Analysis by left-leaning Citizens for Tax Justice concludes presidential candidate’s plan to shut down the IRS and set up a flat tax would be devastating

Firebrand senator Ted Cruz’s tax plans are “crazy” and would cost the US at least $16.2tn, according to an analysis by thinktank Citizens for Tax Justice (CTJ).

The Republican presidential candidate who has made a name for himself attacking government spending set out specific tax plans earlier this week that he claimed would cost $1tn.

He also announced plans to shut down the Internal Revenue Service (IRS) and replace the taxman with a 10% flat-rate income tax, that he said would reduce personal income taxes by 60%.



Such a plan would cost $12.8tn over a decade, according to CTJ. Cruz would also eliminate corporate income tax, at a 10-year cost of $4.7tn, and repeal the estate tax, at a cost of $300bn, the left-leaning thinktank calculates.

Cruz’s other major proposal is to repeal payroll taxes for social security and Medicare (at a cost of $13.1tn) and replace those taxes with a value-added tax, or national sales tax, that would raise $14.7tn.

All in all, CTJ calculates the Cruz plan would reduce total federal revenues by about 37%.

On Tuesday at the fourth Republican presidential debate Cruz said his flat rate plan would mean “every income group will see double-digit increases – from the very poorest to the very weakest – of at least 14%. So if you’re a single mom, if you’re making $40,000 a year, what that means is an extra about $5,000 in your pocket to provide for your kids, to make ends meet. It has a powerful, powerful effect.”



Bob McIntyre, CTJ’s director, said the plan was unworkable and could be even more expensive than his calculation.

“Cruz’s claim that his plan would cost ‘less than a trillion’ depends critically on raising an enormous amount from his 16% VAT, which would apply to almost everything American consumers purchase. The remaining revenue shortfall would, in Cruz’s estimate, be offset by a supposed economic boom based on the discredited supply-side magic that has been part of the far right’s economic fantasies for decades,” said McIntyre.

“But Cruz’s math has a gigantic hole in it. He wouldn’t just make consumers pay his VAT, he would also make the government pay the tax (to itself) on all of its purchases, from warplanes to paper clips and the wages it pays to its employees. Cruz’s claim that the government can raise money by taxing itself accounts for a third of the alleged yield from his VAT. Without this sleight of hand, Cruz’s overall plan would cost more than $16tn over a decade and reduce total federal revenues by well over a third.”

McIntyre said his $16tn cost estimate may seriously understate the real cost of Cruz’s plan, since he says he will eliminate the IRS. “If he really means that, then he would apparently reduce total federal revenues by close to 100%, since without a tax collection agency, no one would pay any taxes,” said McIntyre.



CTJ has run similar analyses of plans by other Republican candidates including frontrunner Donald Trump, Marco Rubio and Jeb Bush. With those analyses CTJ calculated a distributional analysis, working out which income groups would receive the most benefits from the cuts. Rubio’s plan, for example, would give the top 1% a tax cut of $220,00 a year, according to CTJ. McIntyre did not do a distributional analysis for Cruz’s plan because “it’s too crazy”.

