Rick Perry has outlined today what some entities are referring to as a “flat tax”, but nothing could be further from the truth. In reality, Perry’s plan is intended to gain the attention and fervor of Herman Cain’s 9-9-9 plan while at the same time appeasing multiple groups.

The plan starts with giving Americans a choice between a new, flat tax rate of 20% or their current income tax rate. The new flat tax preserves mortgage interest, charitable and state and local tax exemptions for families earning less than $500,000 annually, and it increases the standard deduction to $12,500 for individuals and dependents.

In other words, if you are part of the 47 percent of Americans who pay no federal income taxes today, you still won’t pay any income taxes. Everyone whose effective tax rate is higher than 20 percent would take this option, which includes most of the top 20 percent of income earners and very few others. Additionally, every high income earner using the mortgage interest tax credit on a multi-million dollar jumbo loan will continue to benefit and drive the effective 20 percent no-so-flat tax rate down.

In other words, this plan would actually be a disaster for revenues and this is where Perry’s plan only begins to stumble.

Temporarily lower the rate to repatriate funds to 5.25%.

It is important to bring our capital back for investment in our country, but a temporary fix is a waste. It will only create a bubble, a nice surge that will help the economy enough so the the incumbent President is more likely to gain reelection. You either believe in allowing funds to be repatriated or you do not. Otherwise, you are no different than President Bush in sending out reelection payoffs “stimulus” checks to the masses.

Reduce the corporate tax rate to 20%.

This is this most sensible measure in Perry’s plan. It would put business on an even playing field, assuming he does not have hidden deductions making the tax not really flat, as he does in the optional personal “flat” income tax. A lower tax rate for business would free up capital for investment and growth. A flat tax would provide certainty for the future, also encouraging growth.

Eliminate the tax on Social Security benefits, boosting the incomes of 17 million current beneficiaries who see their benefits taxed if they continue to work and earn income in addition to Social Security earnings.

The real problem is we are paying people to not work through Social Security who are perfectly capable of working. Some of these people actually want to work. Perry’s proposal does not solve the actual problem. A real solution would encourage people to work without drawing Social Security, such as providing the option for people eligible to draw Social Security to continue working 100 percent federal tax free (income, payroll, etc.) until the day they choose to take Social Security. This solution would allow people the dignity of working when it is still possible for them to work, potentially making more income, while simultaneously preserving the Social Security program for those who actually are in need of it. Perry’s plan is simply designed to win votes, not fix anything.

A clear goal of balancing the budget by 2020.

In the real world, no plans, especially those made by the federal government, will remain intact nine years from now, let alone next year. Congress has not even passed a budget for several years (we have been operating under a series of continuing resolutions). Over the time frame from now until 2020, the entire House of Representatives will have been up for reelection five times (including 2020), and the entire Senate one and one third times. The only realistic way the budget becomes balanced is in the President’s first term.

Passing a Balanced Budget Amendment to the Constitution

There is a whole lot more to this than saying “hey, we’re going to pass a balanced budget amendment!” Amending the Constitution is  significant process. Although I agree with this sentiment, Perry is throwing it in here as political rhetoric.

Freezes federal civilian hiring and salaries until the budget is balanced.

This is common sense. It is exactly what business does when it is facing economic difficulties.

Overall, Perry is trying to gain the notoriety earned by Herman Cain by proposing a so-called flat tax. But in reality, with it being “optional”, it is all talk and with the exemptions it allows, it is not a flat tax. This plan is intended only the lower the taxes of the top 20 percent of income earners without requiring any contribution from the bottom 47 percent of income earners who pay nothing today. I’m all for lowering the tax rates of those who are forced to pay all the taxes in this country, but only when the tax burden is fairly distributed. A true flat tax would tax every income earner at exactly the same rate, with no loopholes or exceptions whatsoever. Then people would choose how to spend their money in whatever way was most economically beneficial to them, rather that the way the tax code dictates.

Being advised by the great mind of Steve Forbes, I expected so much more from Rick Perry. This however, is a unmitigated disaster.

Comments

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  • Whodat

    1) Perry only hatched this plan last night. Who knows what it would really contain?
    2) The “opt-out” part reminds me of Obombacare.
    3) Perry is worthless in general, so any specific idea he has is worthless.

