Pirate's Cove

Better late than never. Skipping the preamble and heading to the meat

(Wall Street Journal) 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.

Good idea? Mostly. It is rather simplistic, which is not bad. The tax code should be simplistic. But, it is a huge mistake to couple a flat tax with any exemptions and deductions. It defeats the purpose, and opens the tax code up to someone saying “hey, what about the deduction for X?” and “sure, I’ll hook your company up with a deduction, since you donated so generously to my campaign” and “that’s kinda bad, so, there should be an excise tax on that”, and then you are quickly back to the crazy tax code we now have. For reference, see the book Showdown at Gucci Gulf about Ronald Reagan attempting this same thing, with no exemptions or deductions (and the rate would have been ever lower, somewhere between 10-15%). By adding exemptions and deductions, Perry has already started the process of complicating the tax code.

He also plans on eliminating taxes on Social Security payouts and on certain dividends and long term capital gains, as well as temporarily lower the “repatriation” rate to 5.25% for those bringing cash back from overseas.

In terms 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.

Why stop at 2008? Take a look at all regulations.

Now, the question remains, once you read the entire op-ed by Perry, how serious is he? It tends to hit virtually every economic meme from Conservatives, including the repeal of Obamacare, Frank-Dodd, and Section 404 of Sarbanes-Oxley, which most people will say “huh?” What the hell is that?” They know that S-O is a pain in the ass for companies, especially small businesses. Beyond that? Only if they deal with it. It’s almost like it was thrown in to look wise. Just like the rest of the plan.

So, we’ll await the release of Perry’s plan today, so we can see the full details. And see if he talks about it on the campaign trail. Or, if this is simply a way to put Perry out there as having released a plan, and time to move on.

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