Cruz's plan would go further than others’ toward simplifying the tax code, reducing the number of people who itemize their taxes by 96 percent. | Getty Cruz's plan would radically change tax code The Tax Policy Center said Tuesday that his plan would add at least $8 trillion to the debt over the next decade.

Republican presidential candidate Ted Cruz has proposed one of the most radical overhauls of the tax code of any of the White House contenders, a new report shows, one that would balloon the debt while overwhelmingly favoring the rich.

The Tax Policy Center said Tuesday that his plan would add at least $8.6 trillion to the debt over the next decade, and perhaps as much as $10 trillion once additional interest payments are included.


The wealthy would be the biggest winners, according to the group’s analysis, with the top 1 percent getting an average tax cut of $400,000. Those at the bottom of the income ladder would get a tax cut of just $46 in 2017, the analysis said, and by 2025 would actually see their taxes go up.

The hit to the budget is in the ballpark of what other Republican candidates have proposed, and would come at a time when the outlook for the government’s finances is already dire. The government will rack up some $9 trillion in additional debt over the next decade, the Congressional Budget Office said last month, and will routinely run trillion-dollar deficits by 2022.

Cruz's plan would go further than others toward simplifying the tax code, reducing the number of people who itemize their taxes by 96 percent.

And while Cruz has adamantly denied his plan would amount to creating a value-added tax on businesses — something that is anathema to many conservatives — the analysis said his plan would do just that.

“The plan is a major tax reform — it would represent a fundamental change in the way we tax people and businesses,” said Len Burman, head of the Tax Policy Center. "It would be much simpler than current law, and the proposals we've analyzed, but also very regressive."

The group, which has analyzed four of the Republican presidential candidates’ plans, said last week that Marco Rubio’s plan would add at least $6.8 trillion to the debt. It's working on analyses of Democratic presidential candidates Hillary Clinton's and Bernie Sanders's tax plans.

A Cruz spokesman did not immediately respond to a request for comment.

Cruz’s plan would blow up virtually every major part of the tax code: He would junk the progressive income tax structure as well as the Social Security and Medicare payroll taxes and the corporate income tax. All itemized deductions would be eliminated, except the ones for mortgage interest and for charitable deductions.

He’d replace all of that with a flat 10 percent tax on individuals, and a 16 percent levy on businesses.

Whether what Cruz calls his "business flat tax plan" would amount to a VAT has been hotly debated in Republican policy circles, and repeatedly denied by Cruz in the presidential debates. "The business flat tax that is in my tax plan is not a VAT," he said Saturday. "A VAT in Europe is a sales tax. The business flat tax is not a sales tax."

Many Republicans loathe anything resembling a European-style VAT because they believe it would be able to easily raise vast amounts of revenues, which would allow politicians to finance expansions of government programs.

Cruz’s tax is not exactly like the one used widely in Europe, but it nevertheless amounts to a variation on it, the Tax Policy Center said.

"The base of this new tax would be the difference between a firm's sales and its purchases from other businesses, which is equal to the value-added of the business," the report said. "This tax is what is known as a 'subtraction method' VAT."

The group estimated Cruz's VAT would generate $19.2 trillion over a decade.

His plan would slash the cost of making business investments, the group said, in some cases cutting the effective marginal rates on things like structures and inventories by more than 20 percentage points.

But that's also the main reason why his plan is projected to raise taxes on the poor.

Under Cruz's proposal, businesses would no longer be allowed to deduct the cost of their workers' wages. Facing the prospect of paying a 16 percent levy on that money, businesses would make up that cost by cutting pay, the Center's analysis said. The result: Those in the bottom 20 percent of income would see an average tax increase of $116 in 2025.

Cruz's plan would also go a long way toward simplifying the code, as well as making it more transparent, the group said.

"The plan would reduce record-keeping and reporting requirements and reduce the number of taxpayers who itemize by 43 million (a 96 percent reduction)," the group said. "Overall, the share of filers who itemize in 2017 would fall from 31 percent under current law to about 1 percent."

One of the losers though would be charities. Fewer people itemizing their deductions means fewer claiming the break for charitable deductions, which to many taxpayers would be a deterrent to giving.

"Although charitable deductions would still be deductible, the dramatic drop in the number of itemizers would eliminate the charitable tax incentive for nearly all taxpayers," the analysis said.

But it noted, "Most very-high income taxpayers, who account for the bulk of the dollar value of charitable donations, would continue to itemize and thus still benefit."