Source: NCPA
When it comes to economic growth effects, the Cruz tax plan “trumps” the Trump plan, according to the advance summary of a new analysis from the National Center for Policy Analysis’ Tax Analysis Center and the Beacon Hill Institute. However, without assuming that some spending reductions would take place, both plans would add to the national debt.
The full study will be published later this week.
Both plans share some features, such as eliminating the estate tax, eliminating the marriage penalty, reforming corporate taxes, reducing tax rates, and eliminating the Alternative Minimum Tax – while preserving the mortgage and charitable deductions for individual filers. Yet, in many ways, the plans are worlds apart.
For example:
- Trump’s plan calls for four income tax brackets with a maximum marginal rate of 25 percent, while Cruz calls for a flat, single rate of 10 percent.
- Trump calls for corporate tax reform with a 10 percent repatriation tax, while
- Cruz would eliminate the current corporate tax system altogether and replace it with a 16 percent business flat tax.
The table below displays the impact of each plan for the years 2017 and 2026 compared to today’s current tax laws (baseline):
- Trump’s plan would produce almost 3 million additional jobs in 2017, and slightly more than 3 million additional jobs in 2026, but Cruz’s plan would double that to 6.2 million above baseline in 2017 and 5 million in 2026.
- Personal income would be 4.14 percent above baseline in 2017 with the Trump plan and 6.7 percent above baseline with the Cruz plan. By 2026, personal income would be 3.8 percent above baseline with the Trump plan but would be 6.28 percent above baseline with the Cruz plan.
- Most significantly, capital investment would be 12.5 percent above baseline in 2017 under the Cruz plan (compared to 2.19 for Trump) and 21.84 percent above baseline in 2026.
However, both plans would reduce federal revenues by over $7 trillion over the 10-year period. And none of the presidential candidates has addressed corresponding spending cuts needed to finance these plans.
Advanced study preview:
Trump and Cruz Tax Proposals under the NCPA/BHI National Model