The pluses and minuses in Ted Cruz’s tax plan (10% Flat Tax, 16% VAT)

https://www.washingtonpost.com/blogs/right-turn/wp/2015/10/30/the-pluses-and-minuses-in-ted-cruzs-ta ^

[springwater13]

The Tax Foundation, which Cruz cited in the debate, spells out the terms: “Senator Cruz’s (R-TX) tax plan would enact a 10 percent flat tax on individual income and replace the corporate income tax and all payroll taxes with a 16 percent ‘Business Transfer Tax,’ or subtraction method value-added tax. In addition, his plan would repeal a number of complex features of the current tax code.” The plan repeals the estate and gift tax and the payroll tax. The income tax cut is substantial ($3.6 trillion) with a static model but all but $786B is made up in a dynamic scoring which also includes what in effect is a VAT tax. (Cruz does not specify spending cuts to make up the difference.) The income tax is not a pure flat tax since it retains a number of deductions and credits (home mortgage and charitable deduction, child tax credit, etc.) and familiar exclusions from income (e.g. employer provided healthcare insurance).

[DoodleDawg]

I guess you mean the half that currently pays no taxes.

Little or no taxes, yes. And while we can argue about the free ride the fact is that they get it and they're not going to be any more thrilled with their taxes going up than you or I would. But if anyone can sell it I think Ted Cruz can.

[Catsrus]

Congress will never vote to go to a flat tax. That’s why Trump came out with just 4 categories - it has to be done gradually. Remember, these people in DC don’t care about us - they live to keep the status quo.

[ziravan]

VAT in this case is a misnomer.

When you get paid, your employer pays taxes for your labor. Those are value added taxes because your labor adds value to your employer’s product.

In that sense, your employer is already paying a VAT on payroll and Cruz’ plan replaces it and other employer taxes with a flat payroll tax. It’s no more invasive a “VAT” tax than we already have.

I do agree with you about hell no to VAT taxes, but the taxes being referenced here aren’t point of sale consumption taxes.

Cruz is advocating a flat income tax and a flat payroll tax.

[itsahoot]

No doubt both the flat (i.e., income) tax and the VAT will start relatively low.

When the income tax was first proposed no one could conceive of it ever exceeding 2%

[rrrod]

I like this in theory.....it eleiminates the underground economy and forces everyone to pay taxes...while rewarding capitol!!!

[theBuckwheat]

When government taxes something, it also implies the power to require auditing and to investigate for evasion. Any tax on income allows government to destroy your privacy, to make you prove that the dollar in your wallet was properly reported and taxed. This is why I favor abolition of the income tax entirely and to levy taxes upon sales alone.

One of the causes of our overbearing government comes from the fact that the full cost of government is not sufficiently tangible to enough citizens. A sales tax would restore that necessary social and political feedback mechanism.

[lewislynn]

The first $36,000 for a family of four would be exempt from taxation and a lot of the deductions remain in place. I don't think anyone should get a free ride.

You're not thinking at all, you contradicted yourself.

a lot of the deductions remain in place

How do you show itemized deductions on a post card?

[lewislynn]

The link I posted is a great primer.

The dimwit that wrote that "primer" should be fired. He doesn't have the slightest idea of what he's talking about.

The whole thing is riddled with misinformation.

It must have been dictated by Cruz.

Off the top of my head.
The employee half of the payroll tax is not "after tax" and neither is the employer half.

Income tax is a percentage OF your income (inclusive)...Not ON your income (exclusive).

You cannot have a "exclusive" tax on income. Income tax can only be inclusive because income is where the money comes from to pay the tax. The only "exclusive" tax ON your income/wages is the employer half of the payroll tax.

For him to say that a 16% income tax is 19% "exclusive" is just mindless fun with a calculator.

There is no such thing as a federal "business tax". If Cruz is going to have a "business tax" it will be A NEW TAX.

All businesses are NOT corporations with shareholders. The 16% "business tax" coupled with the personal individual tax of a business owner is a small business/jobs killer.

He talks about business deductions as if Cruz invented it. ALL businesses deduct costs before taxes now.A new tax legislation that will resemble Obamacare before it's over.

Cruz is business and tax illiterate.

[CHISEL32]

When Cruz announced it on the debate stage I was initially supportive. But after hearing his corporate tax is actually a VAT I am opposed. Under no circumstances should we adopt a VAT. I appreciate what Cruz is doing but a VAT is essentially a hidden tax and the Democratic Party would have a field day raising it the second they got back in.

[marron]

If you want to “eliminate the IRS” as we know it, you have to eliminate deductions on personal income. You push the responsibility for collecting taxes to the employer, who is already withholding the money. With a simple table, the employer withholds the proper amount, and there is no question because your withholding is the same as anyone else’s at your salary.

If they withhold the wrong amount the responsibility is theirs, not yours. You never file for taxes. You just fill out the form when you go to work, and never again the rest of your working life.

Thats how it works in other countries; the idea that you have to hire accountants on a salary income is preposterous.

[lewislynn]

Many people are self-employed and don't have withholding. They also have expenses that need to be deducted before taxes are calculated...

It's sad that too many people don't understand how life works outside of their cubicle.

[marron]

If you are self-employed, you’re a business and you have to behave as a business. I, for example, am a business so I understand exactly what you are talking about. At one time in my life, though, I lived in a country where withholding for salaried employees was the responsibility of the employer. There were no deductions. No April 15 filing. Nothing. It wasn’t your responsibility. There was no way for you to make a mistake and it wasn’t your problem if a mistake was made. So I know that kind of system can be available for salaried people. For people who are in business for themselves, with materials to buy and costs to detail, then you are right, there is no escaping a more detailed accounting.