Rick Perry Tax Plan Gives Millionaires A $500,000 Tax Break: Study
WASHINGTON -- Under Texas Governor Rick Perry's tax plan, the U.S. government would lose $995 billion in revenue by 2015 while individuals making more than $1 million a year would receive an average tax cut of roughly $510,000 by that same year, a study by the centrist, highly respected Tax Policy Center concluded.
The findings, one of the first comprehensive analyses done of the plan so far, make Perry's proposal one of the more regressive of those introduced by Republican presidential candidates to date when compared to current policies.
"You can say, to his credit, that Herman Cain's plan actually does somewhat come close to raising the same amount of revenue cut relative to the current policy baseline," said Joseph Rosenberg, a research associate at the Urban Institute, in reference to Cain's proposal to introduce a nine percent sales tax alongside reducing the corporate and personal income rates to nine percent. "Rick Perry is essentially providing a massive tax cut disproportionally benefiting higher income people."
Perry debuted his plan in a series of speeches last week. He proposes scrapping the current income tax system and the corporate tax rates and replacing both with a 20 percent flat rate. The plan also calls for eliminating the estate tax and long-term capital gains tax. Taxpayers could claim an exemption of $12,500 for each individual and dependent as well as deductions on things like mortgage interest and charitable giving.
To add some flexibility to the system, Perry declared that his proposal would be optional: if an individual or family thought they could fare better in the current system they would be entitled to stay in it.
That wouldn't seem like an inviting option for wealthy Americans. According to the TPC study, which was conducted jointly by the Brookings Institution and the Urban Institute, millionaires would see a 23.5 percent jump in after-tax income under the Perry plan. The benefits would come almost immediately. According to an earlier study produced by the TPC, retired couples with more than $722,000 in total income would receive a $96,102 tax break in 2011. Married couples with two children that have an income level above $424,900 would receive a $46,440 tax break.
The poor wouldn't receive anything close to those benefits under Perry's flat tax. By 2015, after-tax income for those making between $40,000 and $50,000 a year would actually go down 0.6 percent.
On a macro level, Perry's plan could potentially be a major budget buster. According to TPC, the proposal would witness "roughly a 27 percent cut in total projected revenue." Perry, however, has accompanied his tax proposal with a call for a strict cap on government expenditures as a percentage of GDP. But as The Huffington Post reported, that might not be enough to make it deficit-neutral.
Perry also announced Tuesday that he wants to bring federal spending down to 18 percent of gross domestic product. GDP is roughly $15 trillion this year. Bringing spending to 18 percent of $15 trillion would mean cutting it down to about $2.7 trillion a year. The government, however, spent $3.6 trillion in the 2011 fiscal year, according to the Congressional Budget Office. That's a $900 billion difference.
Below is the full TPC study of Perry's plan: