Cruz tax plan

It is not easy to compare tax plans by various candidates but Ted Cruz came out with one yesterday and I see it as follows. A married couple with no children earning $50,000 currently pays $3,502 in federal income plus $3,825 in payroll tax for a total tax of $7,327. Under the Cruz plan this same couple would pay $1,400 in federal tax plus $1,071 in payroll tax for a total of $2,470. Don’t get too excited yet. Cruz also proposes a value added tax (VAT) of 16%. He says the corporations will pay for this but the old story is that corporations don’t pay tax they just pass the cost onto their customers. The VAT is based on consumption that is you pay for it when you buy something and since most couples earning $50,000 will spend all their after tax money they will pay $50,000 less $7,327 or $42,673 and 16% if that is $6,827. Assuming they spend all of their net income their total taxes will increase from $7,327 to $9,297. Now let’s look at one of those rich people called the one-percenters, a married couple earning $500,000 a year. Under current tax law this couple will take home $244,000. Under the Cruz plan this same couple will pay 10% on the net income and 16% VAT. If they spend all of their money they will net $370,000 which is $126,000 more.