Cut, Balance and Grow: Rick Perry Introduces Sweeping Economic Plan October 25, 2011, Matthew Cochrane
In South Carolina today, Texas Governor Rick Perry unveiled his “Cut, Balance and Grow” economic plan which includes details on much-needed tax reforms, entitlement reform and how to balance the budget by 2020 without raising tax rates.
Rick Perry is proposing letting Americans choose between their existing income tax rate or a new flat tax of 20 percent, part of a tax and spending reform plan that the Republican presidential candidate is dubbing "Cut, Balance and Grow."
"The goal of my 'Cut, Balance and Grow' plan is to unleash job creation, address the current economic crisis, while at the same time generating a stable source of revenue to address our record deficit and put our fiscal house in order," Perry, the governor of Texas, said at an event Tuesday in South Carolina.
Perry said people taking up the flat tax can scrap the current code, and it would lower and simplify tax rates to the point that Americans could file their tax returns on a post card, which he pulled out as he spoke.
I am seriously in love with this plan. The tax reform is loosely based on Steve Forbes’ flat tax plan from the late nineties with some key improvements. It begins with a 20% flat tax but, for families earning less than $500,000, it keeps in place mortgage interest deductions, charitable deductions and increases the deductions for dependents. Essentially, this means middle class families, like mine, will be paying less in taxes. For liberals who feel like paying taxes is their patriotic duty, they can opt to keep their tax rates and provisions. It also gets rid of the alternative minimum tax (AMT), which can penalize families for having too many children. The plan also eliminates the death tax (hurray!) and taxes on Social Security benefits. The plan quickly earned Steve Forbes’ endorsement:
In a Wall Street Journal opinion piece, Perry explains how the plan will affect businesses and help boost the economy:
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.
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.
Perry’s plan should not be mistaken for merely including tax reform; it also includes detailed spending cuts that will lead our country toward a balanced budget by 2020. He writes:
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.
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.
Obviously I support the passage of a balanced budget amendment but I also love the part about freezing federal salaries until the federal budget is balanced. This will give all federal employees reason to want to the budget to get balanced and incentivize the reporting of waste and excess.
The Texas governor also understands entitlements are the real driver of long term federal debt and his plan includes proposals to get the big three’s – Social Security, Medicare, and Medicaid – costs under control. He advocates the option for workers to pay into a personal Social Security account, makes it illegal for Congress to raid the Social Security funds to pay for other measures, gradually increases the age of Medicare and Social Security eligibility, and gives states more control of their Medicaid funds (something Perry and other governors have been pushing for a long time).
This is a big plan for big-time candidate. It’s more substantive, serious, and comprehensive than any other candidate’s economic designs at this point. On Perry’s campaign site, it is broken down in detail over thousands of words, sixteen graphs, and 82 footnotes. In other words, it’s more substantive than Cain’s vaunted 9-9-9 plan and bolder than Romney’s timid 59-step proposal.
Indeed, the plan is far too broad and comprehensive to spell out in detail in a mere blog post and, needless to say, there is a lot in the plan I have failed to mention here. If Perry learns how to communicate these ideas effectively in interviews and debates, and not just fiery stump speeches, he will be the Republican Party’s nominee and, in all likelihood, the next president of the United States.
I wonder if debating Obama would be easier for Perry than debating other Republican/conservatives. I like the pay the one you like idea. Libs in favor of higher taxes can chose to pay higher taxes.
- c (10/25/11 3:38 PM)
Here's a fun game for everyone to play on C21. Go here and put in your income:
Then see how much more you would be paying under a 20% flat tax. Now remember this calculator doesn't take out deductions. This is your basic bracket calculator. So even if you include mortgage deduction, dependants, etc as in this plan, it would probably still have to go a ways to meet your middle class income.
Everyone in the US currently pays the same rate. Everyone. It's just a graduated index. Even millionaires are paying 10% on their first 8,000. Exactly what is needed for a healthy economy. Not a trojan horse flat tax plan. No thanks Perry.
But what about what TLM and Warren Buffet talking about the rich paying less? But our economy is NOT healthy under the current system! What about the complicated tax code? What about farmers? Yea, we can talk about fixing our current system, but those are all Red Herrings to try and sell us a massive tax increase and shifting of the burden down the chain. Different issues.
You don't need to use that complicated calculator. Just fill out a sample form on Perry's website using last year's numbers for you and your family. See what you will pay under Perry's plan, compare it to what you actually paid. See what you like better. Remember, under Perry's plan, you can choose between your current tax rates and his plan.
In other words, you have a choice. Liberals only like choice when mothers choose to kill their babies.
Also, that calculator doesn't even include deductibles like mortgage payments or dependents or charitable contributions...Taxes under the current code are all about deductions, not rates. Perry's form on his site is a much better indicator of what you are paying now as opposed to what you wold be paying under his plan.
So I fish out my tax return from last year and go to Perry's site to plug in my numbers and find...it's just a sample form, not an interactive feature. Nice Perry. In other words, you have to do everything by long hand. Hmm...I'll get back to this.
The last sentence of this post explains how Perry can become the nominee and win the White House while at the same time adequately detailing the reason he will not.
- Stephen (10/25/11 4:40 PM)
TLM is wrong...again. (Surprise, surprise, right?).
Actually, with Perry's exemption increase from $3,650 to $12,500 a family of five would not be paying any taxes on their first $62,500 in income. If anything, this is actually a little more of cut than I owuld like, but I certainly would not be paying more taxes. This doesn't even begin to take into account other deductions, like charitable donations, mortgage payments, and state/local taxes.
*Unless my primitive calculations are incorrect. Unlike TLM, I am not a computer scientist programmer guy and math is my arch-nemesis. I try at it but I'm not that good.
Here is a good article, with some good points for his GOP rivals:
Perry's tax plan would preserve all the confusion, waste, and market distortions in the current code, and add another layer.
Perry claims that tax filers could fill out their taxes on a post-card. That's true, but most taxpayers would have to at least calculate what their tax bill will be under both plans. Perry's GOP rivals should feast on him for making Americans calculate two bills for themselves.
Great job Rick!!! More poor breeders not paying any taxes! - Anonymous (10/25/11 5:52 PM)
If at first you don't succeed, lower your standards.
- c (10/25/11 6:20 PM)
TLM and the felt need to calculate two tax bills. Duh. How else you gonna be sure you are paying the lesser of the two. Start a game of tax roulette if'n you don't like it.
- c (10/25/11 6:22 PM)
"Perry claims that tax filers could fill out their taxes on a post-card. That's true, but most taxpayers would have to at least calculate what their tax bill will be under both plans. Perry's GOP rivals should feast on him for making Americans calculate two bills for themselves."
I'm bad at math and it took me all of five minutes. And you basically only have to do it once, it's not like most people would have to do it every single year. If this is the best argument against it that his oponents have, it's an even better plan than I first thought.
Matthew, TLM doesn't like Perry's plan as you said, liberals don't like choice, AND he's afraid of it and he can't come up with a good reason to oppose it. Occupy NSE!
- c (10/26/11 5:06 AM)
Yeah I really like Perry's plan. It's not perfect but my goodness it's better than what we've got going on right now. I still think a state-rate tax plan is better.. maybe one day (I can dream right?).
Now we just gotta get Perry to take immigration more seriously..