Posted on 02/06/2016 5:02:50 AM PST by Kaslin
With the first real votes being cast in the presidential race Monday, this is an opportune moment to do some last-minute comparison shopping on the candidates' tax reform plans. On this issue there's a lot to cheer about. All the Republican candidates have crafted plans that would slash tax rates for everyone and most would vastly simplify the thousands of pages of IRS tax code.
Ted Cruz and Rand Paul have endorsed flat-tax plans that, for full disclosure, were designed by Arthur Laffer and myself. These plans have drawn some criticism from the Right of late, though these attacks are mostly baseless.
Ben Carson wants a low-rate flat tax, too, and he would heroically eliminate all special interest deductions and carve-outs. Mike Huckabee is pushing a national sales tax to entirely replace the income tax. Jeb Bush, Chris Christie, John Kasich and Donald Trump want to cut personal income tax rates 20 percent to 25 percent while eliminating indefensible loopholes.
One common goal of nearly all these plans is to turbocharge growth by dramatically lowering the business tax rate (now the highest in the world) and reducing the punitive double taxation of investment income. Most GOP plans would cut the corporate/business tax to 15 percent to 25 percent.
All of this contrasts sharply with the two Democratic candidate plans. Hillary Clinton and Bernie Sanders seem to be in a weekly bidding war to see who can raise tax rates the most. Clinton favors hiking maximum capital gains and personal income tax rates to the mid 40s or higher. Sanders said last week that he wouldn't go to a 90 percent tax rate, but anything below that seems to be fine by him.
The Tax Foundation has recently ripped both these plans, finding that they would lower business investment and cut middle-income pay by about 10 percent over a decade. Somehow, making the middle class poorer is supposed to strike a blow for equality. Since most of the rich who would be plucked are business owners and investors, wage and salary workers will suffer the collateral damage from the class warfare potshots.
In short, wealth redistribution is not an economic growth or jobs program.
The sparks are flying on the Republican side over which tax plan works best for American workers. Marco Rubio is running attack ads slamming Cruz's flat tax as something Ronald Reagan would have opposed. He says that the Cruz plan is a European-style "value-added tax."
This is a bit of a scurrilous jab because almost all flat-tax plans have this type of business net income tax -- dating back to the Steve Forbes plan 20 years ago.
But it is hard to see why conservatives wouldn't be excited about what Cruz and Paul have put forward. It's what tax filers have been waiting decades for:
First, the Cruz/Paul plans would give America the lowest tax rates since the income tax was devised 100 years ago. For this reason, these plans are estimated by the Tax Foundation to grow the economy by a gigantic $2 trillion extra GDP per year after 10 years. That's exactly the opposite effect of the Clinton and Sanders plans.
Second, both the Cruz and Paul plans eliminate almost all deductions and credits -- which is how they get the rate so low. The IRS could be dramatically shrunk in size. Don't forget, when there are fewer deductions, there are fewer ways to cheat on your taxes. The lower the tax rate, the less incentive to cheat, which means greater voluntary compliance.
Third, because the Cruz and Paul plans are "border adjustable": Imports are taxed at the flat rate when they are brought into the U.S., but American products sold abroad are not taxed at all. This would level the global playing field for American manufacturers, tech firms and drug companies and bring these jobs scampering back home. Trump's tariff ideas could be put back on the shelf, and those who want "fair trade" should celebrate.
Rubio and his allies are charging that the flat tax that imposes a low tax rate on the broadest possible business tax base, which includes wages and salaries and benefits, will quickly rise from the teens to the twenties or even 30 percent.
What is ironic about these attacks is that those rates that Rubio imagines would still be lower than his own plan's income tax rate of 35 percent.
It's hard to imagine that the two most relentless anti-big-government crusaders in Congress, Rand Paul and Ted Cruz, have a secret tax plan to supersize the government.
Finally, here is why this is not a value-added tax like the ones in Europe. In Europe, the VAT has been an add-on tax to existing income and payroll taxes. The flat tax is a replacement for the corporate and payroll taxes.
Some conservatives complain that the tax is too efficient and will raise too much money. Liberals will try to raise the tax rates to finance even more spending. But no matter what the tax system, liberals always want to raise tax rates. Any new pro-growth tax system is subject to the same criticism. In other words, this is the argument to do nothing with our tax system and retain the mess of a tax code we have right now.
Rubio is right to advise that, with any flat-tax, Republicans should press for a supermajority-vote requirement in the House and Senate to raise the rate.
I'd take any of the GOP plans over the current tax laws. But it's hard to see how cutting individual tax rates from 40 percent and business taxes from 35 percent down to 17 percent or less isn't a big winner for the economy. The flat tax won't make America look like Europe; it will make America race past Europe and the rest of our competitors. That's conservative and pro-growth -- and fair.
This idea of taxing total receipts which is what Cruz is talking about it not new. As a small business owner I had to deal with it for years from DeKalb County where my office was located. I just lied about my total receipts for years or it would have killed me financially to pay the tax every year.
The business part of Cruz’s tax plan is terrible. I’m not surprised as Cruz has never run a business in his life. Trump understands what its like. His tax plan is far superior.
I would like to understand.
Can you explain or point to a creditable source to help me do so?
Ask your accountant about it. He will likely be glad to explain it.
A flat rate 16% is terrible?
Granted, an NRST would be preferrable, but getting rid of the convoluted crap we have now would be an improvement.
