Ted Cruz Releases A Tax Plan That—To No One’s Surprise—Favors The 1 Percent
Last night, just minutes before the Republican presidential candidates took the stage for their debate in Boulder, Colorado, Sen. Ted Cruz released his tax plan. Among the stated goals of his tax plan is to make tax returns so “simple” that families could fill it out on a postcard (or, for the #Millennials, a phone app). How does he plan to do this? By replacing the current progressive individual income tax with one, single flat income tax with a rate of 10 percent; ditching the corporate income tax and payroll tax, which fund Social Security and Medicare, in favor of a new 16 percent “Business Flat Tax; and pushing a bunch of other Halloween treats for the wealthy.
If pieces of this sound familiar, it should: Cruz’s plan, just like his GOP rivals for the Presidency, would shower the wealthy few with some extremely generous tax gifts—just with different packaging. As with most other GOP tax plans out there, Cruz declines to provide some of the important details to explain clearly everything his tax plan would do, but here are a few key takeaways:
- Swapping taxes that help families with taxes that help the rich: The Cruz Plan subs the current progressive income tax, where people pay a higher rate as they move up the income ladder, with a 10 percent flat tax on income—no matter how much money they make. Flat income taxes like the one Cruz proposes are clearly a boon to the wealthy and often end up raising the tax bills of everyone else. A recent Center for American Progress report puts it succinctly: “Since the current tax system has a progressive rate structure—meaning that higher incomes are subject to higher tax rates—those at the top will always benefit the most from a flat tax, regardless of the level at which the single tax rate is set.” Even the conservative-leaning Tax Foundation estimates that the biggest gains from the Cruz plan would go to the wealthy few. In their analysis of the plan, the top one percent of tax filers see a staggering 29.6 percent boost in their after-tax income.
- Promising a “Business Flat Tax” that would mean a higher tax bill for struggling families: The Cruz plan is a little different from most other Republican tax plans in that it also proposes scrapping the corporate income tax in favor of a tax on consumption which Cruz calls a “business flat tax.” The problem is that he’s swapping a tax that falls primarily on the wealthy owners of corporations with a tax that will be borne by consumers or by workers in the form of lower wages. This is why switching to a tax like the one Cruz is pitching would hit struggling families harder than wealthy ones. Increasing taxes on things people buy effectively means that working families pay a bigger share of their income on taxes than people at the top, and Cruz’s plan could mean that employees of companies operating under the new tax system could take a bigger hit to their wages.
Pushing other big tax gifts to the wealthy: Cruz is also towing the Republican Party line on the estate tax, pledging to get rid of it—even though it only applies to the very wealthiest Americans, or those with estates worth more than $5.43 million. Only two out of every 1,000 estates will owe any estate tax at all in 2015.
BOTTOM LINE: While pieces of Sen. Cruz’s tax plan are undoubtedly a little novel when compared to the rest of the Republican field, the upshot is the same: yet more gifts to the wealthiest under the mantle of “tax reform.” Don’t be fooled by the gimmicks. Postcard or not, Ted Cruz is more interested in doing what he can for the richest Americans than he is for working and middle-class families.
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