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Cruz tax plan would lower federal revenue, give tax cuts to wealthy: Analysis

A report on the Republican nominee's policy was published by the Washington-based Tax Policy Center on Tuesday.

U.S. Republican presidential candidate Senator Ted Cruz (R-TX) walks from the stagReuters

Ataxplanproposed by Republican presidential candidate Ted Cruzwould cut federal revenues by $8.6 trillion over 10 years, adding substantially to the debt, according to an analysis published on Tuesday by a nonpartisan research center.

Cruz'splan, unveiled in November, would create a flat 10 percent individual incometaxthat with other changes would mainly benefit high-income households, the study by the Washington-basedTaxPolicy Center found. (http://tpc.io/1ToCN7M)

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Other changes include repealing the corporate incometax, as well as payrolltaxes for Social Security and Medicare, and estate and gifttaxes; increasing the standard deduction and eliminating most other deductions except for mortgage interest and charity; and adding a broad-based 16 percent value-added consumptiontax.

"Theplanwould cuttaxes at most income levels, although the highest-income households would benefit the most and the poor the least," theTaxPolicy Center said.

The value-addedtaxproposed byCruz, a Senator from Texas who won the Iowa caucuses among Republicans last month, would replace only 70 percent of the costs of thetaxcuts, according to the center.

Cruzis a favorite of the conservative Tea Party movement who helped provoke a 16-day government shutdown in September 2013 with his opposition to a spending bill. The goal was to gut the healthcare law known as Obamacare.

The TPC analysis noted that high-incometaxpayers would see an averagetaxcut in 2017 of about $6,100 or some 8.5 percent of after-taxincome, while those with annual incomes over $3.7 million would see an average cut of nearly 29 percent, or more than $2 million.

"Households in the middle of the income distribution would receive an averagetaxcut of $1,800, or 3.2 percent of after-taxincome, whiletaxpayers in the lowest quintile would receive an averagetaxcut of $46, or 0.4 percent of after-taxincome," the TPC said.

The changes would "boost incentives to work, save and invest," but the lower revenue would require unprecedented cuts in government spending to avoid borrowing that would raise interest rates and discourage private investment, it said.

TheTaxPolicy Center is a joint venture of the Urban Institute and the Brookings Institution, two Washington-based think tanks. It has issued studies of other candidates' proposals.

 

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