Cruz’s plan is not a VAT tax, however, it is an unconstitutional tax as it would continue to misapply the law just as the current income “excise” tax is misapplied. Also, $36,000 for a family of four is NOT middle class in today’s economy.
The fact is, the numbers in Ted’s tax plan do not add up, and not to be biased about the subject, as a Trump supporter, I can honestly tell you that Trump’s flat tax plan is not any better. The problem is downsizing government, educating the public as to the true nature of what and “excise” tax is and does that “excise” refer to “all that one deposits in their bank account”. Therein lay the problem of the bloated government beast, the misapplication of a 100% constitutional Article 1 “excise” tax.
Here is a better explanation of Cruz’s business tax. It replaces current 35% Corporate tax And all payroll taxes - approx. 15:
What Is Ted Cruz’s Business Flat Tax?
Ted Cruz’s “Business Flat Tax” is what most tax policy experts would call a “tax-inclusive subtraction-method value-added tax” (VAT) or a “business transfer tax” (BTT). These terms are pretty technical, so I’ll try to distill them down into something a little bit easier.
What this means, in plainer terms, is that it’s a broad tax on all kinds of income, levied on businesses and organizations. You, personally, wouldn’t have to file it for yourself. Instead, it would be taken care of at the organizational level.
That does not, of course, mean it’s free. When businesses pay taxes on people’s behalf, it still ultimately means that the government gets some money that otherwise would have gone to people. Further on, we’ll talk about who would end up losing money from the existence of this tax.
How Would It Apply To an Ordinary Business’s Income?
The starting point for a subtraction-method value-added tax is pretty simple, especially when it comes to everyday private businesses. You start with all of a business’s revenues. (Most likely, this tax would be filed on a quarterly basis.)
However, you don’t stop there: a problem with counting all business revenues is that it ends up being a double-counting. For example, suppose you love watching Disney movies on Netflix. Netflix gets revenues from your subscription, and then it uses some of that money to pay Disney for the rights to Disney content. If we counted that money both at the Disney level and the Netflix level, we’d end up taxing the same basic product twice, merely because it involves two different companies. This is not good tax policy; that’s why modern tax systems try to avoid this.
The way the subtraction-method VAT fixes this is by, well, subtraction. Under this kind of tax system, Netflix would count all of its revenue, but then subtract the amount that it pays to other businesses, like Disney. Disney would then have to account for its own revenue and also file taxes. The result is that everything gets neatly single-counted, and nothing gets double-counted.
There’s also one other thing the tax subtracts: capital costs. That is, when Ford builds a new auto plant, it can deduct those business costs as well. This is an important aspect of the tax, and it marks a slight difference with corporate income taxes today (which also allow these costs to be deducted, but over a much more complicated schedule.)
http://taxfoundation.org/blog/ted-cruz-s-business-flat-tax-primer
Cruz’s plan has been scored as a 700b tax reduction over 10 years, however, Cruz is also proposing elimination a good number of gov agencies to reduce spending.
While I advise everyone to pay taxes [simply to avoid penatlies], as I understand it the income tax amendment was improperly written and thus unconstitutional.
All a huge mess, all the better for tax brokers.