  • Troy La Mana

    The 9-9-9 Plan is easy to understand and fare to all while Perry’s plan is just plain stupid.

  • Brian H

    Any plan that is simple enough for Perry to understand is likely not a good plan.

  • Stephen

    1) Rick Perry wants to give us 20-20 instead of 9-9-9? Really? I’m no math wiz but even I can figure out that 27 < 40. I'll take the lower amount thank you very much. I know it's not that simple but that's what it looks like and we all know that appearances are more important than facts in politics.

    2) Companies don't pay taxes. People do. Any tax on business is passed on to the consumer or the employee and amounts to either a hidden sales tax or a hidden income tax.

    3) Government spending is the main problem. If spending goes up, taxes go up. If spending goes down, taxes go down. If the government chooses to print money rather than tax it out of the people, it amounts to a hidden tax in the form of inflation.

    4) We need to reduce spending to the point that if we were to establish a flat or fair tax it wouldn't be so painful. The problem with flat/fair tax proposals is that they don't address spending; they try to be revenue neutral. But in order to do so the tax rate has to be sky high, which makes them politically impossible to implement.

  • Alaina Segovia

    This is as much of a flat tax and will be as good for the country as Perry is a Conservative…
    .
    The real disappointment for me is that Steve Forbes had anything to do with this…

  • Whodat

    Just another rearrangement of deck chairs on the Titanic. And where has Lil Ricky been with this grand plan? He had no idea of having a plan until he watched Cain whiz by in a 9-9-9. So, the useless doo-fuss comes up with his own plan, a half-baked baloney pie designed to make him look like he is a wise conservative who is all about tax reform. Bad words and insulting gestures to him and his retarded staff!
    .
    My brand of conservatism still looks at SPENDING as the correct target. The way we are taxed matters less than the reality that their spending will result in an ever-increasing need for more taxes. To tout tax reform as the goal misses the real point completely: The politicians spend too much, they waste too much, they talk too much and they accomplish too little.
    .
    Cain’s 9-9-9 is a scary idea, but I am surprised at the righteous indignation over the 9% national sales tax. It is not a new idea at all. For years, the great Dick Armey toured and touted the elimination of the IRS in favor of a national sales tax – totally. Maybe 18 or 20%. Steve Forbes ran for POTUS 2 or 3 times screaming much the same thing. Nobody seemed to notice – maybe because nobody believed it could happen. But, when a Cain raises it and it raises him to a tie for first (no matter what PD says), it upsets folks.

    • David Kaiser, Editor

      No one noticed Steve Forbes because a ficus tree had more personality than he did.

      There’s a reason he was called “Robo-Dork” during his campaigns.

      Perry, to his credit, has a lot more in the way of personality, though I completely agree that his new position as a flat tax apostle is purely a way to gob some luster off of Cain and his vaunted 9-9-9 plan.

      • Whodat

        There you go again! “Robo-dork”. Isn’t that a nice thing to say. How do I reach your mother?

        • David Kaiser, Editor

          Haha! I didn’t dub him that Whodat, I merely am repeating what was said.

  • Joyce A (East of Eden)

    That made my head hurt, very early in the AM too….why must it be so complicated? A flat tax should just be easier than what they’ve made it.

    • http://scottslant.blogspot.com/ Scott A. Robinson

      It’s complicated because it’s not a flat tax. Perry is merely attempting to gain notoriety from using that name.

      So I suppose one thing we can learn from this exercise is that as President, Rick Perry will be really, really good at making up names for legislation that have absolutely nothing to do with the actual legislation!

      • Joyce A (East of Eden)

        Kinda like what we have now then! #fail #bla!

  • Steve M.

    This plan will be the thing that finally sunk Perry for good. Just as he was stabilizing, he lays this joke out there as a real plan.
    Scott, you are absolutely right — this amounts to a cut for the top 20% of income earners, an increase for no one (by definition) with no real cuts of any sort … a couple of vague swipes at a “clear goal” and “balanced budget.”
    He tried to catch lightening in a bottle and I think he’ll get struck instead.