The Reader’s Digest version of Sen. Cruz’s plan is that it:
- Replaces the present individual income tax with a 10% flat tax.
- Imposes a 16% subtraction method VAT.
- Eliminates the payroll tax.
- Eliminates the corporate income tax.
- Eliminates all personal deductions except the charitable deduction and the home mortgage interest deduction.
- Increases the exemption for dependents and the Earned Income Tax Credit.
- Depends heavily on growth assumptions for solvency.
- Would result in a federal revenue decrease of $768 billion over 10 years.
My observations about it are:
- I agree with Mr. Woodhill about the objectives of a tax system.
- The plan seems to be a solid one. You will note that it incorporates a number of things I’ve advocated here over the years.
- Finding offsetting cuts at the level required should be easy.
- If you can’t find the cuts, the plan will, ironically, become a poorly-constructed Keynesian stimulus plan.
- It would be a more effective way of discouraging tax avoidance schemes by corporations, e.g. inversions, than anything that Sen. Sanders or Sec. Clinton have proposed.
I also note that it will be extremely difficult to enact because of the large number of sacred oxen it will gore. Opposition to the plan will be fierce and will come from all directions.