Tax Rascal

Rick Perry Supports the Right to Choose… Your Own Federal Income Tax Rates

Categories: Featured, Politics, Tax Policy
Rick Perry Supports the Right to Choose… Your Own Federal Income Tax Rates

Rick Perry for President hits a hurdle with his optional flat tax

Locked in a competition with Herman Cain to see who can propose the most crazily unrealistic tax reform that panders to the delusions of the Republican base, Rick Perry delivered a speech in South Carolina Tuesday in which he outlined his plan for (kind of) scrapping the current tax code and offering taxpayers the choice of an optional 20% flat income tax.

At the CNN debate in Las Vegas, during which Perry seemed to awake from his stupor while Herman Cain took fire over apples and oranges, Perry promised a tax reform plan that could compete with the pizza mogul’s 9-9-9 plan. “I’ll bump plans with you brother,” Perry promised Cain, “And we’ll see who has the best idea about how you get this country working again.” Tuesday, Perry delivered.

Perry proposes giving Americans the right to choose between their existing tax rate under the old system and a flat income tax of 20%. This change is the central pillar of his tax and spending reform plan titled “Cut, Balance, Grow,” which sounds vaguely like one of those counter-insurgency euphemisms the Defense Department uses to refer to terrorist killing and nation building.

In a bid for renewed conservative street cred (and to compete with what he has described as the Tolstoy novel on Mitt Romney’s website) Perry debuted the details of his plan in an op-ed in the Wall Street Journal.

Lest you fear that the Texas governor has completely lost touch with his down-home roots, writing a fancy opinion piece in the newspaper favored by fat cat banker types, Perry opens his proposal with “The folks in Washington might not like to hear it…” Don’t worry folks, he’s still the same good ol’ boy you know and love, just a good ol’ boy preoccupied with federal tax rates.

In this department, simple is the watchword. Perry boasts that the end result of his plan will be to make the tax code simpler and his method of delivery is certainly simpler than Mitt Romney’s. It seems simple is what the economy needs to get going again. Or at least simple is all Perry thinks Republican primary voters want to hear.

And yet, for all the emphasis on simple, the goals of “Cut, Balance, Grow” are pretty audacious: Perry proposes to “scrap the current tax code, lower and simplify tax rates, cut spending and balance the federal budget, reform entitlements, and grow jobs and economic opportunity.” Wow, all in one mega-blast from his laser gun.

And yet, the only element of his plan that Perry has really elaborated upon is the optional flat tax, which would preserve mortgage interest, charitable, state and local tax exemptions for families with incomes under $500,000 and increase the standard deduction to $12,500. It would eliminate all other exemptions and loopholes, hence the simple part.

He also plans to lower the corporate tax rate to 20% and temporarily offer a low rate of 5.25% in order to “encourage the swift repatriation of some of the $1.4 trillion estimated to be parked overseas.”

He envisions this lower tax rate having sweeping effects on American business. In the Texas Governor’s words:

We will renew incentives for entrepreneurial risk-taking and investment that creates jobs, inspires Americans to work hard and forms the foundation of a strong economy… My plan restores American competitiveness in the global marketplace and provides strong incentives for US-based employers to build new factories and create thousands of jobs here at home.

The most bizarre aspect of the plan is the fact that the flat income tax is optional, a slick political move that essentially ensures no voter will face the prospect of a tax increase. But coming from a governor of the state of Texas who prides himself on being a bold, no holds barred straight shooter, it’s kind of a cop-out.

Though it might be politically expedient, allowing taxpayers to opt out undermines the whole message of simplicity. Preserving the complex current tax code, and then dumping a whole new flat tax on top of it, even if it is optional, is hardly simple. In fact, it’s a gross complication of the already complicated tax system.

Perry boasts that his plan is so simple that it “will allow Americans to file their taxes on a postcard.” But won’t most people have to calculate their tax liability under both plans, essentially doubling the amount of work involved in paying taxes?

The poor will surely opt to stay under the current code, but middle income taxpayers will have to put some real work comparing and contrasting one option from the other to figure out exactly what to do. And it might even behoove the wealthy, who stand to benefit from the proposed flat tax, to invest time and money into exploiting the traditional tax loopholes that have allowed many to escape higher rates of taxation. All in all, Perry’s plan promises less simplicity and more complication.

I’m not even going to bother addressing other arguments against Perry’s proposal, such as the fact that the poor stand to benefit not at all while the rich will gain greater flexibility in minimizing their tax burdens, or the fact that federal revenue will likely take a hit, contributing greatly to the deficit. Clearly, the governor is not interested in answering these questions himself.

In a rare journalistic flourish, Bill O’Reilly inquired of Perry, “So how much would the feds lose in revenue under your plan, governor?”

Perry brushed the question off. “Well, I don’t really worry about what the feds are going to lose,” he said, before moving on to the usual campaign tosh about putting America back to work.

If Perry doesn’t take his own proposal seriously, why should we?

There’s no doubt Perry needs some sort of bold proposal to break out of his current slump. In the latest CBS/NYT poll of Republican primary voters Perry comes in a disappointing fifth with only 6%, behind Herman Cain with 25%, Mitt Romney with 21%, Newt Gingrich with 10%, and Ron Paul with 8%. That last name has to be a particularly sore point with Perry, after the Texas Congressman’s sharp criticisms of his governor as some recent debates. Even when you narrow the field to Tea Party supporters, which should be Perry’s bread and butter, he still comes in fifth with 7%. Here the sting has got to come from Romney’s 18% support.

Unfortunately, it is doubtful that this tepid tax proposal will be enough to shake up the race in Perry’s favor. For one thing, electoral history is not on Perry’s side. Businessman Steve Forbes has endorsed Perry and helped him craft his flat tax proposal. But in 1996, when Forbes himself ran for President on a similar platform, he couldn’t even beat Pat Buchanan in the primaries.

It seems unlikely that Perry will be able to capture any of the enthusiasm currently propelling Herman Cain to the front-runner position. His flat tax proposal, though it doesn’t come weighted down with what has become a controversial national sales tax, isn’t nearly as catchy.

The goal for these smaller Republican candidates is to paint themselves as alternatives to Mitt Romney in both personality and policy. Cain has already won on personality, but there is room for Perry to flank Romney on policy. And with this confusing optional plan I think he fails to do it.

Perry’s $15 million campaign war chest ensures that this won’t be his final fumble, but it may just be the thing that relegates his candidacy to final irrelevancy. Someone who can’t even decide on a single coherent tax policy is someone who’s not prepared to face the tough economic challenges living in the White House currently entails.

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