Carson's Flat Tax Proposal

January 11, 2016
Demian Brady
Ben Carson

Shortly after formally jumping into the race for the White House, Dr. Ben Carson floated the idea of an across-the-board flat tax, which he described as similar to a biblical "tithe,” meaning that the rate different people pay would be in proportion to their income. Finally, after it was first reported in September that his campaign had hired an economist to develop the plan, the details have been unveiled.

“My overarching goal for tax policy is that it should raise revenue—not redistribute wealth, micromanage free citizens or intrude on privacy.”

In diagnosing the problem of our current Tax Code, Dr. Carson cites NTU Foundation research showing that the compliance burden and lost productivity costs the economy nearly $344 billion.   

The existing income tax code contains seven brackets with rates (for joint filers in 2016) ranging from 10 percent for those making at least $18,550 to 39.6 percent for income above $466,950. And, of course, employers and workers also owe payroll taxes for Social Security (6.2 percent), Medicare (2.9%) and State and Federal Unemployment Taxes (6.2 percent).

Dr. Carson would repeal the income tax code and replace it with a flat 14.9 percent tax. That rate would apply to all income above 150 percent of theFederal Poverty Level. Anyone earning at or below the that level would be required to pay an annual “de minimis tax payment,” however, the details on how much that would be are not yet available, and It is also unclear whether he would modify payroll taxes. In addition, his plan would:

  • Eliminate all deductions such as deductions for home mortgage interest, charitable giving and state and local taxes;
  • Eliminate tax credits including “refundable” credits that can be claimed regardless of a filer’s income tax liability.
  • Kill the death tax;
  • Eliminate the Alternative Minimum Tax under which certain filers are required to re-calculate their taxable income and liability under a different set of allowable exemptions, deductions, and credits.
  • Eliminate double taxation of capital gains, dividends and interest income at the personal level.
  • Reduce thecorporate tax rate from 35 percent to 14.9 percent.

The tax code is often used to provide incentives for specific industries or activities. One of the many complaints about the tax extenders package that cleared Congress last December was that it included several narrowly focused credits from which few benefit. Conversely, tax increases are often offered under the guise of discouraging certain activities. Carson views all such treatment of the tax code as “manipulation.” His plan merits points for simplicity and transparency, but as nearly 36 percent of filers pay no income taxunder the current system, it may be a tough sell to those voters who will lose paments for “refundable credits” (which resulted in outlays of $86 billion in 2015) and would be required to make an unspecified de minimus tax payment.

The plan also earns points for encouraging economic growth. The Tax Foundation analyzed Carson’s plan and found that it would boost the economy by 16 percent over the long-run, and lead to higher wages and capital stock. It would also reduce revenues by $2.5 trillion (under a dynamic impact) over ten years and increase outlays for net interest payments on the debt.

However this plan would certainly allow for a much smaller Internal Revenue Service which would lead to budgetary savings for enforcement (for FY 2016, the IRS’s budget will be approximately $12 billion, including $2.2 billion for taxpayer services, $4.9 billion for enforcement, and $3.7 billion for operations support).    

In addition, Carson also has offered several spending-related reforms and increases. In a snapshot of his agenda last October, NTU Foundation determined that his proposals with verifiable price tags would reduce outlays on net by $99.5 billion per year, but there were several items whose costs were unknown, including Veterans Administration reform.

There will be a debate among the Republicans this week which will provide Carson and his fellow candidates a fresh opportunity to be candid regarding their proposals and how they would address Washington’s chronic overspending and debt problems.

Demian Brady

Director of Research

Demian Brady is the Director of Research for the National Taxpayers Union Foundation. His responsibilities include producing commentaries and studies on fiscal issues, as well as managing NTUF's BillTally program (which tracks the impact of legislation on the size of the federal budget), State of the Union analysis, and more. Demian's research has been cited in the New York Times, the Wall Street Journal, and the Washington Times. In addition, he has written on a number of budget-related issues for both NTU and NTUF. Mr. Brady resided and worked in Columbus, Ohio before moving to Washington, DC in 1998. He earned an M.A. in Political Science from American University. He received a B.A. in Russian Area Studies from Bowling Green State University, Bowling Green, Ohio, where he graduated Magna Cum Laude and was inducted into Phi Beta Kappa. 

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