I’m one of those people that likes to look into things myself. A while back I had people sending me information on the flat tax. Initially it sounded like a good thing, but as I said I like to check into things. I quickly changed my mind when I found out a flat tax is really a vat tax. More on that below. My mother always said you can’t get blood out of a turnip. The truly poor would fit that description. Taxpayer’s pay the taxes for those getting government assistance since they buy things with taxpayer dollars. Raising the taxes on them really doesn’t make much sense.
According to the Tax Policy Center; Trump’s tax plan would significantly reduce marginal tax rates on individuals and businesses and increase standard deduction amounts. The Trump plan is outlined in it’s entirety on Donald Trump’s site. Snip…
The Trump Tax Plan: A Simpler Tax Code For All Americans
When the income tax was first introduced, just one percent of Americans had to pay it. It was never intended as a tax most Americans would pay. The Trump plan eliminates the income tax for over 73 million households. 42 million households that currently file complex forms to determine they don’t owe any income taxes will now file a one page form saving them time, stress, uncertainty and an average of $110 in preparation costs. Over 31 million households get the same simplification and keep on average nearly $1,000 of their hard-earned money.
For those Americans who will still pay the income tax, the tax rates will go from the current seven brackets to four simpler, fairer brackets that eliminate the marriage penalty and the AMT while providing the lowest tax rate since before World War II:
|Income Tax Rate||Long Term Cap Gains/ Dividends Rate||Single Filers||Married Filers||Heads of Household|
|0%||0%||$0 to $25,000||$0 to $50,000||$0 to $37,500|
|10%||0%||$25,001 to $50,000||$50,001 to $100,000||$37,501 to $75,000|
|20%||15%||$50,001 to $150,000||$100,001 to $300,000||$75,001 to $225,000|
|25%||20%||$150,001 and up||$300,001 and up||$225,001 and up|
With this huge reduction in rates, many of the current exemptions and deductions will become unnecessary or redundant. Those within the 10% bracket will keep all or most of their current deductions. Those within the 20% bracket will keep more than half of their current deductions. Those within the 25% bracket will keep fewer deductions. Charitable giving and mortgage interest deductions will remain unchanged for all taxpayers.
Simplifying the tax code and cutting every American’s taxes will boost consumer spending, encourage savings and investment, and maximize economic growth.
Now let’s take a look at Ted Cruz’s plan and some of the dirty little secret’s he isn’t telling you. According to the Tax Policy Center;
Ted Cruz’s tax plan “represents probably the most radical departure from the current code,” said Goldsmith.
Cruz is looking to collapse the seven individual tax rates to a single 10% rate. Meanwhile, his proposal would also repeal the corporate income tax, payroll taxes for Social Security and Medicare, and estate and gift taxes. He would then introduce a new 16% broad-based consumption tax. Federal tax revenues would decline by $8.6 trillion over a decade, according to Tax Policy Center.
“His plan actually represents the biggest boon to the wealthy of any of these plans. But it’s a tax cut that’s very broad-based,” Goldsmith said.
“Today, companies already pay something like 1.5% of their revenues in corporate taxes, and another 7.65% to Social Security and Medicare, matched by the employee. The payroll taxes are imposed on wages that account for around 70% of corporate expenses. So, corporations are paying around 5.4% of sales (70% of 7.65%) in retirement benefits to the government on behalf of their employees. Assume they pass that cost along to customers, and our current corporate tax system already increases prices by around 7%.
Cruz wants to eliminate those taxes. But he would add new taxes totaling 19%. So all prices—for cars, cheeseburgers, bracelets, new houses—would immediately rise by something like 12%. According to Cruz, the big price hike would raise sufficient revenue to cover the total elimination of payroll taxes, and fund the shortfall from the big reduction in the federal income tax rate.
The plan has one major benefit: It’s broad base and simplicity. But it has two major drawbacks. The first is that it raises prices the same amount for everybody, rich and poor alike. Generally, nations put lower burdens on the basics, to make VATs progressive. They also make big transfer payments to middle class folks because their burden is perceived as higher than that of the upper class. Cruz isn’t proposing doing that.
The second problem is that the tax is hidden in the price of all products. People hate income taxes, and detest it when they’re raised, except sometimes on high earners. It would be extremely difficult for spending as a share of GDP to keep growing with our current tax system.
But it could explode with a VAT. That’s the lesson from Europe. Every time tax receipts drop in a recession, governments slyly lift the VAT. And it almost never comes back down, and neither does spending.”
The middle class WILL BE HURT more by the Cruz tax plan. Forbes reports on the Raw Deal for Middle Class Families;
“Under his income tax, Cruz permits the first $36,000 of income for a family of four to be deducted. That results in taxable income of $36,000. The tax before credits is $3,600, and this is reduced by $2,000 in child tax credits. The tax after credits is $1,600.
In a subtraction method VAT (the Cruz “business transfer tax”), wages are not deductible as a business expense. That means that wages are actually taxed twice under the Cruz plan. First, they are taxed as part of the VAT tax base. Then, they are taxed again when subjected to the personal income tax.”
Call me suspicious if you like, but I always look for an ulterior motive.