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November 01, 2011 9:25 AM Perry’s overly-generous gift to the rich

By Steve Benen

The tax plan Rick Perry released last week is more a caricature than a policy proposal. The Republican presidential hopeful wants a flat tax, the elimination of the Estate Tax, and the elimination of the capital-gains tax. If you’re thinking that sounds like the kind of plan that would benefit the wealthy, you’re right.

Gov. Rick Perry’s proposal for an opt-in flat tax would primarily benefit the wealthiest Americans, according to a new analysis from the Tax Policy Center, a nonpartisan research organization. Compared with current tax policy, the plan would most likely reduce federal tax revenue by $570 billion, or about 15 percent.

The plan, released last week as part of Mr. Perry’s campaign for the Republican presidential nomination, allows taxpayers to calculate their personal income taxes under the existing tax code, which is progressive. But it also allows taxpayers to instead have their income taxed at a flat 20 percent rate. In this alternative system, long-term capital gains, qualified dividends and Social Security benefits would not be taxed, and only a handful of deductions would be allowed. Once a household chooses the new system, it cannot switch back.

Because no one would be forced to use the alternate system, Mr. Perry has said, no one would have to pay higher taxes (at least initially; presumably if a family’s income changes a few years after entering the plan, it may no longer be advantageous). Even so, the greatest beneficiaries of the flat-tax option — that is, the households that would be most likely to switch to this system — are far and away the highest earners.

McClatchy ran a chart that helps drive the point home nicely:

Unlike Herman Cain’s infamous “9-9-9” plan, Perry’s approach manages to cut everyone’s taxes*. There are, however, two catches. The first is that lower-income workers would get a very small cut, while millionaires and billionaires would be showered with another round of overly-generous breaks. It’s the Bush/Cheney strategy on steroids.

The second is that Perry won’t even try to pay for these massive tax breaks, and last week, his campaign argued he shouldn’t have to, since massive giveaways to the wealthy pay for themselves. In Grown-Up Land, this would, according to the Tax Policy Center’s analysis, add an additional $1 trillion to the debt in 2015, unless the costs are offset by brutal spending cuts that eliminate a large chunk of the federal government.

As for the larger takeaway from all of this, I think Bruce Bartlett has the right idea: “Mr. Perry’s plan cannot be taken seriously. I don’t think it’s meant to be, at least by those of us who don’t plan on voting in Republican primaries. It’s just a signaling device, telling the Republican faithful that they can trust Mr. Perry on the tax issue. Whether the plan makes any sense as a matter of policy is irrelevant to its purpose, which is to win him the Republican nomination.”

* Clarification: There are actually three catches. Bruce emails to remind that the Perry flat-tax plan is intended to only give 60% of taxpayers a cut, not 100%. The key detail is that taxpayers would have a “choice” — between the status quo and Perry’s new system — and that 40% would stand to benefit more from sticking with the existing tax structure, which would allow them to pay less. It’s one of the key reasons revenue shortfalls would be so dramatic.

Steve Benen is a contributing writer to the Washington Monthly, joining the publication in August, 2008 as chief blogger for the Washington Monthly blog, Political Animal.

Comments

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  • Danp on November 01, 2011 9:34 AM:

    How does this plan lower someone's taxes if their income is below $10,000? Are we talking about those who only have investment income or something? Aren't they already in the "47% club" anyway?

  • c u n d gulag on November 01, 2011 9:36 AM:

    Well, you've got to give Perry some credit.

    If "Trickle-sown" didn't work, maybe "Gusher-down" will.

    Check the definition of insanity - I'm pretty sure it says something about doing the same things over and over again...

  • stormskies on November 01, 2011 9:38 AM:

    One of the things I will never forget, that reflects that attitude of the Repiglicans, is when Bush was installed as President, and then proceeded to change all the tax laws for the rich in order to benefit them. A reporter asked Dick "I am not a piece of shit" Cheney how this was at all fair. And his answer was simple: "It's our due". And there you have it, the attitude of these self appointed Zarathustra's towards all the rest of us, the 'little people'.

