Tag Archives: Tax Plan

Is Marco Rubio right about his attacks on Ted Cruz’s business tax plan?

Texas Senator Ted Cruz
Texas Senator Ted Cruz

Here’s an article from Dan Mitchell of the Cato Institute, published with Forbes magazine. Cato economists are libertarians, so they are good at fiscal policy, but terrible at moral and social issues.

It says:

But here’s the part of Cruz’s plan that raises a red flag. He says he wants a “business flat tax,” but what he’s really proposing is a value-added tax.

His proposal is a VAT because wages are nondeductible. And that basically means a 16 percent withholding tax on the wages and salaries of all American workers (for tax geeks, this part of Cruz’s plan is technically a subtraction-method VAT).

Normally, I start foaming at the mouth when politicians talking about value-added taxes. But Senator Cruz obviously isn’t proposing a VAT for the purpose of financing a bigger welfare state.

Instead, he’s doing a swap, imposing a VAT while also getting rid of the corporate income tax and the payroll tax.

And that’s theoretically a good deal because the corporate income tax is so senselessly destructive(swapping the payroll tax for the VAT, as I explained a few days ago in another context, is basically a wash).

But it’s still a red flag because I worry about what might happen in the future. If the Cruz plan is adopted, we’ll still have the structure of an income tax (albeit a far-less-destructive income tax). And we’ll also have a VAT.

So what happens 10 years from now or 25 years from now if statists control both ends of Pennsylvania Avenue and they decide to reinstate the bad features of the income tax while retaining the VAT? They now have a relatively simple way of getting more revenue to finance European-style big government.

And also don’t forget that it would be relatively simple to reinstate the bad features of the corporate income tax by tweaking Cruz’s business flat tax/VAT.

[…]Notwithstanding my concern about the VAT, Senator Cruz has put forth a plan that would be enormously beneficial to the American economy.

Instead of being a vehicle for punitive class warfare and corrupt cronyism, the tax code would simply be the method by which revenue was collected to fund government.

Rubio ignored all of those details during the debate, and instead accused Cruz of bringing in a VAT tax that is the same as those in Europe, with no other taxes being lowered or eliminated to compensate. It’s dishonest, but he was probably hoping that Cruz would not have time to respond.

Here’s Cruz’s response from the debate last night:

In Rubio’s question, he deliberately misrepresented Cruz’s proposal by neglecting to mention all the taxes that Cruz would eliminate. Dan Mitchell mentioned them. I don’t understand why Rubio is smearing a fellow conservative with such attacks. Unless maybe Rubio is not a fellow conservative at all? I’ll be looking at that more next week.

This is not the first time that Rubio has tried to distort facts in order to smear Ted Cruz. Honestly, I used to have Rubio listed as my 5th choice, but he keeps smearing Cruz with dishonest attacks that are easily cleared up with a little knowledge from experts. I have therefore removed Rubio from my list of candidates.

Debate evaluations

Google Trends shows that the debate was essentially a showdown between Trump and Cruz, based on search engine traffic during the debate:

Google Trends analysis of search terms during Fox Business GOP primary debate
Google Trends analysis of search terms during Fox Business GOP primary debate

There are some reports out now on who did well in last night’s debate.

And The Weekly Standard has a new podcast up.

The FIVE departments that Ted Cruz would shut down if elected president

Texas Senator Ted Cruz
Texas Senator Ted Cruz

Wow, I only want to shut down three of them.

Here’s Ted Cruz explaining his plan in National Review.

Tax plan:

At the last Republican presidential debate, I presented the Simple Flat Tax — which, for a family of four, exempts the first $36,000 from all income tax, and above that amount collects one low rate of 10 percent for all Americans. It eliminates the death tax, the payroll tax, the corporate income tax, and the Obamacare taxes; ends the corporate carve-outs and loopholes; and requires every business to pay the same simple business flat tax of 16 percent. That plan will unleash unprecedented growth, create millions of new jobs, raise after-tax incomes for all income levels by double-digit percentages — and abolish the IRS as we know it.

[…]First, to begin the process of reducing the scope and cost of government, I have identified the Five for Freedom: During my first year as president, I will fight to abolish the IRS, the Department of Education, the Department of Energy, the Department of Commerce, and the Department of Housing and Urban Development. To do that, I will press Congress relentlessly. And I will appoint heads of each of those agencies whose central charge will be to lead the effort to wind them down and determine whether any of their programs need to be preserved elsewhere because they fall within the proper purview of the federal government. I do not anticipate the lists to be long.

The IRS and these cabinet agencies are unnecessary and will be shuttered for the following reasons:

Internal Revenue Service – to dramatically simplify the tax code and enable everyone to fill out their taxes on a postcard or smartphone app.

