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The Broader Tax Base Under Ben Carson’s Tax Plan

4 min readBy: Kyle Pomerleau

This week Dr. Ben Carson released his taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. plan. His plan would replace the current income tax code with a 14.9 percent flat taxAn income tax is referred to as a “flat tax” when all taxable income is subject to the same tax rate, regardless of income level or assets. on wage income and 14.9 percent tax on corporate income with the first 150% of the federal poverty level of wages exempt from taxation. It would eliminate taxation on capital gains, dividends, and interest income. All businesses would be able to fully expense capital investments and the estate taxAn estate tax is imposed on the net value of an individual’s taxable estate, after any exclusions or credits, at the time of death. The tax is paid by the estate itself before assets are distributed to heirs. would be eliminated. It would also eliminate a number of other taxes such as the AMT, the Net Investment Income Tax, and the Medicare SurtaxA surtax is an additional tax levied on top of an already existing business or individual tax and can have a flat or progressive rate structure. Surtaxes are typically enacted to fund a specific program or initiative, whereas revenue from broader-based taxes, like the individual income tax, typically cover a multitude of programs and services. .

His plan aims to cut the overall level of federal revenues. The proposals outlined above would certainly do that. I estimate that the cuts contained in his plan reduce revenues by $12.3 trillion over the next decade. However, our overall analysis found that the plan would reduce tax revenue by $5.6 trillion over a decade without accounting for any economic benefits of the plan.

This is because his plan pairs the large tax cuts with significant base broadeners. The Carson plan is based on what is called the “Hall-Rabushka Flat Tax.” The Hall-Rabushka Flat Tax was introduced in 1981 by economists Robert E. Hall and Alvin Rabushka. Their plan was put forth as a complete replacement for the federal income tax that would tax all income once, at a low, flat rate. While this plan looks like a simpler version of our current income tax system, it is actually a consumption taxA consumption tax is typically levied on the purchase of goods or services and is paid directly or indirectly by the consumer in the form of retail sales taxes, excise taxes, tariffs, value-added taxes (VAT), or an income tax where all savings is tax-deductible. in disguise.

As such, it eliminates many deductions and exemptions that are not consistent with a consumption tax. This includes eliminating many tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. s, such as education credits, the EITC, and the Child Tax Credit. It also would eliminate some very large exemptions such as the income exemption for employer-provided health insurance.

The elimination of these proposals brings in a lot of revenue under the Carson plan. For example, the elimination of all itemized deductionItemized deductions allow individuals to subtract designated expenses from their taxable income and can be claimed in lieu of the standard deduction. Itemized deductions include those for state and local taxes, charitable contributions, and mortgage interest. An estimated 13.7 percent of filers itemized in 2019, most being high-income taxpayers. s would bring in $1.9 trillion over a decade. The elimination of the employer-provided healthcare and other fringe benefit income exclusion would bring in $1.5 trillion. The elimination of all credits, except for the foreign tax credit, would bring in another $1.6 trillion.

Altogether, the base broadeners would reduce the cost of the Carson plan by half.

Revenue Impact of Tax Cuts and Base Broadeners under the Carson Plan


10-Year Revenue Impact (2015-2024

Eliminate ACA NIIT and Medicare Surtax


Eliminate Individual AMT


Flat 14.9 percent Tax Rate on Income


Eliminate Capital Gains and Dividends Taxation


Standard Deduction/Exemption 150% of FPL


Eliminate PEP and Pease


14.9 Percent Corporate Tax Rate/Repeal Corporate AMT


Full Expensing of Capital Investments


Eliminate Estate and Gift Tax


Sum of Tax Cuts


Eliminate the CTC and EITC and other Credits (Including Refundability)


Eliminate All Itemized Deductions


Eliminate SS Benefit Taxation and Eliminate Employer-Side Payroll Tax Deduction


Eliminate Employer-Provided Healthcare Exclusion


$100 Minimum Tax Payment


Eliminate Interest Taxation and Deductability


Eliminate Various Business Tax Expenditures


Sum of Base Broadeners


Note: Revenue impact when plan is fully phased in.

The advantage of having a significantly broader tax baseThe tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates. is that it allows a tax system to raise much more revenue at a much lower marginal tax rateThe marginal tax rate is the amount of additional tax paid for every additional dollar earned as income. The average tax rate is the total tax paid divided by total income earned. A 10 percent marginal tax rate means that 10 cents of every next dollar earned would be taken as tax. . This minimizes economic distortions and makes a tax code much more pro-growth. This is the main reason why we find that the Carson tax plan would increase the size of the economy over the long run.

The trade-off is that many of these base-broadeners hit low- and middle-income taxpayers hard. The elimination of the employer-provided healthcare exclusion would mean that many families would see their taxable incomeTaxable income is the amount of income subject to tax, after deductions and exemptions. For both individuals and corporations, taxable income differs from—and is less than—gross income. increase significantly. Even with the lower marginal tax rates, their tax bill would likely go up. We find that the much broader base results in a static tax increase on every income group, except for the top.

Distributional Analysis for Dr. Ben Carson’s Tax Reform Plan

Effect of Tax Reform on After-Tax Income Compared to Current Law

All Returns by Decile

Static Distributional Analysis

Dynamic Distributional Analysis

0% to 10%



10% to 20%



20% to 30%



30% to 40%



40% to 50%



50% to 60%



60% to 70%



70% to 80%



80% to 90%



90% to 100%



99% to 100%






Source: Tax Foundation Taxes and Growth Model, Oct. 2015.

Carson’s plan clearly shows some of the tradeoffs you need to make when developing a tax reform plan. You can create a broad-based, flat rate tax plan that will increase the size of the economy. However, it will likely come at the cost of raising taxes on many people.

Read more about presidential tax plans here.