The Economic Impact of Ted Cruz’s Plan

October 29, 2015

The Economic Impact of Ted Cruz’s Plan
Analysis Details Proposal’s Impact on Jobs, GDP, and Revenue

Washington, DC (Oct 29, 2015)—Yesterday, presidential candidate Senator Ted Cruz became the seventh presidential candidate to release a compressive tax reform proposal. According to details outlined in his Wall Street Journal op-ed, the plan includes provisions such as the introduction of a flat tax on individual income, the replacement of the corporate income tax with a “business transfer tax” or value-added tax, and the adoption of universal savings accounts.

Today, the nonpartisan Tax Foundation released an analysis of Ted Cruz's tax proposal. The report summarizes the plan’s many components and details its impact on the U.S. economy.

The report’s key findings include:

  • Senator Cruz’s (R-TX) tax plan would enact a 10 percent flat tax on individual income and replace the corporate income tax and all payroll taxes with a 16 percent “Business Transfer Tax,” or subtraction method value-added tax. In addition, his plan would repeal a number of complex features of the current tax code.
  • The plan would cut taxes by $3.6 trillion over the next decade on a static basis. However, the plan would end up reducing tax revenues by $768 billion over the next decade when accounting for economic growth from increases in the supply of labor and capital and the much broader tax base due to the new value-added tax.
  • The plan would significantly reduce marginal tax rates and the cost of capital, which would lead to a 13.9 percent higher GDP over the long term, provided that the tax cut could be appropriately financed.
  • The plan would also lead to a 43.9 percent larger capital stock, 12.2 percent higher wages, and 4.8 million more full-time equivalent jobs.
  • On a static basis, the plan would cut taxes by 9.2 percent, on average, for all taxpayers.
  • Accounting for economic growth, all taxpayers would see an increase in after-tax income of at least 14 percent at the end of the decade.

The other candidates who have proposed comprehensive plans include Jeb Bush, Bobby Jindal, Rand Paul, Marco Rubio, Rick Santorum and Donald Trump. Additionally, many other candidates have proposed various tax changes as standalone policy initiatives, rather than as a part of a comprehensive package. The interactive 2016 Presidential Tax Tracker allows users to compare the details of each candidate’s various plans and proposals.

For more details, read the full report: Details and Analysis of Senator Ted Cruz's Tax Plan

Media Contact:
Richard Borean
Manager of Communications
Tax Foundation
202-464-5120
borean@taxfoundation.org

The Tax Foundation is the nation’s leading independent tax policy research organization. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and local levels.

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The Tax Foundation is the nation’s leading independent tax policy research organization. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and local levels.