According to a cost analysis by the Tax Policy Center – a Washington, D.C.-based research center – released Tuesday, Republican 2016 hopeful Sen. Ted Cruz’s tax proposal would cost $8.6 trillion over the course of a decade.
In addition to adding nearly $9 trillion to the deficit, the nonpartisan think tank estimates an additional $12.2 trillion would be tacked on the following decade.
Cruz proposed simplifying the tax code by eliminating the seven current tax brackets, replacing them with a 10 percent flat income tax rate. Businesses would also see a lower rate in the form of 16 percent value-added tax. Companies would be allowed to deduct for employer contributions to retirement plans, and employer and employee payments for health insurance. “Unclaimed depreciation, net operating losses and inventories and credits accumulated through 2016” could also be deducted, although it would no longer allow for deductions or exemptions on business sales to nonprofits or governments.
The corporate income tax, payroll taxes for Social Security and Medicare, the estate tax and the gift tax would all be eliminated under the plan.
“Most of the revenue loss would stem from repealing payroll taxes ($12.2 trillion), cutting individual income taxes ($11.9 trillion), and eliminating the corporate income tax ($3.5 trillion),” the analysis reads. “The VAT would raise $19.2 trillion over the decade, offsetting only 70 percent of the cost of the tax cuts.”
The Washington Post reports much of the lost revenue could be made up through spending cuts and the repeal of Obamacare.
Of the Republican 2016 field, Donald Trump’s plan is the only proposal that would increase the deficit more than Cruz’s proposal, raising it by an estimated $9.5 trillion over the course of 10 years.
The Cruz campaign stands by the plan, saying it does not take the economic growth it would cause into account.
“Tax cuts create economic growth,” Cruz spokesman Rick Tyler told the Associated Press. “Economic growth creates more taxpayers who make more money and have more revenue to be taxed, which creates more revenue for the government.”
According to an earlier analysis by the Tax Foundation, “the plan would also lead to a 43.9 percent larger capital stock, 12.2 percent higher wages, and 4.8 million more full-time equivalent jobs.”
— Alan Cole (@AlanMCole) February 16, 2016
The organization estimates the economy would grow 13.9 percent over a decade, which, when taken into account, would increase the deficit by $768 billion – far less than the Tax Policy Center’s estimate.
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