Just when the storm concerning Cain’s plan has started to die down, rival candidate Texas Governor Rick Perry finally announced his economic plan on Monday:
Republican presidential candidate Rick Perry unveiled a sweeping economic agenda Monday highlighted by a plan to level a voluntary 20 percent “flat tax” on all taxpayers who will accept it in place of what they’re paying now.
The plan, outlined in a Wall Street Journal op-ed column a day before the Texas governor was set to unveil it in South Carolina, also calls for capping federal spending at 18 percent of the country’s GDP while allowing younger earners to privatize their Social Security accounts. Taxpayers who don’t want to pay a 20 percent flat income tax, he said, can keep their current rate.
Perry offers several proposals that appear designed to sweeten the offer – and to counter criticism that the flat tax is regressive, taking a proportionally bigger bite from smaller incomes. His plan would preserve popular deductions for mortgage interest and donations to charity for households earning less than $500,000 a year. It would increase the standard deduction to $12,500.
Calling his agenda “Cut, Balance and Grow” — a clear nod to congressional Republicans, who have proposed a “Cut, Cap and Balance” budget bill — Perry says his proposal is the best way to cure the nation’s ailing economy.
“Cut, Balance and Grow strikes a major blow against the Washington-knows-best mindset,” Perry said. “It takes money from spendthrift bureaucrats and returns it to families. It puts fewer job-killing regulations on employers and more restrictions on politicians. It gives more freedom to Americans to control their own destiny. And just as importantly, the Cut, Balance and Grow plan paves the way for the job creation, balanced budgets and fiscal responsibility we need to get America working again.”
As with any economic proposal, there are pros and cons to a flat tax:
Proponents of the flat tax system claim that it would do away with the complicated tax code and tax forms. Using one form, you would add your income (pension, salary, other income) and pay 17% on the sum. Deductions and credits would be eliminated under this plan. Opponents of the flat tax system claim that it would favor the wealthy and could put a higher tax burden on those who earn less.
For example, person A makes $40,000 a year and would pay $6,800 in income taxes, leaving them with $33,200 of net income. A person making $250,000 would pay $42,500 in income taxes, leaving them with $207,500 of net income. There’s been discussion of establishing a taxable income floor so that individuals making less than a certain amount would not pay taxes.
The funny thing is…
Steve Forbes proposed a flat tax rate of 17% in his book, Flat Tax Revolution. However, everyone gets an exemption: $13,200 for adults ($17,160 for single mothers) and $4,000 for dependents. A family of four would not pay taxes if they made less than $46,000. The estate tax and the Alternative Minimum tax would be done away with. In addition, any income that is saved or invested is tax exempt. That means no taxes on capital gains, Social Security benefits, interest, or dividends. Corporations could expense all investments, doing away with depreciation schedules, and would only be taxed on American-made products.
Forbes wanted to implement a flat fax because
The current U.S. tax system is so complicated, it costs taxpayers a lot just to implement it. On average, it takes 28 hours and 30 minutes to figure out what you owe – whether you do your own taxes, or you work the hours needed to pay someone else to do the taxes. The cost in lost productivity is $200 billion. That’s not counting the 97,440 IRS employees’ salaries.
A fictional tax return given by Money magazine to 45 tax preparers resulted in 45 different tax calculations. Even a Treasury Department study found that callers to the IRS toll-free help lines got the wrong answers 25% of the time.(Source: MISES)
Governor Perry evidently believes that endorsing a Flat Tax will make him competitive in the Republican primary race, once again. He has to do something. His rapid, inexorable decline in the popularity polls has taken him from number one among the Republican contenders to third place.
When the Houston Chronicle asked him about his decline in the public polls back on October 14th, Gov. Perry blew it off by calling it “a distraction,” saying Americans are worried about jobs and not candidates’ standing in the endless surveys.
…“Polls are going to go up and down – this is going to be a long race,” the three-term governor said on NBC News’ “Today Show.” “I don’t worry much about polls.”
Perry downplayed comments by his wife Anita in South Carolina on [the previous] Thursday that he had been “brutalized” by Republican rivals and the news media. “Family members always take these campaigns a little more personally than the candidates do,” Perry said. “I have been shot at and then missed, shot at and hit for 20 years running for public office… We have ups and downs.”
Perry dubbed the tumult of the presidential campaign “just distractions” for most Americans, adding: “They want to hear a conversation about who is going to get this country back working again and that’s what I’m staying focused on.”
Okay. But wouldn’t lessening the corporate tax rate, in order to encourage businesses to start hiring again, thus jump-starting the economy, be the first step to get Americans working again, before announcing a Flat Tax?
Or, are you just trying to outdo Herman Cain and become the flavor of the month again?
And, by the way, how does the Texas Dream Act get Americans working again?
Inquiring minds want to know.