In the recent Republican presidential debate in North Charleston, S.C., U.S. Ted Cruz’s tax plan, envisioning tax returns that fit on postcards, would whack businesses twice over, Marco Rubio says. You can easily see why a bold tax reform plan might include one. The good news for Cruz is that VATs are widely used around the world because economists generally regard them as an efficient way to raise revenue.
While its base is identical in economic terms to that of the credit-invoice VAT seen in many OECD countries, it is calculated from corporate accounts, not on individual transactions. A business transfer tax is also often known as a subtraction-method value-added tax. The tax would exempt from taxation the purchase of health insurance. This would include the payroll of business, government, and non-profit institutions, as well as net imports. This tax is levied on all business profits, less capital investment. Later, the foundation elaborates further:Įnacts a broad-based, 16 percent "Business Transfer Tax" or value-added tax. In addition, his plan would repeal a number of complex features of the current tax code. 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. Don't take my word for it - ask the conservative Tax Foundation, which is rather enthusiastic about Cruz's tax plan (the foundation says it will lead to a 13.9 percent increase in economic growth) but is very clear that it is a VAT: It's not entirely clear why the semantics of what you call the tax are important, but Rubio accurately pointed out that "you find that tax in many countries in Europe," and it's possible Cruz is reluctant to admit that he's proposing to imitate an aspect of European public policy.īut whatever Cruz's reason for denying that his plan calls for a VAT, his plan calls for a VAT. Cruz insisted that on the contrary his business flat tax is something very different. Marco Rubio accused Ted Cruz of creating a new value-added tax (or "VAT tax," as Rubio called it) in his tax plan in a robust exchange at Thursday night's Republican debate.
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