Economics, Taxes and Spending

Rick Perry’s 20-20 flat tax plan: pro-growth, though not perfect

Texas Governor Rick Perry gives the broad strokes of his flat tax plan in The Wall Street Journal today. The key deets:

—A choice between a new, flat tax rate of 20 percent 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.

—Abolishes the death tax once and for all, providing needed certainty to American family farms and small businesses.

—Lowers the corporate tax rate to 20 percent—along with a tax holiday for foreign earnings—and moves toward territorial taxation.

—Eliminates the tax on Social Security benefits.

—Eliminates the tax on qualified dividends and long-term capital gains.

Oh, and the Perry Plan also promises a balanced budget by—you guessed it—2020, while reducing spending to 18 percent of GDP. (Need many more details on those.)  The good in the plan is obvious. It creates a flattish consumption tax that reduces penalties on work, saving, and investment. That could add at least a half percentage point to long-term GDP growth going forward with an immediate boost from reduced business/investor/consumer uncertainty. And if it does kill the healthcare tax exclusion, that would go a long way toward creating a consumer-driven healthcare market.

What I don’t like: a) It keeps the market-distorting, revenue-gobbling mortgage interest deduction; b) making it optional seems gimmicky; c) it does nothing about the payroll tax such as uncapping it and then lowering it; d) if it is not revenue neutral on a static basis (and I am guessing it is not), the media will kill it. I look forward to getting more details later today.

6 thoughts on “Rick Perry’s 20-20 flat tax plan: pro-growth, though not perfect

  1. “Under my plan, we will establish a clear goal of balancing the budget by 2020. It will be an extremely difficult task exacerbated by the current economic crisis and our need for significant tax cuts to spur growth. But that growth is what will get us to balance, if we are willing to make the hard decisions of cutting.”

    More… grow-our-way-out-of-it gibberish.
    Another non-plan plan. No surprise. No innovation. No inspiration. No chance.

  2. I’m not so concerned about the mortgage interest deduction, since I think it is very useful in driving investment (including moral investment) in local communities. I would, however, like to see it restricted to a primary residence and not for second homes or vacation homes.

  3. It has become popular amongst some coservatives to dis the mortgage intrest deduction. In the real world money will gravitate towards those most adept at financial accumulation hence human history filled with societies of 1% mega rich, 70% dirt poor and a small merchant middle class. America as a post agrarian society needs the correct balance to secure a thriveing middle class of which the mortgage dedution is one part.

  4. Obviously this is politically charged.
    1) Mortgage interest deduction is a subsidy to the construction industry, plain and simple. It is one step backwards to our current system of trying to control people’s behavior. What makes the construction industry more important than the auto industry, for example. This is only included to avoid criticism by MSM/Democrats.
    2) Most of our charitable funds come from people making more that $500,000. Removing the deduction will hurt charity. He is bowing to Obama’s class warfare, here.
    I prefer the honesty of Cain’s 9-9-9 to this “politically sensitive” plan.

  5. I have been surfing online more than three hours as of late, but I never found any fascinating article like yours. It’s beautiful value sufficient for me. In my view, if all web owners and bloggers made good content material as you did, the web will probably be much more helpful than ever before.

  6. certainly like your web site however you have to check the spelling on quite a few of your posts. Several of them are rife with spelling problems and I find it very bothersome to tell the reality however I will certainly come back again.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>