Republican presidential candidate Ted Cruz's flat tax plan is much simpler than current law and other rival candidates' plans, but it would cost the government at least $8.6 trillion over a decade unless offset by massive spending cuts, according to a new study conducted the Tax Policy Center, a nonprofit Washington think tank.
The plan would implement a flat 10 percent tax on all individuals and eliminate corporate income tax, the payroll tax and the estate tax, instead imposing a 16 percent business flat tax. In turn, the federal government would take in $8.6 trillion less in taxes over 10 years and $12 trillion less in the second decade, which would "almost surely depress the economy over the long run," said the group.
Among the GOP presidential field, only businessman Donald Trump's tax plan would cost the government more money over the next decade.
Cruz's plan is a "major tax reform" and a "fundamental change," said Len Burman, director of the Tax Policy Center. He added that it's "much simpler than current law and than the other [Republican candidates'] plans we've analyzed." It's still not so simple that taxpayers could file returns on a postcard, as Cruz has promised, according to the Washington Post.
The cuts would "dramatically" benefit the rich, with the top 0.1 percent of taxpayers - the ones who earned more than $3.7 million in 2015 - getting an average tax cut of more than $2 million in 2017, almost one-third of their after-tax earnings, noted the Washington Examiner. Americans making average incomes would only receive a cut of about $1,800, or 3.2 percent of their after-tax income, while taxpayers in the lowest fifth would have their taxes reduced by $46, less than 1 percent of their after-tax earnings.
Cruz would also do away with practically all deductions, with the exception of those for charitable contributions, retirement savings and mortgage interests. All tax credits, other than the earned income tax credit and child tax credit, would also be eliminated. The plan would allow taxpayers to deduct up to $25,000 a year if the money went to a Universal Savings Account, according to CNN.
