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Perry Calls His Flat Tax Proposal ‘Bold Reform’

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.

GRAY COURT, S.C. — Gov. Rick Perry of Texas unveiled a plan on Tuesday to scrap the graduated income tax and replace it with a 20 percent flat rate. By throwing out rates as high as 35 percent and eliminating estate and investment taxes, the plan would grant a major tax cut for the wealthy. It is the centerpiece of an ambitious proposal that aims to overhaul political sacred cows like Social Security and Medicare while slashing the federal budget.


Mr. Perry, a Republican presidential candidate, said his proposal would also offer benefits to middle-class Americans by giving a $12,500 deduction for every member of a household while preserving exemptions for state and local taxes, mortgage interest and charitable contributions for anyone making less than $500,000. He said anyone could still file under the current code, and he also pledged to lower the corporate tax rate to 20 percent, from 35 percent.

“Taxes will be cut on all income groups in America,” said Mr. Perry, who promised that taxes could be filed on a postcard-size form under his plan. “The net benefit will be more money in Americans’ pockets, with greater investment in the private economy instead of the federal government.”

The plan represents a gamble for Mr. Perry, who is trying to reinvigorate a once-high-flying campaign by capturing some of the energy Herman Cain generated with his flat tax plan and by drawing a sharply conservative contrast with Mitt Romney.

But in proposing what he called “bold reform” that may trim Social Security and Medicare benefits for many, Mr. Perry is also advocating potentially sweeping changes in entitlement programs that may open him to new lines of attack from Republican rivals, all at a time when polling shows many Americans want to see higher — not lower — taxes on the wealthy.


The plan also proposes reducing the scope of the federal government by requiring drastically austere federal budgets — compared with what exists now — that spend no more than 18 percent of the nation’s gross domestic product, which analysts said would most likely force big cuts in government spending at almost every level. That would equate to a cut of one-quarter of the budget from 2011 expected levels, and it would mark the lowest level of spending relative to G.D.P. since the mid-1960s, though rising tax receipts during the roaring economy of a dozen years ago temporarily brought the level close to 18 percent.

To address the projected long-term financial shortfall within Social Security, Mr. Perry suggested raising the retirement age and potentially changing the age eligibility for Medicare and using a sliding scale to limit benefits based on income — two proposals that could face significant opposition in Congress. Mr. Perry, who said his plan would balance the budget by 2020, also proposed letting younger workers divert some of their Social Security taxes into private investment accounts, a longtime goal of economic conservatives.

Analysts said it would take time to examine the effects of the Perry plan. But Roberton Williams, a senior fellow at the nonpartisan Urban-Brookings Tax Policy Center, said: “There are two things we can say with certainty: It will lower revenue and be a great benefit to the wealthy.”


He said the poor who have children would most likely do better under the current system, because refundable tax credits provide some with net payments from the government. But Mr. Williams said it was unclear how many among the middle class would benefit — though families with more children or bigger mortgages would be more likely to opt for his proposal.

Mr. Perry pledged to not cut any benefits of current Social Security retirees or those about to tap into the system. But to do that, and cut the budget to 18 percent of G.D.P., would require cutting at least one-third of the remaining federal budget, said James R. Horney, the vice president for federal fiscal policy at the Center on Budget and Policy Priorities, a liberal research group in Washington. It would require “a dismantling of federal programs,” Mr. Horney said, and “draconian cuts in virtually every kind of spending.”

Ben LaBolt, a spokesman for President Obama’s re-election campaign, criticized both the Perry plan and one offered by Mr. Romney as “guided by the same principle: they would shift a greater share of taxes away from large corporations and the wealthiest onto the backs of the middle class.”

Mr. Romney, the former Massachusetts governor, has called for extending the Bush tax cuts, lowering the corporate tax rate to 25 percent and exempting investment income for taxpayers who make less than $200,000.


Conservative tax activists like the Club for Growth say the Perry plan would spur economic growth, but many economists warn that if put in place immediately, anything that cuts the size of the federal government as severely as Mr. Perry’s proposal would throw the nation back into a recession.

What remains to be seen is how much appetite there is among Republican primary voters for such an ambitious reshaping of tax policy and, potentially, entitlement programs. A New York Times/CBS poll released Tuesday found that 65 percent of Americans say taxes should be increased on households earning $1 million or more, while 66 percent say money and wealth in the country should be distributed more evenly. Another 69 percent say the policies of Republicans in Congress favor the rich, while 67 percent say it is a bad idea to lower taxes for large corporations.

Analysts also immediately raised questions about how many people would actually see their taxes simplified, one of Mr. Perry’s main claims: Many middle-class families would actually need to figure their taxes using both systems before deciding which one would save them more money, potentially increasing the amount of time they spend on taxes rather than making tax preparation easier.

Another question is how well Mr. Perry and his newly revamped campaign team can package and sell the tax proposal. That effort may have been undermined on Tuesday, when, many media outlets, instead of focusing on the tax plan, covered Mr. Perry’s statement in two interviews that he was not certain Mr. Obama was born in the United States. Those comments linked him to the “birther” movement, whose members question whether the president is occupying the White House legally.


Given an opportunity to play down the issue in an interview Monday night with CNBC and The New York Times, Mr. Perry refused, saying that “it’s a good issue to keep alive.”

John Harwood contributed reporting from Simpsonville, S.C., Michael D. Shear from Washington, and Catherine Rampell from New York.


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