Perry’s Cut, Cap and Balance Flat Tax Plan is a Winner But Will it Make Him a Winner?

  Bookmark and Share  In advance of his announcement of a flat tax proposal that would be the most dramatic tax reform in the nation’s history, Governor Rick Perry penned a summary of his proposal in this mornings Wall Street Journal .

Calling his proposal “Cut, Balance and Grow”, Perry hopes to balance the federal budget by 2020 and explains that his plan will abolish the death tax and give taxpayers the option to pay their current income tax rate or a new 20% flat tax that “preserves mortgage interest, charitable and state and local tax exemptions for families earning less than $500,000 annually, and  increase the standard deduction to $12,500 for individuals and dependents.”   In addition to a 20% personal income tax, the Perry plan will also adopt a lowers the corporate tax rate to 20% and encourage the swift repatriation of nearly $1.4 trillionthat are currently hidden overseas by temporarily lowering the rate to 5.25%.  The third part of his flat tax proposal includes what he calls a transition to a “territorial tax system”, that will only tax income earned in the United States.

Perry’s plan also calls for the elimination of the tax on Social Security benefits, a change that will supposedly boost the income of 17 million current Social Security recipients.

Governor Perry argues that without significant changes, our nations will go the way of Europe and be mired in a longterm debt crisis that will only get worse than the one we are currently experiencing and to help avoid that in addition to his new flat tax reform he attempts to cut, cap and balance federal spending habits by capping federal spending at 18% of our gross domestic product, banning earmarks and future bailouts, and passing a Balanced Budget Amendment to the Constitution. Additionally he will freeze federal civilian hiring and salaries until the budget is balanced and enact an immediate moratorium on pending federal regulations while also mandating  a full audit of all regulations passed since 2008 to determine their need, impact and effect on job creation.

In what is a direct nod to his need to shore up those voters who are fearful about Perry’s past remarks about Social Security being a Ponzi scheme and as such, something which he would seek to eliminate, Perry’s plan touches entitle reforms, an issue which needs to be addressed and which Perry’s plan does not address enough. His proposal merely declares that he will preserve benefits for current and near-term Social Security beneficiaries, by permanently prohibiting “politicians from raiding” the Social Security trust fund.

That part of his plan is the most politically shallow aspect of his proposal.  While he addresses that issue under the category of entitlements, he does not really address all of the entitlement reforms that are burdening the budget now and will bust it in the future.  It is also worth mentioning that it is nearly, if not totally impossible for a President to vouch for the permanent inability of Congress to “raid” any fund.  President’s come and go.  The mentality that relies on political expediency among Congress lasts forever.

In general, Perry’s Cut, Cap, and Balance plan is one of the most comprehensive and promising plans to come down the pike in decades.  One of the most, but the not only one.  Others have proposed similiar flat tax based plans and one of the major differences between those other plans and Perry’s plan is that at 20%, Rick Perry sets his flat tax at a rate significanlty higher than most all others.  That high 20% rate is probably the least attractive aspect of Perry’s plan.

Insofar as reform goes, it is much more solid than the light on detail, 9-9-9, hybridized flat tax proposal of Herman Cain and when it comes to the issue of reform, Perry’s proposal outshines even Ronald Reagan’s, Jack Kemp inspired, lower taxation, supply side economics plan of the 80’s.  That plan simply adjusted the existing tax code and while it was in no way insignificant, Perry’s plan admits that the tax code is not worth tinkering with and needs to be scrapped and replaced by something that will allow America to be competitive in the modern global economy.

In a previous post I indicated that if Perry proposes a good flat tax plan and can market it properly and exploit the promise that exists in a flat tax from a politically strategic point of view, than he can reestablish himself as a frontrunner, or at least within reasonable striking distance of such a status.  Now that the relative details of his plan are out, I can honestly say that despite my belief that his 20% rate is too high,  if he can build his campaign around this plan and make it a focal point of the overall Republican nomination contest, than Rick Perry will have many fruitful themes to touch upon and run on.  Now is just a matter of developing an effective campaign strategy and organization that can force the other candidates to run around his promising, conservative based economic plan and reforms. Bookmark and Share

Huckabee’s Fair Tax Mistake

Bookmark and Share Mike Huckabee has released an editorial promoting the virtues of a national sales tax or as he calls it the Fair Tax.

He writes;

Hopefully by now youre somewhat familiar with how the FairTax works, but if not let me explain it briefly: You get rid of all income and payroll taxes and you get rid of corporate taxes completely. When someone tells you corporations should be taxed more – remember, if more taxes are put on a corporation – the corporation is simply going to raise the prices of their products to cover the increase – passing the increased cost to you.

That sounds good but it is also typical Mike Huckabee.deceptive.

Now I shouldnt be too hard on Huckabee. He does at least have the guts to propose true reform of a tax system that is obsolete, chaotic, oppressive, and a hindrance to economic growth. We need a presidential candidate and President who will not simply tinker with a broken system but prepared to support a cash for clunkers like approach to our tax code by junking it and replacing it with a system that does not penalize success, oppress entrepreneurial innovation, and hold back our economy.

Huckabee is correct when he writes refers to tax reform in his editorial by writing , I do know we wont have a chance if we dont have the courage and leadership in Congress to see the task through. That is most certainly true. But that leadership must come from more than just Congress. Sweeping change must be supported by our Commander-in-Chief, the person who has the power of the bully pulpit behind them and who believes in the reforms that he or she convinces the nation of the need for.

