Image via WikipediaToday, Rick Perry finally unveiled his plan to help spur the economy. Perry's plan is called the "Cut, Balance, and Grow" plan but could also be dubbed the 20-20-20 plan, which like Cain's 999 plan would be easy enough to remember. Perry calls for a 20% flat tax, a 20% corporate tax rate, and a balanced budget by 2020.
Most opponents of flat tax plans are quick to attack them on the basis of the liberal view of "fairness." However, the Perry plan addresses this potential argument by allowing taxpayers to have a deduction of $12500 per person per household. A family of four earning $60000 per year, would have a deduction of $50000 and would pay a 20% income tax on $10000, or a total of $2000 which works out to a tax rate of just over 3%.
In addition to the generous standard deduction, taxpayers who make less than $500,000 per year would also get to keep some favorite deductions. They would still be able to deduct mortgage interest, state and local taxes, and charitable deductions. This lowers the total taxable income even further, allowing middle and lower income earners to pay a much lower rate than the 20% rate.
Like Cain's 999 plan, I would be concerned about how such a tax plan would impact me personally. The unknown on the Cain plan would be how much of my total income would be taxed on the 9% sales tax. I had no such issue with the Perry plan. Looking at my tax return from this year, I would actually fare significantly better under the Perry plan vs. the current tax structure.
I should also add that I make well under $100,000 per year, so I am hardly one of the dirty rich that opponents of the flat tax say would benefit from the flat tax at the expense of lower and middle income folks. My own example should be enough to help dispel that faulty argument, but those on the left will continue to claim that only the wealthy will benefit from Perry's plan.
Another aspect of the Perry plan is to lower the corporate income tax rate from the current 35% to 20%. This would help to make the United States more friendly towards corporate investment. It would be expected that would increase investment here leading to economic growth. With growth, would increase the tax base in the country.
The third 20 in Perry's plan is to balance the budget by 2020. He calls for spending to be capped at 18% of GDP. This would put spending at levels that were maintained during the Clinton era. It also calls for a balance budget amendment.
I heard a couple of commentators being interviewed about the proposal earlier today. Both thought that the plan had merit, and would definitely lead to economic growth. One of the commentators, though, pointed out that Perry's plan lacked a lot of specifics. One had interviewed Perry and said that Perry had admitted that they had not necessarily costed out the proposal, nor did he have details on the spending cuts needed to balance the budget.
For the most part, Perry has been floundering since entering the race for the Republican nomination. His performances in the debates has been, to put it mildly, less than stellar. Consequently, his poll numbers have been dropping steadily. It is good to see him come out with a plan that we can look at and analyze. It will be interesting to see if he can get any kind of bump from his latest proposal and get back in the game as it were.