Tuesday, February 16, 2016

Cruz's Tax Plans for America

U.S. Republican presidential candidate Senator Ted Cruz (R-TX) walks from the stage at a campaign event on the USS Yorktown in Mount Pleasant, South Carolina February 16, 2016. REUTERS/Joshua Roberts SAP is the sponsor of this content. It was independently created by Reuters' editorial staff and funded in part by SAP, which otherwise has no role in this coverage. . SAP is the sponsor of this content. It was independently created by Reuters' editorial staff and funded in part by SAP, which otherwise has no role in this coverage.

GOP presidential candidate Ted Cruz is sticking to his conservative roots with his plans, revealed in November, pertaining to the future of the American economy. Among his ideas, Cruz claims that when he becomes president he will try to eliminate the IRS (Internal Revenue Service) and introduce a new tax plan. This tax plan would consist of a "flat 10 percent individual income tax" and a "16 percent broad-based consumption tax" (Reuters, Washington Post).

An analysis completed by the nonpartisan Tax Policy Center concluded that Cruz's plan would slash federal revenues by $8.6 trillion in 10 years, causing a substantial addition to our already increasing debt. Additionally, these flat income taxes would more largely impact poorer Americans rather than middle- and high-income taxpayers. In fact, these taxes would substantially decrease the tax burden on the wealthy and would also slightly decrease the tax burden on middle-income families.

Cruz's campaign spokesperson Rick Tyler responded to the Tax Policy Center's analysis by saying that "'tax cuts create economic growth...economic growth creates more taxpayers who make more money and have more revenue to be taxed, which creates more revenue for the government'" (Washington Post).

Opponents of Cruz's tax plan also cite that historically large tax cuts by GOP presidents such as Ronald Reagan and George W. Bush have resulted in increased national debt. According to the Washington Post, these increases in national debt occurred because the economic growth that was predicted or proposed to happen afterwards, to hypothetically offset the decrease in federal revenue, never occurred.

After reading Tyler's response, I could not help myself from noticing the large gap in the vague phrase "'tax cuts create economic growth.'" Tyler elaborates on how economic growth would aid our government but never actually bridges the gap between tax cuts and economic growth. After reading about economic growth in tonight's homework, do you think that Cruz's tax plan will really increase economic growth? And if so, how? Also, what do you think about Cruz's proposal to get rid of the IRS? What consequences, good and/or bad, could this proposal possibly have? Lastly, do you agree or disagree with Cruz's policies. What are some alternative ideas for spawning economic growth for our country?



Louis Villa said...

Im not sure why he wants to get rid of the IRS. If he still wants to collect taxes, as it sounds he would, he would need to make some new agency that would do it and spending the time to get such an agency up and running sounds like a large waste of the money that he would be trying to collect. Also, it is interesting some part of Cruz's support base are in the lower class and would be dramatically hurt by his plan but continue to stand by Cruz

Kristen Tamsil said...

If Cruz's plan to have a flat rate income tax is real, then the role of the IRS is severely reduced as the tax code becomes very simple. Flat rate taxes are common in Eastern European countries, and some Western countries such as the Netherland (but much higher, 40%). I believe also that exceptions (such as deductions, corporate taxes) will make IRS continue to be relevant. There are no countries without the Tax man! However, the danger of flat tax is as the article indicated, the country will immediately receive less income. The promise of job creation, economic boost etc as a result of more available money in the hands of citizens and American Corporations in the past have not been realized, although only with a lower tax brackets of past Republican administrations. Unlike some of the countries who have succeeded in implementing a flax rate, America is such as huge county with large economy (the largest in the world) that implementing such as radical change to tax policies is equivalent almost to having all of Western Europe implement a flat tax rate system. I think also that implementing a flax tax at federal level would require richer states to collect money from the state citizens and corporations to make up the difference as there is less federal money coming to the states. I believe progressive tax system still makes more sense in a large and rich country like ours. If you make more money, you should spend more money back towards improving your city, your nations in general. The issue has not been about who should pay more taxes in the past. It's about how collected money is spent. This will not change when the tax system is changed. So let's fix the root cause of the problem. Holding federal and state level government spending accountable regardless of how the tax is collected, and how much.