... attacks the following problems head on:
- The tax code is too simple
- Rich people need more after-tax income
- There's too much retirement security in America
- Multinationals aren't creating enough jobs abroad.
How does how he meet these goals?
Under the Governor's plan, you can choose to pay taxes either under the current system or pay a 20% flat tax.
By adding a new tax code to live astride the current one, it adds much complexity to an already too complex system.
Now, as I've argued before, the idea that one rate=simplicity is just false. Under this plan, you still have most of the exemptions, deductions, and credits that create the complexity in the code. And, since you can choose which system to file under, you get to go through the joy of figuring out your tax bill...TWICE! (Three times if you count the Alternative Minimum Tax.)
Let me be crystal clear about this. We could have a system with a hundred different rates that you pay on all your income from any source. Under this system, you'd look up your income in a table and figure out what you owe. It would take less than a minute. In fact, the IRS could probably do it for you.
Or we could have a system with one rate that kept all the myriad income definitions, credits, exemptions, loopholes, etc. of the current system. That's where things get complicated.
Now, it's obvious that under this plan, people will compare their tax bills under the different regimes and choose the one that lowers their payments. That means Gov. Perry either collects less revenue and faces larger budget deficits or has to get the missing revenue elsewhere.
Since, under his new plan, rates are lower at the top (20% vs 35%), and he exempts cap gains and dividends, new revenue will have to come for the middle class (deductions protect the poor). Of course, this means you can't really let people choose anymore, so either there's no internal logic here or we lose revenue.
As Kevin Drum observes:
...you sort of have to admire Perry's gimmick of allowing everyone to choose between his plan and the existing income tax. You can almost imagine the conversation: one of his advisors points out that no matter how careful you are, someone will pay more under the new plan. Probably people with low incomes, and you just know the librul media will have a field day with that. "It's regressive! Rick Perry hates the poor!" It'll be a nightmare.
But Perry has a brainstorm! Give everyone a choice! This means that not one single person will pay more under his plan, because they can always choose the old system if they want.
It is perhaps with this in mind that Gov. Perry says he wants to freeze spending at 18% of GDP. The average since 1969 is about 21%. Does anyone outside of the R base think that with our demographics and pressure from health care costs, not to mention climate, income disparity, bubbles and busts, public debt, external threats, and who knows what else, we can have the government we need with a significantly smaller share of revenues?
That there is one of them rhetorical questions.
There are other problems too -- the plan undermines Social Security and incentivizes American firms to invest abroad.
Gov. Perry proposes that we let young people opt out of Social Security, thus breaking the intergenerational contract, eliminating pay-as-you-go, and -- consistent with his position on Soc Sec -- undermining the last guaranteed pension retirees can rely upon.
Then there's the corporate stuff -- repatriation and transition to territorial. The former lets multinationals bring home deferred earnings at a 5% (!) rate; the latter ends their obligation to pay US taxes on foreign earnings (currently, they're supposed to pay the US the difference between what they paid where they earned the profits and what they owe here). Both will incentivize American firms to expand their overseas operations.
If the itches here are: taxes are too simple, rich people don't have enough money, seniors have too much retirement security, and multinationals are not creating enough jobs abroad, Gov Perry just scratched them all.
This post originally appeared at Jared Bernstein's On The Economy blog.
Is there a history of political flack for candidates in their own districts after non-so-successful runs for higher office?
I'm sure there people in Texas and Michelle Bachmann's Minnesota districts who have never been thrilled with their governor / congresswoman. Will their current campaigns negatively effect their current positions and re-election prospects since the broader light cast on them has been less than flattering?
Or we could have a system with one rate that kept all the myriad income definitions, credits, exemptions, loopholes, etc. of the current system. That's where things get complicated."
Or we could have a genuine flat tax with one flat rate with one personal and dependent deduction to remove poverty level income from taxation.
Unlike Mr. Bernstein's preferred "hundred different rates," a true flat tax could actually be filled out on a post card in five minutes.
In this election cycle, the only candidate offering a close approximation to a flat tax is Cain with his 999 plan.
We need change, right or wrong - at least the repubs are discussing it. Where are the dem ideas? People will respond to a good idea - ANY good idea.
We can talk about flat taxes when we've got our national debt down to 5 trillion. If we would stop allowing the MIC to spend half of our revenues, we could be on the road to recovery in no time.
Now. can we talk about how we are going to get 20 milion people back to work so they can pay taxes?
The marginal federal flat income taxes (10%, 15%, etc). Yes, there is such a thing as a marginal flat tax. Look it up.
The Social Security flat tax. Doubled if you're self-employed, yet income limited above $107K (thank you very much Ronald Reagan and Congressional Democrats).
And, the Medicare flat tax (see Social Security above, excluding the income limit).
The real problem isn't that we have these particular flat taxes versus another flat tax system. It's that we have a handful of overly broad rates.
The deductions are also more than a bit ridiculous at the upper income levels.
More granularity (i.e. more rates applicable to smaller divisions of income per rate), a larger starting income exemption ($30K is the optimal amount), and fewer deductions (Bernstein suggests some of this right smack in the middle of his article here, by the way) would be a much better idea.
which is why I propose Liberals should get behind (and push for) a true flat and fair tax proposal for all americans.
Social security taxes should be on ALL earned income and the rate lowered to 10% from the current 12.4%.
Medicare already is , so no changes needed.
a flat income tax of 20% on ALL income (earned,capital gains, dividends, inheritence, etc). with a standard deduction for everyone of $10K per adult and $5K per child under 18 YO in household.
get rid of all business ' taxes and replace it with a 1% GROSS revenue tax on all business.
for instance GE which made $50 BILLION last year and paid no income tax,would have paid $500 MILLION in taxes.
this plan would bring in more revenue than today and arguably can get federal revenues back up to 18-20% of GDP rather than the current 14% .
tie this tax plan to a proposal to cap spending at 20% of GDP (except in emergencys with a 2/3 vote by congress) and I truely beleive you'd have a program that most middle/.working class people would get behind and support.
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But Perry has a brainstorm! Give everyone a choice! This means that not one single person will pay more under his plan, because they can always choose the old system if they want.
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Of course, this is a lie, when the Rich and Powerful continue to buy their way to lower and lower taxation-
. . . the rest of us, by necessity, have to pay more
. . . a Free Rider Program for the Rich
http://en.wikipedia.org/wiki/Free_rider_problem
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SINCE THE ERA OF REAGAN
. . . the wealthy have been paying less and less of their share
Through quite an number of different tax doges mostly
. . . PROMINENT AMONG THEM, IS CONGRESS's
Willingness to conveniently define their earnings as something other than income
SEE MY PREV POST HERE FOR MORE DETAILS:
http://www.huffingtonpost.com/social/Zip_Zinzel/is-poverty-a-death-senten_b_960598_107774956.html
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NOW PERRY IS TELLING THEM,
. . . that if he is able to, he is going to LET THEM CHOOSE
TO PAY, in most cases, ABSOLUTELY ZERO IN TAXES
Their propaganda campaign has been so successful, that if you listen to CSPAN's morning call-in program, several times each hour you will hear relatively poor people call in saying that they want the government to go to a FLAT or FAIR tax system.
the middle class were too powerful... they could not buy the elections... they almost lost to gore but they got Florida to sway their way. After that they went on the war path... what they didn't count on was OBAMA a black man stealing their fire.. and they have been trying to down him any way they can... and to keep themselves in the future... they have to gut the middle class... make them so poor and fearful of just every day life they will not rally to get a fair president. They will not be able to out spend the GOP FUD