Department of Education – to return education to those who know our students best: parents, teachers, local communities, and states. And to block-grant education funding to the states.

Department of Energy – to cut off the Washington cartel, stop picking winners and losers, and unleash the energy renaissance.

Department of Commerce – to close the “congressional cookie jar” and promote free enterprise and free trade for every business.

Department of Housing and Urban Development – to offer real solutions that lift people out of hardship, rather than trapping families in a cycle of poverty, and to empower hurting Americans by reforming most of the remaining programs, such as Section 8 housing.

Second, besides these unnecessary cabinet agencies and the IRS, we will sharply reduce the agencies, bureaus, commissions, and other programs that are harming American households and businesses — including the Consumer Financial Protection Bureau. Together with the four departments and the IRS, our conservative estimate of the effects of these eliminations and reductions is a savings of over $500 billion over ten years. And that’s just a start. The true savings — of scaling down the scope of the federal government, of restoring to the states their rightful authority, and of unleashing the people’s ingenuity — cannot be measured by a number. We are uprooting the centralized power that we have lived under for far too long.

Even if he just pared them down, that would still be great. And he’ll do it, too. I don’t doubt that.

My list is just the Department of Education, the Environmental Protection Agency, and the Internal Revenue Service. I guess I would be fine with getting rid of the Department of Energy, as well, a lot of good they do for economic growth. It’s important to understand that America is a federalist system. We have layers of government. When something ceases to be the responsibility of the federal government, it doesn’t just disappear, it gets pressed down to the state level, and perhaps even the local level. You can see how much sense that makes with something like environmental protection, energy and education. And for the IRS, we just need to simplify. They have to go, because they abused their power to go after conservatives. We should shut them down, and cancel the pensions and benefits of everyone above the level of resource manager.

One thing is for sure – if you eliminate 5 federal departments, then yes, you can afford to run a much lower flat tax rate. I don’t think he can get down to 10%, but 15% is doable. We really do have too much government, and taxes really are too high. We need to let families and workers and businesses keep their own money. Really not sure why so many young people want to keep borrowing, spending, and making government bigger and bigger. Doesn’t government help you as much as private businesses? How about your employer… does government help you as much as your paycheck? Really don’t understand young people. I suspect they don’t even understand their own madness.

Santorum campaign relies on donated buses and door-to-door campaigning

From socially liberal Business Week.


With minimal campaign organization and less funds than his rivals, Santorum has boosted his campaign with the votes of a network of evangelical Christians, anti-abortion rights activists and home-schooling parents who are resisting frontrunner Mitt Romney. In a March 8-11 national Bloomberg Poll, likely voters who described themselves as “born again” or evangelical Christian backed Santorum by 42 percent compared with 28 percent for Romney.

“Romney’s inability to close out the race has given Santorum a golden opportunity to unite social conservatives behind him, and they are getting in line,” said Keith Appell, a Republican public relations executive who works with social conservative groups.

Parents who home school their children are spreading the message on Facebook. Southern Baptist pastors are promoting Santorum’s candidacy to their members. Anti-abortion rights advocates are boarding the “Rick Bus” for multi-state voter mobilization tours.

Two days before Tennessee’s primary, Santorum attended services on March 4 at the Bellevue Baptist Church, a 7,000- member organization in the Memphis suburbs.

[…]Santorum won the state’s primary.

Such efforts are helping the former Pennsylvania senator compensate for a campaign operation that trails Romney in every measure of strength: money, staff, and organization.

Romney raised $63 million for his campaign through January, compared with $7 million by Santorum. Santorum had spent $148,806 on salaries and benefits through January; Romney’s personnel costs have exceeded $4.5 million. Santorum recently opened a national campaign headquarters in Virginia; Romney’s offices near Boston Harbor have been open nearly a year.

He’s tapping into well organized yet loosely affiliated groups of activists whose leaders consider Santorum one of them. “Santorum has piggybacked on the top of other existing grassroots networks,” said Cleta Mitchell, his campaign counsel. “They’re basically activating their networks on his behalf.”

[…]Romney and a political action committee supporting him ran 64 percent of the commercials that aired in Mississippi and Alabama in the month before the primaries, compared to just 15 percent aired by Santorum’s backers, according to data from New York-based Kantar Media’s CMAG, which tracks advertising.

The article tries to paint Santorum as a social conservative, and he is. But he also has a solid economic plan, that’s targeted to the middle class, and especially manufacturing. Basically, Romney is burning through millions and millions of dollars to buy the nomination. But ordinary conservatives, especially social conservatives, like Rick Santorum best.

Rick Santorum