But the Fair Tax is not the reform that this nation needs. First of all, the Fair Tax is anything but fair. If George Soros decides to have his help purchase televisions for all the bathrooms in all of his estates, he can afford the additional cost that a national sales tax places on his purchases. But for an average family that lives from pay check to pay check, the new national sales tax simply makes it harder for them to replace the one TV screen that they have had for 10 years and is displaying a screen with a picture that is shrinking.

For a family making $200,000 a year, a rise in the cost of all products may be affordable but for too many higher prices simply puts more products further out of the reach and places a significant burden on them.

Higher prices are not what I believe the Republican candidate for President or Congress should be proposing.

Instead I believe it is incumbent upon our Party and its candidates to demand that we abolish our current arcane tax code and replace it with a Flat Tax. Unlike the so-called Fair Tax, a Flat Tax is exactly what it says..flat. It is one rate for one nation. There is no discrimination, there is no hike in the costs of products and there is no penalizing of success. Instead, a Flat Tax offers tax relief, puts an end to loopholes, and grows our economy.

Of the last ten years, the fastest growing economies of the world have adopted a flat tax for their nations. The greatest examples of this exist in the former Soviet states of the Balkans. When they adopted a flat tax, they saw their economies boom and have maintained steady economic development and growth. Yet, the United States, still hangs on to our antiquated tax system, a system that only grows our economy whenever we tinker with it to reduce rates. And when we reduce rates, which area of debate is the greatest source of disagreement? Why it is who those reductions should go to. And from there inevitable comes the debate on what constitutes defining one as rich.

The Flat Tax puts an end to all those debates. With a Flat Tax rate of say, 14%, the wealthy still pay a greater percentage than do the less wealthy. 14% of 40 million comes out to be much more than does 14% of 40 thousand. And unlike Mike Huckabees national sales tax, it does unduly burden families with higher costs. In fact for many, it lowers the amount of money that the government currently takes from them.

Huckabee understands that we need real change in America. That is a good thing, but what he does not realize is that the change he proposes does more harm than good and if he really wants to promote tax fairness, then the Flat Tax, one rate for one nation is the way to go.

Government does not produce wealth and it is not naturally sustainable. The people and the entrepreneurial spirit of America through its free markets, are what creates wealth and sustains our government. That is why I believe we must eliminate our current oppressive tax code, a tax code that rewards failure must go. We need leadership that will implement what I call a National Economic Recovery and Responsibility plan that will help spark our economy, reduce spending and put America back on the road to a steady, growing, stable economy. As such I offer my own detailed tax reform plan for Governor Huckabee to consider in place of his national sales tax.

I.-The National Tax Equity Act

(For a detailed explanation click on thebill titlelink above)

1. A flat tax rate on individuals and businesses shall be adopted as outlined below with a rate of 18% that, after three years, will level off at 15.5% of whats left of the total annual income from all wages, salaries, and pensions after subtracting a personal allowance.

Those four allowances would be:

  • – $26,600 for married filling jointly
  • – $16,850 for single head of household
  • – $13,650 for single
  • – $5,300 for each dependent child
1.A Individual gross earnings up to 2 times the established poverty level (based upon the year preceding) are exempt from taxation. All income above that level shall be taxed at the specified rate.

1.B Businesses and Corporations with gross earnings up to the value resulting from multiplying the number of legal US resident employees in the business against 2 times the established poverty level (based on the year preceding) shall be exempt from taxation with all gross income above that level taxed at the specified rate.

1.C– All corporations will be taxed by the same single national tax rate and they will take their total income, subtract total expenses and if the result is a positive amount (profit), they will pay tax on that amount at a the national tax rate.

2.A – All Businesses and Corporations thatexceed federalenergy efficiency and environmental standardswill be entitled to an annual dedcution of10%the amount oftheir annual profit.

2.B-All individual home amd property owners thatexceed federalenergy efficiency and environmental standardswill be entitled to an annual dedcution of10%the amount oftheir annual profit.

3.A -There shall be an exemption up to but not to exceed the greater of 10% of gross annual income or 25% of the annual median income, applied to College Savings Accounts, Individual Retirement Accounts (IRA), Money Market Accounts and Certificates of Deposits.

3.B– Allow for the automatic deposit of tax refunds that are based onthe rate of savings formula implemented upon passage of thefederally insuredPrivatizedFuture Security Annuity Accountsprogram that will take the place of SSI.(see proposed PFSA program here)

3.C-Provide employment-based health insurance to individuals with annuals earnings under $55,000, in the form of refundable, advanceable tax credits. Families would get up to $5,700 a year and individuals up$2,300 to buy insurance and invest in Health Savings Accounts

4. Social Security benefits are exempt from taxation.

5. A complete 100% exemption from the flat tax for spouses of military personnel deployed in a theatre of battle to be effective from the time of deployment to the end of the calendar year after deployment ends.

6– The following will hereby require a 2/3 majority for passage and adoption:

-Raising or reducing the flat tax rate

  • -Extending or eliminating tax credits
  • -Increasing or decreasing the rate of a penalty tax
  • -Creating any new penalty taxes
  • -Borrowing money to pay for general expenses
7. Direct income from inheritance settlements are exempt from taxation.

8. Specific provisions for implementation to be determined by a Congressional review committee with input from regulators, industry representatives and budget experts

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