Tuesday, October 25, 2011

Unicorns and Leprechauns: A Quick Analysis of the Rick Perry Tax Plan

Cain’s 9-9-9 has been replaced by Perry’s Cut-Balance-Grow. 
Disclaimer: I am not an economist and I am not a frequent guest at Holiday Inn Express.
Perry wants a 20% flat tax rate for all Americans across the board with zero progression.  Of course he would give Americans the option of filing against their current rate with current deductions. Doesn’t sound flat to me, sounds progressive and now overly complex.  Does this mean those that currently aren’t making enough to hit the minimum threshold will still pay no income tax?  Perry Plan also stipulates that families with incomes less than $500,000 can also retain their deductions for mortgage interest, charitable donations, and state and local tax exemptions if they chose the flat tax route. 
Wait there’s more.  Perry will lower the corporate tax rate to 20% from 35% while phasing out corporate loopholes and special interest tax breaks.  The plan will also allow companies to repatriate their offshore earnings, estimated at $1.4trillion, at a greatly reduced tax rate of 5.25%.  A trick performed by fellow Texan Bush in 2005 that led to negligible job growth and juicy bonuses for executives.  He doubles down on this element by proposing a territorial tax system that only taxes earnings companies make domestically.  If that isn’t an incentive to our multinationals to expand overseas, I do not know what is. 
This tax approach will reduce federal revenues dramatically while providing the biggest savings to the top tier.  I will leave it to the CBO to score the net impact on the deficit.
The real fantasy lies in capping federal spending at 18% of GDP, a level last seen in the 50’s and 60’s before we really started spending on Defense and before our population demographics started shifting.  But don’t worry, Perry will cut the EPA and Department of Education to make up for it.  Never mind he would love to scorch the planet and have Texas become the nation’s model for third world education and healthcare, the numbers don’t even come close to adding up.
Oh and here is the kicker.  The man, who makes Bush look like Einstein, says he can balance the budget by 2020.  Not even Paul Ryan took that bet.
Another big giveaway by a Republican.
If you want to provide such a sweeping tax holiday for everyone, you will need to get realistic on spending and that means sweeping cuts to Defense, Medicaid, Medicare, and Social Security.
Why am I skeptical?  Although I am not an economist, the Club For Growth Endorsed the Plan, AND that cannot be a good thing.

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