Yes a flat rate of 16% is great if its based on profits. But Cruz’s plan is not based on profits. Its based on total receipts and then you can take out business expenses but not wages. So you are paying 16% tax on money you don’t even keep. How may jobs would you want to create so you could pay 16% tax on the wages? Not many is the answer.
I successfully ran a small business for 17 years and this is a really crappy idea for small business people. Its because Cruz has always worked for a paycheck not for himself.
The corporate income tax – the source of endless waste and fraud in our tax system – will be eliminated. No longer will American businesses face the highest top tax rate, 35 percent, in the developed world. The trend of American companies and jobs moving off-shore will stop. Instead, all companies will pay a simple, low rate Business Flat Tax of 16 percent. The tax will be based on revenues minus expenses such as equipment, computers, and other business investments.
Also eliminates the payroll tax...
“The tax will be based on revenues minus expenses such as equipment, computers, and other business investments.”
What did I just say? Revenues = total receipts.
“minus expenses such as equipment, computers and other business investments” But not wages. You as a business owner will now pay 16% tax on wages which is not profit to you. My payroll was about $58,000 per year so that would be $9,280 or about a $4,650 addition onto my expenses and then I would be paying 16% on my wages and then another 10% on that money for personal taxes when I file my individual tax return. Thanks Ted but I’ll vote for Trump. 15% on profits.
Who cares?!?!?
The bills HAVE to be paid; one way or another!!
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Who has the biggest spending slashing knife would impress me!
We have invisible VAT now.
EVERY business pays some kind of taxes on something, and that cost of doing business is passed onto the next purchaser of the product.
Every step of the way, more and more taxes are added to the final product.
Well you are currently paying for 1/2 your employees payroll taxes and 1/2 of their Medicare taxes. Those payments go away. You didn’t include this benefit to your business in your analysis.
You employees will also not be paying payroll taxes.
The departments to be cut are detailed at tedcurz.org
Btw under Cruz’s plan imports are taxed and exports are not taxed.
This will return many jobs back to America.
I'm beginning to smell a national sales tax/VAT tax.
Finally, here is why this is not a value-added tax like the ones in Europe. In Europe, the VAT has been an add-on tax to existing income and payroll taxes. The flat tax is a replacement for the corporate and payroll taxes.
It IS a VAT tax. A tax isn't a VAT unless the taxing authority collects other taxes as well? Argument FAIL.
Both Cruz and Paul are advocating a NMST. You know how that'll shake out -- it'll be tacked on to income taxes by the PTB. We'll be paying income taxes + VAT taxes designed to replace corporate taxes.
Deal-breaker. What the hell is Cruz doing, supporting scum like this?
One of the most unfortunate things that happened during the Reagan Administration was that George Bush (41) reaped a ton of patronage as his price for supporting Reagan in the general, instead of trying to submarine him like Rockefeller and Scranton did in 1964 to poor Barry Goldwater.
Bush got a Treasury appointment for Charls (no "E") Walker, one of the most notorious power lobbyists in "K" Street, who then used that post to lobby incessantly in public media (esp on PBS financial shows) for a VAT to replace the corporate income tax.
A sucker play to fleece the rubes. VAT/NMST hucksters always tell us that "customers pay all corporate taxes anyway, in the price". That isn't nearly as true as it would be if corporate taxes were simply shifted to the public to pay directly. It makes a world of difference, who is responsible for the revenue in the first place. Businessmen count on that difference being too subtle for the public to grasp, while they fleece us.
Who could induce Cruz to support a VAT/NMST?
Goldman Sachs, the Great Vampire Squid.
Damn it. Cruz is their boy after all.
Thanks for throwing a shadow on my support of Cruz. Slippery immigration proposal plus stealth VAT / NMST? We're screwed.
Trump's a liberal, Rubio's a RiNO butt-boy, and now Cruz is in their pocket, too, on immigration and tax policy.
It's obvious why they're pushing the NMST/VAT .... they'll need it when income-tax receipts begin to fall per-family, because immigrants have sandbagged everyone's comp.
We are so screwed.
O! How wonderful!
So instead, the responsibility of replacing that revenue will all come to me, a retiree, in the form of a VAT/NMST.
On top of income taxes.
What a wonderful deal. I can't wait to vote for the guy who has promised Wall Street that wonderfulness, delivered on my back.
Am I getting through to you?
Yeah, tigers prefer tethered goat.
Be sure and go after the retirees. They've got no income, tax hell out of their spending!
But not by statute. Huge difference, if I'm paying it bundled with a quid-pro-quo transaction, or just "screw you" paying it on top of everything.
In replacement of income taxes...
Don’t be deliberately obtuse.
Your spending is already being taxed. As is your property, your automobiles, etc...
Might wanna get that myopia checked.
bkmk
Let's simplify everything by eliminating money altogether.
We could all go to work like we do now, and the government could just dole out to us, all the things we need, from it's vast storehouse!
All of the folks who now work in some way in the collecting of taxes could be re-assigned jobs checking the work output of others.
So instead, the responsibility of replacing that revenue will all come to me, a retiree, in the form of a VAT/NMST.
I suppose that America imports NOTHING from countries with a VAT now; right?
If American companies did NOT pay 35%; then their products could be MORE than 35% cheaper!
That ought fix the dastardly ferineers that flood our shores with cheap junk!
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