A Harsh Critique of the Ted Cruz Flat Tax Plan

As promised during last night’s Republican debate, Ted Cruz came out with his Flat Tax proposal today in a Wall Street Journal Op-Ed. The headline: A Simple Flat Tax For Economic Growth.  We asked one of our economic experts what he thought. His response is as follows:

Yahoo and Yippee!  Talk about the Democrats giving away free stuff.  The Republicans on stage complained they weren’t getting substantive questions.   They were, they just refused to answer.  Cruz’s economic adviser is appropriately named:  “Laughfer.”

For argument sake let’s pretend Cruz was going to tax the whole GDP by 10%  (actually he is not  because he has numerous deductions including $36,000 deduction for families of four, home mortgage deduction, charitable deductions and capital equipment deductions.)  The GDP is $ 17.5 trillion so his tax plan would yield less than $1.75 trillion (actually much lower because of the deductions probably more like $1 trillion).  Here is what we spend that is non discretionary:  Defense $630 billion, Social Security $860 billion, Medicare $520 billion and interest $225 billion for a total of $2.24 trillion.   So if we cut every other expense we would have a $500 billion deficit even if $1.75 trillion was collected in taxes.  The rest of the budget adds up to $1.4 trillion and includes $450 billion for Medicaid, $150 billion for veteran’s benefits and $100 billion for transportation.  Assuming discretionary benefits were not cut, the annual deficit would be somewhere between $1.9 trillion and $2.9 trillion.  
 
Are we supposed to take this proposal seriously?  Do the republicans really want serious questions on policy?   Now do you see why the debate put me in a bad mood.
 
Reagan, a Keynsian if I ever saw one,  did cut taxes but not on this magnitude.  It lead to the largest deficit as percentage of GDP in our county’s history when we were not at war.  Two years later he reversed some of his own tax proposals. Employment and GDP growth were both better under Clinton when taxes were raised.
 
Here is another substantive question that wasn’t asked.  Kasich, you want a mandatory  balanced budget.  During a recession when less taxes are collected and more benefits are paid, wouldn’t balancing the budget move us from a recession to a depression?
 
Who is going to bring sanity back to the Republican party?

 

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» Hosting said: { Jun 1, 2016 - 05:06:06 }

Indeed, they said the terrorist attacks have reordered the candidates in their mind, lifting Cruz and Sen. Marco Rubio and, for many, making Carson an afterthought.