The tax-reform proposal unveiled by Ted Cruz last week is as transformative, intellectually dominating and economically and politically revolutionary for 2016 as Kemp-Roth was in 1980. Indeed, even more so.
Cruz's plan would scrap the current income tax code and replace it with a simple, single, flat rate of 10%, to be paid by everybody on everything — wages, profits, capital gains, dividends, rent, interest and all forms of individual income. No one would be able to claim that billionaires pay lower tax rates than their secretaries or that the system is rigged to favor the rich over the middle class.
The payroll tax, the biggest tax on the poor and middle class, would be erased, with Social Security and Medicare financed in full with no deficits. Included is a $10,000 standard deduction ($20,000 for couples filing jointly) and a $4,000 personal exemption. It means the first $36,000 for a family of four is exempt from all taxes.
The plan retains the current Child Tax Credit and increases the Earned Income Tax Credit by 20%, both favoring poor and lower-income workers as well. So this new system is rigged to favor poor- and middle-class taxpayers.
Most taxpayers could file their income taxes on a postcard under this Simple Flat Tax reform. It means that "we can abolish the Internal Revenue Service as we know it," Cruz said.
The corporate income tax would also be abolished and replaced with a 16% business flat tax. The 16% rate would apply to a business' gross receipts from sales of goods and services, minus purchases from other businesses.
That involves immediate expensing, or deductions, for the costs of plants and equipment, and all other capital investment, which all involve purchases of inputs from other businesses.
That will promote investment in worker productivity — the foundation of rising wages — and in businesses providing good-paying, blue-collar jobs like heavy industry, mining, energy, farming, ranching and manufacturing.
But there would be no more corporate welfare, special-interest credits and deductions, or crony capitalism as under the current corporate income tax.Read the rest of NTLC's LEWIS K. UHLER AND PETER J. FERRARA op-ed HERE.
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