People either don’t know what they’re talking about or do know and are being political.
There is a tax on business receipts less wage and purchases, described as a tax on business operating income.
There is also a tax on wages above a generous zero bracket.
For about half of Americans (the ones who don’t pay income taxes), there is a big reduction of taxes since they won’t pay the S.S. payroll tax. This will more than off-set the increase in prices due to the tax on business.
For the other half of Americans (the ones who do pay income taxes), the main benefit is that the income tax will be much more simple, apply to earned income above the zero bracket but at one relatively low rate. There will be NO tax at the individual level on “unearned income,” NO capital gains tax, NO estate tax, and NO alternative minimum tax.
Tax simplification (lowering the rates in conjunction with reducing the deductions) is thought to reduce the deficit by about $800 million per year EVEN IF you don’t change the average effective tax rate. The savings comes from reduced cost of administering and complying with the tax code.
But there are dynamic effects as well. Ending corporations and rich individuals leaving the country so as to avoid our high tax rates, restoring the incentive to work for the lower middle class, and putting the country on a path to a balanced budget.
There is a long list of issues concerning the transition to such a very different tax system. I’m not going to belittle these traditional issues but the detail work needed to address the transition is not appropriate to a campaign. In a campaign, you lay out broad goals.
BTW there are a lot of similarities among the flat tax, the fair tax and this proposal, as well as some differences. And, Jeff Sessions has a very nice proposal that would provide a huge step to a true flat tax/fair tax combo such as Cruz and Rand Paul have proposed. We can and should enact Sessions’ proposal immediately.