  • walt on November 01, 2011 9:46 AM:

    I like to engage the middle-class shills for the plutocracy on fiscal policy issues. Why, I ask, is it so important to you that the rich be even richer? Why do you care so much?

    Underneath all the boilerplate, talking points, and right-wing bumper stickers is a small voice crying: I want to be rich someday and I don't want to share.

  • ComradeAnon on November 01, 2011 9:48 AM:

    I hope the term "Gusher down" replaces "trickle down". That's your best one yet c.

  • Trollop on November 01, 2011 9:51 AM:

    Wow, more monetary and tax revenue douche-baggery, or is this more teabaggery? It's nice to see that the US is willing to hire another genius in economics soon. I guess we're going for the grapes of wrath again soon except this time, average and poor Americans migrate to a different continent in search of a new shot at an economic prosperity dream, instead of the Republican nightmare..

    Yea, another ASSHOLE from TexAss! Just what Amurka needed!

  • RepublicanPointOfView on November 01, 2011 9:53 AM:

    Governor Perry's tax plan is a major fail!

    Everyone knows that the only problems with our economy are that:
    - the wealthy do not have enough wealth
    - we have too big a middle class
    - the poor do not pay enough taxes

    Governor Perry's tax plan addresses the first problem with our economy, but fails miserably on the 2nd & 3rd. On the other hand, Herb Cain's 9-9-9 tax plan would address all of the problems with our economy.

    Governor Ricky Bobby Perry is failing to adequately address the needs of our economy and his plan needs to be revamped!

  • RepublicanPointOfView on November 01, 2011 9:56 AM:

    Governor Perry's tax plan is a major fail!

    Everyone knows that the only problems with our economy are that:
    - the wealthy do not have enough wealth
    - we have too big a middle class
    - the poor do not pay enough taxes

    Governor Perry's tax plan addresses the first problem with our economy, but fails miserably on the 2nd & 3rd. On the other hand, Herb Cain's 9-9-9 tax plan would address all of the problems with our economy.

    Governor Ricky Bobby Perry is failing to adequately address the needs of our economy and his plan needs to be revamped!

  • BetweenTheLines on November 01, 2011 10:10 AM:

    Yeah!!! We could all be minimum-wage earning Texans soon.

  • T2 on November 01, 2011 10:17 AM:

    this is not Perry's plan. It is a variation on the typical Flat Tax plan that Republicans and semi-Republicans like Ron Paul have been floating for years. Under the guise of "simplification" is the simple goal, let Rich people continue to amass wealth, tax-free.

    It's clear to anyone who's been watching that Rick Perry doesn't have the intelligence to author a Tax Reform of any kind. Somebody fed him this, said "Rick, use this, it's the GOP plan" and he did. It was the easiest thing he could do, which is his choice on most things.

  • tamiasminm on November 01, 2011 12:14 PM:

    For the people who offer them, benefiting the rich is a pleasant side effect of these plans. The real point is disabling the federal government.

  • Patricia on November 01, 2011 5:01 PM:

    perhaps you should mention his huge gift to Mitt Romney -- you know, showing up drunk for his speech in New Hampshire Friday night.

    Merry Christmas, mitt!

  • INTJ on November 01, 2011 5:11 PM:

    You may certainly disagree legitimately with Perry's tax plan; there are valid issues there to discuss. But make no mistake, it is precisely the attitude that letting anyone - including the rich - keep more of their own money instead of taking it from them is somehow a "gift," that makes moderates and conservatives wary of the progressive agenda, and properly so.

  • shane on November 01, 2011 5:33 PM:

    Why is it fair for some to pay nothing and others to pay 36 cents of every dollar? It is fair if everyone pays the same amount. If everyone pays 15 cents per dollar, that is fair. The inequality is just punative on the people who earn more. It is not a gift to allow people to keep some of the money they earn, unless you are a dictatorship.

