Cruz’s plan would go further than others’ toward simplifying the tax code, reducing the number of people who itemize their taxes by 96 percent. | Getty
Republican presidential candidate Ted Cruz has proposed one of the most radical overhauls of the tax code of any of the White House contenders, a new report shows, one that would balloon the debt while overwhelmingly favoring the rich.
The Tax Policy Center said Tuesday that his plan would add at least $8 trillion to the debt over the next decade, and perhaps as much as $10 trillion once additional interest payments are included.
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The wealthy would be the biggest winners, according to the group’s analysis, with the top 1 percent getting an average tax cut of $400,000. Those at the bottom of the income ladder would get a tax cut of just $46 in 2017, the analysis said, and by 2025 would actually see their taxes go up.
The hit to the budget is in the ballpark of what other Republican candidates have proposed, and would come at a time when the outlook on the government’s finances has already darkened considerably. The government will rack up some $9 trillion in additional debt over the next decade, the Congressional Budget Office said last month, and will routinely run trillion-dollar deficits by 2022.
Cruz’s plan would go further than others’ toward simplifying the tax code, reducing the number of people who itemize their taxes by 96 percent.
And while Cruz has adamantly denied his plan would amount to creating a value-added tax on businesses — something that is anathema to many conservatives — the group said his plan would do just that.
“The plan is a major tax reform — it would represent a fundamental change in the way we tax people and businesses,” said Len Burman, head of the Washington-based Tax Policy Center.
The group, which has analyzed four of the Republican presidential candidates’ plans, said last week that Marco Rubio’s plan would add at least $6.8 trillion to the debt.
Cruz’s plan would blow up virtually every major part of the tax code: He would junk the progressive income tax structure as well as the Social Security and Medicare payroll taxes and the corporate income tax. All itemized deductions would be eliminated, except the ones for mortgage interest and for charitable deductions.
He’d replace all of that with a flat 10 percent tax on individuals, and a 16 percent levy on businesses.
Whether what Cruz calls his “business flat tax plan” would amount to a VAT has been hotly debated in Republican policy circles, and repeatedly denied by Cruz in the presidential debates.
Many Republicans loathe anything resembling a European-style VAT because they believe it would be able to easily raise vast amounts of revenues, which would allow politicians to finance expansions of government programs.
Cruz’s tax is not exactly like the one used widely in Europe, but it nevertheless amounts to a variation on it because it would shift the code from taxing business profits to taxing the difference between their sales and their purchases from other firms.
“The business flat tax is a value-added tax,” said Burman