Which Republican Candidate Will Lower Your Tax Bill the Most?

Editors' pick: Originally published Jan. 14.

With the number of GOP presidential candidates winnowed down to 11, Republican voters looking to make up their minds this primary season would do well to examine which candidates' plans are most advantageous to their taxes. After all, Americans have a tendency to vote with their wallets, and finding a politician who's going to lower the check you write to Uncle Sam is an attractive one. 

By now, most candidates have given some idea of what they would do to the tax code if given free reign. Focusing on poll leaders Donald Trump, Ben Carson, Marco Rubio, Ted Cruz and Jeb Bush, Roberton Williams, the Sol Price Fellow at the nonpartisan Tax Policy Center, broke the tax proposals from this year’s candidates into two main categories.

“Group one is the folks that are saying, ‘O.K., we’ve got a basic income tax system. We’re going to stick with that, but we’re going to make some significant changes to it.’”

This includes candidates like Bush, Trump and Rubio. Their plans all use the current basic income tax system but with changes that dramatically alter and eliminate some sections of the code.

Group two would replace America’s income tax system with a consumption/value added tax or a flat-tax system that forms a hybrid with a value added tax. Putting Williams puts Cruz and Carson in this category.

It’s an interesting dynamic -- and certainly the calls for structural change have great political import -- but what will any of this mean come April 15, 2017? The first thing to know is that the Republican plans all have two overriding themes in common: tax cuts and lots of love for the rich.

“The one overriding similarity among the Republican plans is they all cut taxes for the rich a lot,” Williams said. “If you look at the analyses that we’ve done of the Trump plan and the Bush plan, both of those say that the top end is going to get a very significant increase to their after tax income.”

And that has some economists worried.

"I really don't see, when I look at these proposals, how they're possibly going to be able to make those cuts without increasing the budget deficit substantially or cutting social programs," said Mark Thoma, a professor of economics with the University of Oregon. "You look at the empirical work, it just doesn't seem to be the case that they create the economic growth that they promise."

The assumption that lower taxes will drive substantial economic growth is at the heart of each candidate's message, as is the belief that new receipts will help the cuts pay for themselves. Yet there's good reason to be skeptical given the clustered benefits at the top, a sector of the economy where cash is already sitting in stagnant pools.

"I think if you directed tax cuts in the right way, do some things to encourage investment, do some things to encourage innovation, I think we could see substantial impacts on growth," Thoma said. "But simply cutting taxes of the wealthy in the idea that they're now going to get $300 million instead of $200 million, and that somehow is going to make them go out and do all these new economics activities? I just don't think that's the case."

"The promised payoff in terms of trickle down really hasn't been there yet," he added.

But beyond that sweeping glance at the GOP tax strategy, each of these five candidates manages to distinguish himself through a surprising amount of creativity for a subject as arcane as the tax code. Take a look below for a more granular understanding:

Trump: The Gold Plated “I Win” Package

Takeaway: Lower taxes for the middle, especially if you can go into business for yourself.

Donald Trump pledged to Americans that roughly half of all households would see their annual income tax evaporate, replaced by “a new one page form to send the IRS saying ‘I win.’”

Virtually all readers would see their tax bills go down under a Trump administration (assuming that the winner in 2016 gets everything he or she wants). As with all of the Republican tax plans, the greatest benefits would accrue at the top. The highest 0.1% of earners would get 19% back in after-tax income, while middle income households would see a smaller but real bump of 4.9% in after-tax income.

The biggest distinguishing feature of Trump’s tax plan is his hard cap on business taxes, which would be set at 15%.

“He’s very explicit in saying that the people with pass-through income would face a 15% maximum tax rate,” Williams pointed out. The upshot would be that anyone who can recast himself as a business (such as freelancers and the self-employed) would shift from the personal income tax scale with its new 25% cap to the business scale, potentially saving quite a bit of money while blowing a truly massive hole in the budget.

Carson: If It’s Good Enough For God…

Takeaway: Income taxes for everyone except the top 10% will go up.

Carson created a lot of speculation earlier in his campaign when he first floated the idea of a flat tax based on the biblical practice of tithing. Although he took heat for not having numbers ready during the earlier primary debates, Carson has recently come out with a little more detail.

In a field heavily skewed toward the rich, Carson’s plan goes the furthest. Like his colleagues, Carson hits upon several of the common themes such as eliminating the estate and dividend taxes. However, his is the only plan that would not only disproportionately cluster its benefits at the top, but also actually cause everyone else’s bills to go up.

By completely exempting returns on investment, Carson’s tax is effectively a consumption tax, because it will only impact the price of goods and services moving through the economy (in this case, the service being labor). However, in effecting this new flat tax, Carson would also eliminate all deductions and credits, the same system that reduces many Americans’ final bill at the end of the year.

