Senator Ted Cruz of Texas has proposed a tax plan that involves a rather unusual tax not currently seen in the United States. I’m pre-emptively writing this post to try to help people understand how this tax would work, because in my experience very few American journalists or even economists know how it would work. It’s actually a little simpler than the fancy nomenclature would suggest, and it can be explained through its similarities with existing U.S. federal taxes. I’ll try to make this a little easier here.

What Is Ted Cruz’s Business Flat Tax?

Ted Cruz’s “Business Flat Tax” is what most tax policy experts would call a “tax-inclusive subtraction-method value-added tax” (VAT) or a “business transfer tax” (BTT). These terms are pretty technical, so I’ll try to distill them down into something a little bit easier.

What this means, in plainer terms, is that it’s a broad tax on all kinds of income, levied on businesses and organizations. You, personally, wouldn’t have to file it for yourself. Instead, it would be taken care of at the organizational level.

Read the full article at the Tax Foundation: Ted Cruz’s “Business Flat Tax:” A Primer