that last dollar of income to a poor person is worth far more than to $1 million earner. His plan would eliminate all tax deductions except for charitable gifts and mortgage interest.

Cruz would modestly improve the Earned Income Tax Credit, a form of negative income tax for the working poor, especially those with children. Cruz would also adopt a federal tax on the purchase of goods and services, a levy that would be regressive because the higher your income the smaller the share of it would be taxed.

The Cruz plan would reduce federal revenues by nearly as much as the Trump plan and, like the Trump plan, heavily favors the richest Americans.

John Kasich, who played a key role in the budget surpluses during President Bill Clinton’s second term, has given few details other than saying he would lower both individual and corporate tax rates, simplify deductions and expand the Earned Income Tax Credit for the working poor.

Now the Democrats

Bernie Sanders, the Tax Policy Center estimates, would increase federal revenues over the next 10 years by $15.3 trillion. But the way he would do it – through higher payroll taxes, which make workers more expensive to employers, and through a carbon tax – may discourage job creation. Sanders would limit itemized deductions to 30.2% of income and impose a tax rate of 52% on incomes above $250,000 annually, roughly the top 3%, even though some people make four times that much each workday.

A key element of the Sanders plan is Medicare for all, which potentially could have enormous benefits by lifting the burden of healthcare on small employers, eliminating barriers to job mobility for workers with chronic health issues and lowering costs overall.

Hillary Clinton offers the most detailed and comprehensive plan. She favors a minimum 30% tax rate on incomes about $1 million, plus a 4% surtax on incomes above $5 million. She would also add more tax credits to cover such items as out-of-pocket healthcare costs and taking care of elderly parents.

Clinton would also would double to two years the time that assets must be held before they qualify for the reduced 0%, 15 % or 20% (depending on your income) tax on capital gains.

Clinton would also tighten up on the devices by which multinational companies earn profits in the United States, but legally report them as tax-deductible expenses – expenses paid to their offshore subsidiaries.

The net effect of the Clinton proposals would be modest. The Tax Policy Center, whose computer model has proven highly reliable over the years, estimates the Clinton plan would raise an additional $1.1 trillion of federal revenue in the next decade, the equivalent of eliminating the first two years of budget deficits.

What All the Plans Miss

What none of these plans would do is address the major devices by which the wealthiest Americans reduce their tax bills. At the heart of this is deferral of income, which turns the immediate burden of the income tax into a zero interest loan of the money you'd owe.

The way Congress measures income allows many wealthy Americans to delay paying their income taxes for years or even decades. Well-paid athletes, executives, movie stars, hedge fund managers, private equity managers, real estate investors and others all benefit from special rules that let them earn now and pay their taxes by-and-by. Myriad other devices to delay or eliminate paying taxes keep thousands of highly paid tax lawyers and accountants employed gaming the system for rich clients.

We don’t need more tax complexity. We also don’t need simpleminded simplification. What is clear is that the posted rates of tax have little relationship to taxes actually paid, especially for the best-off Americans.

What we need is fundamental reform that recognizes the realities of the 21st-century economy. Wealth is not held just in factories, but in the patents, formulas, contracts and other pieces of paper that describe intellectual property. Factories have to exist physically in some location, so localities can tax them. Intellectual property can be digitized and held anywhere, including that untaxed place called Nowhere. We need new rules so we tax the intellectual property asset regardless of where it is technically located.

Taxes have been with us as long as civilization. The most important lesson about tax systems is that they must flow from the economic order, no matter what that order is, for society to prosper. Our system cuts against the 21st Century economy. The sooner we have a president who embraces the idea of a completely new tax system for the 21st Century economy, the sooner we will all prosper.

Pulitzer Prize winner and recipient of an IRE medal and the George Polk Award, David Cay Johnston is author of five books and the upcoming The Prosperity Tax: A New Federal Tax Code for the 21st Century Economy. He is a Distinguished Visiting Lecturer at Syracuse University College of Law and Whitman School of Management, and also writes for The Daily Beast and Tax Notes.

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