A flat tax and value-added tax could help small biz.
Is it time to simplify the tax code?
For small business owners who want a radically less-complicated way to do taxes, Sen. Ted Cruz’s tax plan is worth a look.
Instead of the six marginal income tax brackets that currently comprise the federal system, Cruz said he would implement a 10 percent flat tax on all income levels, according to a Tax Foundation report.
“On a static basis, the plan would cut taxes by 9.2 percent, on average, for all taxpayers,” the report stated. “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.”
Businesses would also see a tax cut under Cruz’s plan.
A 16 percent business transfer tax—also called a value-added tax—would replace the corporate income tax and payroll tax. A business transfer tax works differently from other taxes because it takes a percentage of a business’ profits instead of charging a tax on each transaction.
The plan would lead to 4.8 million new jobs, according to the Tax Foundation’s analysis.
“Together, we will reduce the burdens on every individual, every small business and every industry so that they will be free to expand and create new jobs,” Cruz wrote in a USA Today op-ed.
Cruz’s plan would slash taxes by $3.6 trillion over the next decade. But a good chunk of the lost revenue would be made up by an increase in “economic growth from increases in the supply of labor and capital and the much broader tax base due to the new value-added tax,” according to the Tax Foundation.
Adjusted for economic growth, government tax revenue would fall $768 billion under his tax plan.
The lower tax rate should incentivize investors, though, according to the Tax Foundation. The economy is predicted to grow 13.9 percent, and wages to rise 12.2 percent, the foundation estimated.
*Note: This news coverage does not equate to an endorsement of any candidate by NFIB.
PREVIOUS TAX COVERAGE:
What Hillary Clinton’s Tax Plan Would Mean for the Economy
Trump’s Plan to Simplify the Tax Code
Bernie Sanders’ “Aggressive” Tax Plan
Photo credit: Gage Skidmore
