Candidates’ battle of the taxes

January 11, 2016

Marco Rubio on Monday broadened his beef with fellow lawmaker Ted Cruz to include tax policy, slamming a business tax proposal the Texan senator favors as “intentionally sneaky” and harmful.

Marco Rubio speaks with supporters in Raleigh, North Carolina January 9, 2016. REUTERS/Jonathan Drake

Cruz has pitched what he calls a “business flat tax” of 16 percent, which he says would allow him to abolish the current corporate income and payroll taxes.

His proposal and that of U.S. Senator Rand Paul of Kentucky are similar to the so-called “value-added” taxes used by much of the world, but criticized by some conservatives in the United States.

In prepared remarks for an economic policy event in his home state of Florida, Rubio, who did not name Cruz or Paul, said value-added taxes would hurt Americans by causing higher prices for consumers and lower wages for workers.

A spokesman for Cruz, however, said that her candidate’s plan did not include a European-style national tax plan, but a business flat tax that “dramatically simplifies taxes for businesses, and is more competitive for capital investment and trade.”

“Rather than misconstruing our tax plan, Marco’s time is probably better served explaining to voters why he continues to support amnesty and has recently tripled-down on in-state tuition for those who are here illegally,” said Cruz spokesman Catherine Frazier.

Value-added taxes are applied to business revenue at each stage of the production process. Payments to other businesses and capital investment are deducted, but not wages and profits.

“That means it punishes businesses for earning money, and it punishes your boss for giving you a raise,” Rubio said.

Cruz and Paul do not call their plans value-added taxes, or VATs, but Rubio said Americans should not be fooled.

“If it acts like a VAT, taxes like a VAT, and grows government like a VAT, it’s a VAT,” he said. Rubio’s own plan would cut the corporate tax rate to 25 percent.

Rubio also said an Internet sales tax proposal that many brick-and-mortar retailers support is anti-free market.

New Jersey Governor Chris Christie has said states should be able to decide whether to compel retailers to collect sales tax online. Rubio, Cruz and Paul have all voted against an Internet tax.

Editor’s note: This post was updated on Jan. 12 to include a response from the Cruz campaign to Rubio’s comments. 

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