Details and Analysis of Dr. Ben Carson’s Tax Plan

Dr. Ben Carson’s tax plan would replace the current federal income tax with a 14.9 percent Hall-Rabushka-style flat tax. The plan would tax all wage income and business income at 14.9 percent. Capital gains, dividends, and interest income would be tax-exempt at the individual level. Businesses would be allowed to fully expense capital investment, but would no longer be able to deduct interest expenses. The plan would also eliminate all itemized deductions and all tax credits except for the foreign tax credit. The plan would further expand the tax base by including fringe benefits, such as employer-provided health insurance, in the tax base.

Moving to a pure consumption tax would significantly reduce the cost of capital. These changes in the incentives to work and invest would greatly increase the U.S. economy’s size in the long run. On a static basis, the plan would raise taxes on a number of taxpayers, compared to current law, due to the elimination of most credits and deductions. On a dynamic basis, taxpayers in all income groups would see at least a small increase in after-tax incomes. The plan would also be a large tax cut, which would increase the federal government’s deficit by over $5.6 trillion on a static basis and over $2.5 trillion on a dynamic basis.

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