Ted Cruz's Simple Flat Tax Isn't All That Simple

Ted Cruz has unveiled his Simple Flat Tax plan that includes a single low, low personal income tax with a single rate of 10%. He also wants to eliminate the federal corporate income tax and the employee payroll tax, and replace them with a 16% Business Flat Tax. But according to Larry Kudlow and the Tax Foundation, he is really talking about a value added tax, a VAT. Here is what the Tax Foundation says about the Cruz plan. It’s actually pretty simple: there’s profits that go to shareholders, and there’s wages, salaries, and other compensation to workers. Both get taxed at the same rate: in this case, sixteen percent. In that sense, a subtraction-method value-added tax is actually just a simple combination of a sort of corporate income tax and an ordinary payroll tax. (Fittingly, Senator Cruz’s plan uses this VAT to eliminate the corporate income tax and the payroll tax.) In a way, you could say that nothing changes. Corporations still get taxed on...(Read Full Article)

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