Ben Carson has released his tax-reform plan–for a 14.9 percent flat tax plus a $100 minimum tax on everyone who makes less than the tax’s threshold level–and the Tax Foundation has scored it (that is, published an analysis of what it views as its likely effects on the economy and on federal revenue under certain assumptions). Dan Mitchell gives it a very positive review because it eliminates the double taxation of saving and simplifies the tax code. I like those features of the plan, too, to a point. But I see some weaknesses of the plan as well.
1) The Tax Foundation estimates that it would reduce federal revenues by $5.6 trillion over ten years unless it generates extra economic growth. Unless Carson pairs the plan with spending cuts in the same ballpark, I think this would both be and strike voters as reckless. (I think the same is true of many other Republican candidates’ plans.)
2) Because Carson does not eliminate or reform the payroll tax, his plan would leave middle-income earners paying a significantly higher marginal tax rate than high earners. I think that in a general election the Democrats would be able to inflict serious damage on any Republican running on a plan with this feature.
3) That vulnerability is heightened by Carson’s ending of the taxing of capital at the individual level.
4) It is heightened again by his minimum tax.
5) Carson justifies this minimum tax by saying it treats everyone in America as a “citizen owner” of the government. I don’t see how someone who gets $10,000 in federal benefits is in any significant way more of a “citizen owner” of his government if he pays a nominal $100 tax than if he doesn’t.*
6) The Tax Foundation estimates that tax bills would increase under his plan for 90 percent of tax returns, partly because of the minimum tax. Leaving aside the effects of economic growth, tax bills would be reduced substantially for the top ten percent. All by itself, this feature of the plan would, in my view, doom anyone who ran on it to electoral defeat and doom its chances of enactment in the unlikely event that candidate won.
All in all, it seems like whatever the theoretical case for this kind of tax reform, it does not make sense as part of a platform of a candidate who seeks to get elected and then enact something similar to what he campaigned on.
* Carson may be alluding to the political case many conservatives make for this kind of reform. On this argument, everyone needs to pay some income tax so that they understand that big government costs them money and so that they then vote in accordance with that understanding. During his own presidential campaign, Bobby Jindal made this argument, although his plan raised taxes “only” on the bottom 40 percent of filers. It seems to me that the assumptions about voter psychology behind this argument have to be that: a) many people vote based in large part on a calculation of the benefits they get and the taxes they pay; b) many of these calculating voters distinguish between payroll and income taxes, not counting the former toward their calculation; c) many of these calculating voters would not subtract the $100 from their benefits and see that they are still net “takers” from the federal government; and d) many of these calculating voters will decide to suspend their usual method of determining their vote for this presidential election, and vote for a candidate who is promising to raise their taxes and cut their benefits. These assumptions, in conjunction, seem unlikely.