February 15, 2016
By Ryan Ellis
There were three interesting exchanges on taxes in the South Carolina GOP debate. Below is the transcript of each one followed by my brief take on it.
Cruz on the VAT
MODERATOR: Senator Cruz…[y]ou have proposed a consumption tax. You call it a flat tax. Some analysts compare it more akin to a value added tax. From a perspective of economic growth and building wages, how does that work? And how would you address the long standing conservative concern that something approaching a value-added tax will be used to constantly increase those rates to pay for future government spending and become an escalator of taxation, not of growth?
SEN. TED CRUZ (R-TX): Well, let me say at the outset that everyone here understands, everyone understands at home, that the middle class has been left behind in the last seven years of the Obama economy. And we’ve gotta bring jobs back. We’ve gotta get people out– back to work. We’ve gotta get wages going up again. We’ve gotta get people moving from part-time work to full-time work.We all agree on that, but it’s not gonna be solved with magic pixie dust. It’s not just gonna be solved by declaring into the air, “Let there be jobs.” We actually have to understand the principles that made America great in the first place.
Now, where do you get economic growth? If you look at cause and effect over our nation’s history, every time we lessen the burden of Washington on small business owners, on job creators, we see incredible economic growth. You do that through tax reform and regulatory reform.
My tax plan, typical family of four. First $36,000 you earn you pay nothing in taxes. No income taxes. No payroll taxes. No nothing. Above 10% everyone pays the same simple flat 10% income rate. It’s flat and fair. You can fill out your taxes on a postcard and we abolish the I.R.S. And if you wanna see the postcard, I’ve got it on– on my website. (APPLAUSE)
MAJOR GARRETT: Right. But to the question– because conservatives have floated with this idea conceptually for a long time. But especially on this consumption value-added tax system, in Europe, where it exists, it has become an escalator of taxation to feed government spending. And that’s why conservatives have long resisted it. Why– and what would you do as president to make sure that doesn’t happen?
SEN. TED CRUZ (R-TX): Well, Major, the– the business flat tax that is in my tax plan is– is not a VAT. A VAT in Europe is a sales tax. The business flat tax is not a sales tax. It is a tax of 16% imposed fairly and evenly across the board on all businesses.
And one of the things that’s critical is we’re doing that in conjunction with abolishing the corporate income tax. With abolishing the Obamacare taxes. With abolishing the payroll taxes, which are the biggest taxes paid by most working Americans. And with abolishing the death tax, which is cruel and unfair.
And you asked about economic growth. The Non-Partisan Tax Foundation estimated that the Cruz simple flat tax would produce $4.9 million new jobs, would increase capital investment by 44% and would lift everyone’s incomes by double digits. That’s how you turn the country around. Not just hoping and praying for it, but implementing policies that work.
A few things here:
First, it’s absolutely absurd that Ted Cruz continues to deny that his subtraction method VAT plan is, in fact, a VAT. It’s not a matter of opinion. It’s a matter of simple tax policy fact. If you’re going to propose a VAT, own it.
Second, as Ramesh Ponnuru pointed out today in NRO, a family of four making $36,000 might not pay the 10 percent flat tax. But they sure will see their wages taxed by the 16 percent subtraction method VAT. Again, every tax plan has upsides and downsides. But you have to own your plan.
Read the full article at Forbes.com: Taxes and the South Carolina Republican Debate