  • Kalzakath on November 01, 2011 5:36 PM:

    How much of "their" money did they steal while making people lose jobs and transporting even more of them over seas. Their theft belong back in the pockets of the people who really work

  • Rastus on November 01, 2011 5:45 PM:

    So far, most of the editorials from left-leaning writers have focused on how much the weathly benefit--directly--from the large tax cuts that persons with high levels of ordinary income would get from Perry's flat tax proposal. Those same writers claim to care desperately about Americans who are now and have long been jobless. What impact will such a tax have on them? I.e., what will be the result of letting high wage earners keep more of what they earn? First, they will probably spend some fair portion of it, helping provide jobs for those that provide and produce the goods and services thus purchased. Second, some of it will be saved or invested, providing capital to banks for lending to business and consumers, or capital to companies via stock puchases. And, importantly, tax cuts will help to starve the gobvernment of cash, thereby forcing it to make real and serious cuts in spending. Finally, no one will get a tax increase. Win, win, win and win.

  • Steve on November 01, 2011 6:46 PM:

    Golly gee - the people that actually pay income taxes are the predominant beneficiaries of a tax that taxes everyone at the same rate. This is what must pass as news for those that don't pay the income taxes.

  • Bubba on November 01, 2011 7:02 PM:

    If I was running for president of the US, I would propose a completely volunteer tax system. People could pay what they wanted. In my system, people can keep their money and the government will run on donations.

    I am sure some will still pay taxes. Analogously, people still signed up for the military when we got rid of the draft. It will also cut the size and influence of government. If your president is not elected or you disagree with policy, don't pay taxes. The free market will take care of roads, etc.

  • JGwen on November 01, 2011 7:16 PM:

    As someone on the lower end of the scale, I am in favor of Governor Perry's flat tax plan. The present federal and state tax revenue demands have halved my income. I do not want to live off the dollars taken from my fellow citizens! Were my clients able to retain more of their income, they would be able to purchase more of my services. Beyond spending their additional income, they would very likely invest it. That would provide needed funding for private sector businesses and a healthier economy.

    As for the Federal (and State were they to follow suit) revenues ... we have a federal debt approaching $15 trillion ... and my state has an outstanding debt over 1 billion. On a close check this is due in major part to profligate undisciplined unproductive spending. We should have NO earmarks, NO "investments", no financing energy development in Brazil. We should be opening the door to energy independence and jobs in the U.S. We should change the dynamic that sends earnings and jobs overseas. This is just a few of the directions I would expect Governor Perry to pursue.

    I want the Government, to the extent possible, out of my life. I will be relieved to make my own decisions for the better or the worse. As a former 24 year federal employee, given the constraints on job performance, coupled with the reward systems and inclinations ... I do not want any Federal (or State)employee making decisions for or about me.

    With many Federal functions abandon, significantly reduced and/or responsibilities transferred to the States, the need for revenues for Federal operations would be significantly reduced.

    This would be a plan I eagerly support!

  • Jack Davis on November 01, 2011 9:19 PM:

    Solyndra? Beacon Power? Both bankrupt after being on the White House teat? Care to comment, Steve? No? I didn't think so.

  • Barry Sullivan on November 01, 2011 10:00 PM:

    INTJ's comment is spot on:

    You may certainly disagree legitimately with Perry's tax plan; there are valid issues there to discuss. But make no mistake, it is precisely the attitude that letting anyone - including the rich - keep more of their own money instead of taking it from them is somehow a "gift," that makes moderates and conservatives wary of the progressive agenda, and properly so.

    Help me out. Who exactly is the "greedy" one when person A claims person B received a "gift" of lower tax rates -- person B who earned money in voluntary transactions or person A who believes they have a right to help themselves (with the government's help) to person B's money?

  • WTexas on November 02, 2011 2:07 AM:

    Greed is not wanting to keep more of the money you have earned!!

    Greed is the government and the socialist parasites wanting more of the money you have earned!!!

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