GOP Presidential Primary

Perry calls for optional 20 percent flat tax

Under Rick Perry’s tax plan, people in the U.S. could choose between their current rate and a 20 percent flat tax, and younger workers could opt in to privatized Social Security.

The Texas governor unveiled the core details of his tax plan in an op-ed in The Wall Street Journal just a few hours before he was scheduled to debut his proposal in South Carolina. The plan, dubbed “Cut, Balance and Grow,” also eliminates the estate tax and phases out taxes on income brought back from overseas.

{mosads}”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,” Perry wrote.

The plan shares many similarities — but also differences — with the other flat-tax plan being floated in the Republican presidential race: Herman Cain’s 9-9-9 plan for a 9 percent sales, income and corporate tax rate.

Perry is steering clear of the national sales tax that Cain proposed, the least favorite feature among Cain’s conservative critics. And by allowing taxpayers to retain their current rate if they don’t want the 20 percent flat tax, Perry might blunt the argument Democrats have made that Cain’s plan imposes a new hardship on lower-income Americans.

{mosads}But Cain asserted from the beginning that his plan maintains the same level of revenue as the current system, while Perry has not yet detailed how his plan would affect the size of the federal purse. Perry does propose limiting federal spending to 18 percent of the gross domestic product.

Like Cain, Perry suggested his tax plan would be so simple to administrate that taxpayers could file their returns on the back of a postcard. Deductions for mortgage interest, charitable contributions and other included in Perry’s plan make that more complicated.

Democrats are likely to argue that the dual-option plan favors those who can afford to do their taxes twice and calculate the greatest savings.

Another element likely to attract heavy attention is Perry’s call for younger workers to be able to opt in to private Social Security accounts, where market forces would dictate the performance of a worker’s portfolio. President George W. Bush tried, and failed, to pass a similar program through Congress.

Perry’s first major test during his presidential campaign when he called Social Security a Ponzi scheme, raising questions about whether he wanted to eventually do away with the program.

“Cut, Balance and Grow strikes a major blow against the Washington-knows-best mindset,” Perry wrote. “It takes money from spendthrift bureaucrats and returns it to families.”

Perry’s tax plan was the culmination of a weeks-long process to develop a tangible economic policy that he and his campaign could rally behind. After Perry entered the race in August, his supporters, enamored by his job-creation record in Texas, expected him to be at his best layout out his economic strategy, But he failed to impress during a Washington Post/Bloomberg debate on Oct. 11 about economic policy.

For weeks, Perry spoke almost exclusively about expanding domestic energy production when asked how he would spur economic growth in the United States. But as Cain rose past Perry in the polls, it became increasingly clear Perry would need a more concrete blueprint to compete with Cain’s 9-9-9 plan, which has drawn widespread interest.

Steve Forbes, who proposed a 17 percent flat tax during both of his presidential campaigns, advised Perry as he developed the plan, and endorsed the governor’s campaign on Monday.

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