My Tax and Spending Reform Plan
Individuals will have the option of paying a 20% flat-rate income tax and I’ll cap spending at 18% of GDP.
By RICK PERRY
On Tuesday I will announce my “Cut, Balance and Grow” plan to scrap the current tax code, lower and simplify tax rates, cut spending and balance the federal budget, reform entitlements, and grow jobs and economic opportunity.
The plan starts with giving Americans a choice between a new, flat tax rate of 20% 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.
This simple 20% flat tax will allow Americans to file their taxes on a postcard, saving up to $483 billion in compliance costs. By eliminating the dozens of carve-outs that make the current code so incomprehensible, we will renew incentives for entrepreneurial risk-taking and investment that creates jobs, inspires Americans to work hard and forms the foundation of a strong economy. My plan also abolishes the death tax once and for all, providing needed certainty to American family farms and small businesses.
My plan restores American competitiveness in the global marketplace and provides strong incentives for U.S.-based employers to build new factories and create thousands of jobs here at home.
First, we will lower the corporate tax rate to 20%—dropping it from the second highest in the developed world to a rate on par with our global competitors. Second, we will encourage the swift repatriation of some of the $1.4 trillion estimated to be parked overseas by temporarily lowering the rate to 5.25%. And third, we will transition to a “territorial tax system”—as seen in Hong Kong and France, for example—that only taxes in-country income. [Scott: See How To Add $1 Trillion To The Economy With The Stroke of a Pen]
The mind-boggling complexity of the current tax code helps large corporations with lawyers and accountants devise the best tax-avoidance strategies money can buy. That is why Cut, Balance and Grow also phases out corporate loopholes and special-interest tax breaks to provide a level playing field for employers of all sizes.
To help older Americans, we will eliminate the tax on Social Security benefits, boosting the incomes of 17 million current beneficiaries who see their benefits taxed if they continue to work and earn income in addition to Social Security earnings.
We will eliminate the tax on qualified dividends and long-term capital gains to free up the billions of dollars Americans are sitting on to avoid taxes on the gain. [Scott: see High Tax Rates Makes People Avoid Taxable Economic Activities, Thereby Reducing Govt Income for more.]
We should start moving toward fiscal responsibility 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. My plan freezes federal civilian hiring and salaries until the budget is balanced. And to fix the regulatory excess of the Obama administration and its predecessors, my plan puts an immediate moratorium on pending federal regulations and provides a full audit of all regulations passed since 2008 to determine their need, impact and effect on job creation.
ObamaCare, Dodd-Frank and Section 404 of Sarbanes-Oxley must be quickly repealed and, if necessary, replaced by market-oriented, common-sense measures.
Cut, Balance and Grow also gives younger workers the option to own their Social Security contributions through personal retirement accounts that Washington politicians can never raid. Because young workers will own their contributions, they will be free to seek a market rate of return if they choose, and to leave their retirement savings to their dependents when they die.
Mr. Perry, a Republican, is the governor of Texas and a candidate for president.
UPDATE 1: The actual plan announcement.
UPDATE 2: The expert opinion is in, and it is looking good:
Using static analysis, the Perry Plan would raise $23.8 trillion from 2014-2020, or $4.7 trillion less than the CBO baseline of $28.5 trillion over that span. Using dynamic analysis that assumes growth effects from the redesigned tax code, the Perry Plan would raise $26.8 trillion, or $1.7 trillion less than CBO baseline.
Under Perry’s plan, the economy would be $3.5 trillion bigger than under the CBO’s estimate of current growth.