Dr. Ben Carson’s plan for a flat tax would cut taxes by $5.6 trillion over 10 years and create more than 5 million jobs, according to an analysis published Wednesday by the nonprofit Tax Foundation.
The Tax Foundation concluded that the Republican presidential candidate’s plan to institute a 14.9 percent flat tax would greatly increase the rewards for businesses to invest, leading to nearly a 50 percent jump in purchases of machinery, buildings and other capital used by businesses.
As a result, the retired neurosurgeon’s tax reform would accelerate economic growth. The added tax revenue from that growth would mean that, in a “dynamic analysis,” the tax plan would lose only $2.5 trillion in revenue over 10 years, relative to the roughly $42 trillion the federal government is currently expected to collect over that period.
The Tax Foundation, a right-of-center nonprofit think tank, uses a model similar to one of those used by Congress and IRS tax data to evaluate tax reform plans. It has run the model for other GOP presidential candidates’ tax plans, including those of Donald Trump, Jeb Bush, Marco Rubio and Ted Cruz. By its estimates, only Trump’s plan would be a larger net tax cut.
Carson, who currently ranks eighth in the Washington Examiner’s presidential power rankings, announced his plan this week. It would overhaul the federal tax code, replacing the complex income and corporate tax codes with a flat 14.9 percent tax on individual and corporate income.
Under Carson, the tax system would shift from an income base to a consumption base, because he also would eliminate taxes on capital gains, dividends and interest. While the change would likely boost commerce, it would also tilt the tax system in favor of higher income earners. That is by design. Carson has argued against redistribution, saying in a GOP debate that “everybody should pay the same proportion of what they make…I don’t see how anything gets a whole lot fairer than that.”
Part of the reform would be to radically simplify the tax code, eliminating all itemized deductions and credits. That includes some tax breaks thought to be politically untouchable, such as the deduction for interest paid on home loans. He also would get rid of low-income tax credits, although income under 150 percent of the poverty line would be exempted from the 14.9 percent tax. He would institute a new $100 tax on all citizens, which the campaign has said would be meant to treat everyone “as citizen-owners.”
The result of those tax changes would be that people earning low incomes would see their taxes rise, according to the Tax Foundation. While overall incomes would rise 4.5 percent, the lowest 10 percent of earners would see their after-tax income fall by 13 percent, while the top 1 percent would gain a 33 percent increase.
Taking into account the expected acceleration in economic growth Carson’s reform would generate, low earners would be better off. The lowest 10 percent of earners would get a 2.5 percent boost in after-tax income, while the top 1 percent would see their incomes rise by more than 44 percent.