“On a static basis, the plan would increase taxes on all income groups except the top 10%,” a Tax Foundation analysis concluded. “The plan reduces the after-tax income of the bottom three income deciles by as much as 14.8 percent. The top decile would see an increase in after-tax income of 16% and the top 1% would see an increase of 33%.” 

Bush: Tax Cuts

Takeaway: Your investment income is safe.

“The Bush plan doesn’t really distinguish itself,” Williams said. “In many ways, it’s the most conventional plan, but it does get rid of tax on investment income.”

Yes, there’s not much else to say about Bush's tax plan. As a piece of Conservative policymaking, it’s straight down the middle: all taxpayers would pay less, most of the benefits would go to the wealthy and investments would no longer count as taxable income.

Bush’s plan is marginally less generous than Trump’s, giving out only a 12% after-tax boost to the top 0.1% and a 3.9% bump overall. (By way of comparison, Trump’s plan would give back 7% of after-tax income on average.) That also, however, makes it less expensive than Trump’s plan. Given that neither candidate has identified offsetting cuts or revenue, that makes Bush’s plan the marginally more deficit friendly one at roughly $8.1 trillion.

That deficit might create real problems for many of the poor. Despite their marginal gains from several of these candidates' tax plans, Thoma pointed out, the subsequent cuts to social programs could easily push their net gains negative.

"I think that's the game that people really have to worry about," Thoma said. "I think if people see the whole picture they're going to be very surprised at what these proposals imply."

Rubio: Friend Of The Family

Takeaway: A family-focused plan that gives its largest benefits to parents.

In keeping with his campaign’s theme of youth and vitality, Rubio has introduced his tax plan's signature move as a series of large tax breaks for families with children. This doesn’t just make his plan stand out as family-friendly but makes it the only proposal in the field where low income people might actually take home a larger tax cut (again, as a share of income) than the wealthy.

According to a Tax Foundation analysis, under certain circumstances parents of qualifying children in the bottom decile could see as much as a 44.2% change in their after-tax income. This is compared with the 11.5% benefit that the top 1% would enjoy.

However, the Tax Foundation authors make clear that for the low-earners, “these benefits come primarily from the new child credit” while for the top 1% the benefits “come primarily from the elimination of taxes on capital gains.” In other words, benefits at the bottom accrue only to qualifying parents while benefits at the top are distributed across the board.

Almost everyone else would barely see their incomes budge, with the 50 to 90 income percentiles seeing a benefit of less than 2% in after tax income. In other words, if you’re a Republican parent or planning to become one in the next eight years, Rubio might just be the guy for you. Unless of course he decides that these parental tax credits don’t apply to the poor, which he just might.

Cruz: An Income Tax/VAT Hybrid

Takeaway: Higher prices at the grocery store combined with one of the lowest personal income taxes of the field.

Described his strategy as a two-pronged plan, Cruz would first impose a flat tax of 10% nationwide. Then he would eliminate the business income tax in favor of a 16% VAT, called a “business activities tax” in the language of the campaign.

Unlike Carson’s flat tax, remaining deductions and credits would allow most Americans to see their income taxes go down. At the same time, the prices at the grocery store would jump, a consequence of businesses covering a considerable new cost. This would disproportionately affect the poor, who can least afford to have the price of basic goods and services shoot up.

Again, as with his colleagues’ plans, Cruz would lavish most of his cuts upon the wealthy, handing them a 29.6% after-tax income boost. The top 10% would see a 17.4% benefit to its after tax income, while all other income deciles would get 4.5% and below.

This plan would have two effects on the average consumer. First, a tax break worth between 1.2% and 2.8% of their after tax income for the middle deciles. Second, increased prices for most commodities due to the new business activities tax.

Cruz’s plan may be the most experimental of all, shifting the tax code from its current reliance on income taxes (both corporate and personal) to a VAT scheme. How that would fare in America, given the added costs it would mean for consumers, remains to be seen.

So which candidate should your wallet vote for? Let's break down the numbers to a couple of quick rules of thumb. If you are...

 

A Parent - Marco Rubio; his tax credits will give you thousands.

 

A High Earner - Ben Carson; he may not be good to many, but his 33% bump is the best offer to the rich.

 

Middle Class - Ted Cruz; you can absorb higher prices, and his plan is marginally more realistic than Trump's.

 

Struggling - Jeb Bush; he offers the highest lower-income boost you can get without children or Cruz's price hike.

 

Self-Employed - Ted Cruz; his plans to get rid of the payroll tax mean twice as much to you thanks to the self-employment tax.

 

A Business Owner - Marco Rubio; while all of the plans cut corporate taxes, his plan allows full deduction of investments (although at the same time eliminating some business credits).

 

A Student - Jeb Bush; he keeps the deductions that help you out, again without the price hikes of Cruz's plan that would pinch students.

 

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