Posted on 11/03/2015 6:04:03 AM PST by St_Thomas_Aquinas
The tax-reform proposal unveiled by Ted Cruz last week is as transformative, intellectually dominating and economically and politically revolutionary for 2016 as Kemp-Roth was in 1980. Indeed, even more so.
Cruz's plan would scrap the current income tax code and replace it with a simple, single, flat rate of 10%, to be paid by everybody on everything — wages, profits, capital gains, dividends, rent, interest and all forms of individual income. No one would be able to claim that billionaires pay lower tax rates than their secretaries or that the system is rigged to favor the rich over the middle class...
The corporate income tax would also be abolished and replaced with a 16% business flat tax. The 16% rate would apply to a business' gross receipts from sales of goods and services, minus purchases from other businesses...
That will promote investment in worker productivity — the foundation of rising wages — and in businesses providing good-paying, blue-collar jobs like heavy industry, mining, energy, farming, ranching and manufacturing.
(Excerpt) Read more at news.investors.com ...
AS I read this:
“The payroll tax, the biggest tax on the poor and middle class, would be erased, with Social Security and Medicare financed in full with no deficits. Included is a $10,000 standard deduction ($20,000 for couples filing jointly) and a $4,000 personal exemption. It means the first $36,000 for a family of four is exempt from all taxes.”
The deductions would still exist, unlike Trump’s 0-5-15 plan.
When the statement read that there would be a 10% tax on ‘rent’, who would pay that, the renter or the lessor?
When the statement read that there would be a 10% tax on interest, what incentive is there to save, since the gawdawful banks only pay me for my paltry monies deposited a half-percent accrued interest, now?
(Wish it would have been that way the past five years).
The tax would be 10% of the interest the banks pay. If they pay a half percent interest, you would still get .45%, the government would get .05%.
Slight problem. From an earlier thread admittedly from the NY Slimes, but hard to ignore
“TED CRUZ noted his just-announced tax plan involved “the lowest personal rate any candidate up here has. That’s true: His plan calls for a 10 percent flat personal income tax rate. But that’s not where his plan gets most of its tax revenue.
The biggest tax in his plan is a 16 percent value added tax. Mr. Cruz describes this tax as a business flat tax, but it’s not a tax on business profits. Businesses would pay the tax on their total sales, minus the cost of the things they bought to produce the thing they sold. They would not be able to deduct wages, meaning they would pay the 16 percent tax on an amount far greater than their profits. The conservative Tax Foundation estimates this tax would generate $25 trillion in revenue over a decade, making it about six times bigger than the existing corporate income tax, which Mr. Cruz would repeal, and more than twice as big as his proposed personal income tax.
Added up across the whole economy, Mr. Cruz’s VAT would be equivalent to a very broadly based sales tax, applying even to services like health care that are ordinarily exempt from sales taxes. Like a sales tax, this tax would be built into prices and paid by consumers†and for many lower-income households, it would be a far greater burden than the income tax.
Between this proposal, his support of H1 visa 6 fold expansion and his votes for TPA which hamstrings congress in avoiding agreements that would be deleterious to America
the bloom is off the Cruz rose for me and I think he may be presenting himself as a conservative while participating in the sale of his soul to the business cartels.
The fatal flaw with a flat tax is the administrative costs of low revenue returns. Administrative costs that exceed the revenue are a waste of time and money to process. That’s why Trumps plan of no returns under a certain revenue range makes more sense. I’ve always favored flat tax plans until Trump explained their fatal flaw.
No income tax replaced with a sales/production tax is still the best in my opinion.
This doesn’t sound good to me either. Can someone compare it with Trump’s plan—or have we seen that yet?
Thanks for the explanation—I think we were both typing at the same time-LOL!
What Cruz is doing is putting a sales tax companies and scrapping corporate income tax. I am still studying.
Also, if Cruz eliminates the payroll tax, then companies would see a payroll tax cut of 7% on wages...
That’s an interesting point. Important to factor that in. I will have to look at whether it was considered by the previous analysis. Its such a minefield with so many groups cherry picking how data is presented to paint their preferred picture.
In general taxing companies is easier for the government because companies represent a relatively small number of fixed high value targets compared to taxing each individual. Companies pass those costs on however, so the true effect of a corporate tax is to tax the people who purchase goods. The ratio of purchase/income is higher for poorer individuals so its a regressive tax effect. Hard to sell that. The middle class doesn’t need more squeezing.
flat rate of 10%, to be paid by everybody on everything  wages, profits, capital gains, dividends, rent, interest and all forms of individual income.So renting will no longer be a business?
"Profits" along with all business income would be taxed 16% under his NEW BUSINESS TAX. Then if you are a business owner those same "profits" would be taxed 10% again for your individual tax.
The eliminated corporate income tax is paid for off the backs of small business owners. The NEW BUSINESS TAX coupled with the business owner's tax on individual (business) income for all businesses is a small business/jobs killer.
They claim a 12.2% increase in wages. You might ask, where did these geniuses come up with that percentage? It comes from the elimination of payroll deductions, half of which is paid by your employer. To say it's a "wage increase" is a clever lie since payroll taxes are part of your wage package to begin with. What they aren't addressing is what happens to the 6% employer half of your payroll tax. They include that in the sham "wage increase" but that is a battle yet to be fought.
You would still be able to itemize deductions...how do you do that on a post card and no IRS to police it?
This is a plan thrown together by tax and business illiterates using "flat" as bait for idiots...by idiots. It looks like it was written the night before the debate on cocktail napkins.
It would be a legislative nightmare and debated to death. Sadly there's nothing Cruz loves more than new (bipartisan) legislation and debating.
Before it's over the "simple flat tax" would legislatively resemble the present tax code or Obamacare.
That’s mentioned in the article, but their analysis is different, as far as I can tell.
The eliminated corporate income tax is paid for off the backs of small business owners. The NEW BUSINESS TAX coupled with the business owner's tax on individual (business) income for all businesses is a small business/jobs killer.---
Doesn't say if it applies to sole proprietorships.
Also, as you know, business owners don't pay taxes --their customers do. International market prices are the only cap on this. So the business tax would be passed along to consumers, effectively a 16% VAT.
OTOH, employees really pay both halves of SS, so you can add 15% to the wages of any employee.
So the net tax on individuals would be significantly lower. If you are a low-wage worker, the benefit from eliminating SS would give you an effective tax rate of 0-,-5%, while paying a VAT of 16% on goods and services.
That's my quick analysis. Where did I go wrong? 8-)
Plus Trump’s plan specifically addresses the corporate inversion issue. Trump is THE ONLY candidate talking about that. Imagine 2.5 trillion in real, not printed, money dropped into businesses in US. Imagine what that would do for the economy coupled with the 15% corporate tax rate.
Carl Icahn has been asked and accepted Sec Treasury. Trump and Carl are already rolling on the corporate inversion issue; http://carlicahn.com/needed-legislation-letter/
Meanwhile Obama is out on another round of golf and rendered irrelevant.
Trumps tax plan position paper.
https://www.donaldjtrump.com/positions/tax-reform
There are other position papers on his site.
Trump doesn’t propose a horrible VAT tax, either.
DO NOT LET THAT CAMEL’S NOSE INTO THE TENT!! LOOK AT EUROPE!!
Once they start - with just a “small” VAT tax, it does nothing but continue to grow....just like EVERY other tax. NO VAT TAX, EVER!!
When people live in the cash economy they inevitably need to buy stuff and pay rent. They WILL pay the tax on those purchases! Now, all the money stays underground. That is a LOT of money the government doesn’t get now!
bfl
The renter will wind up paying it one way or another.
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