- The Washington Times - Tuesday, October 25, 2011

Hoping to breathe new life into his flagging presidential campaign, Texas Gov. Rick Perry rolled out a sweeping economic plan Tuesday that would give taxpayers the option of paying a 20 percent flat income tax, balance the budget by 2020 and cap federal spending at levels not seen since Lyndon B. Johnson was president.

Mr. Perry is the latest candidate in the GOP’s presidential field calling for scrapping major chunks of the existing tax code and attempting to capitalize on conservative zeal for a flat tax — a constant rate that some economists say could lower taxes for many Americans.

In the Republican primaries, it also has become a synonym for major reform.

“My plan does not trim around the edges, and it does not bow down to the established interests,” the three-term Texas governor said as he campaigned in South Carolina. “But it is the kind of bold reform needed to jolt this economy out of its doldrums and renew American prosperity. Those who oppose it will wrap themselves in the cloak of the status quo.”

Mr. Perry’s broader budget plan erases a slew of taxes, including the estate or “death tax,” taxes on Social Security benefits and taxes on dividends and many capital gains. It also lowers the corporate tax rate to 20 percent and retains the state and local tax exemptions for families earning less than $500,000 annually, while increasing the standard deduction to $12,500 for individuals and dependents.

To reach a balanced budget by the end of the decade, Mr. Perry said, federal spending should be capped at 18 percent of gross domestic product — a level that hasn’t been seen since 1966 and that would require Congress to slice roughly a quarter of all federal spending — in part by raising the age for Social Security and Medicare benefits and delivering the national health care plan for seniors on a sliding scale based on income.

But it is the flat tax that likely will spark the most debate, coming on the heels of economic plans from other candidates.

Georgia businessman Herman Cain has surged in the polls while touting his call to scrap the entire federal tax code in favor of 9 percent taxes on corporate and personal incomes, and a 9 percent federal sales tax.

Former House Speaker Newt Gingrich challenged Mr. Perry on Tuesday to compare their economic plans, suggesting that his push for a 15 percent optional flat tax on personal income and a 12.5 percent corporate tax is a far bolder plan that would lead to more robust job creation and capital investment in the country.

“If you are going to bump plans with my friend Herman, then you can bump plans with me. Let’s compare flat taxes,” Mr. Gingrich said.

Former Massachusetts Gov. Mitt Romney is calling for a less dramatic overhaul of the federal tax code. He proposes eliminating taxes on capital gains, dividends and interest on Americans with incomes of up to $200,000, cutting non-defense discretionary spending by 5 percent, reducing the federal workforce by 10 percent through attrition and capping overall federal government spending at 20 percent of GDP.

Rep. Ron Paul of Texas has vowed to slice $1 trillion out of federal spending during his first year in office by cutting war funding, eliminating the agency that oversees airport safety and closing five Cabinet departments, including the departments of Energy and Education.

The flat tax has become this campaign’s boutique policy prescription, but the idea has been brewing for years. In 1996, Steve Forbes made it the centerpiece of his failed bid for the GOP presidential nomination.

Mr. Forbes this week endorsed Mr. Perry.

At root, Republicans argue that a cleaner tax code will remove a major drag on the economy, freeing Americans to spend and invest.

Democrats say the entire conversation on the Republican side is tilted toward the rich.

“Governor Perry and Governor Romney’s tax plans are guided by the same principle: They would shift a greater share of taxes away from large corporations and the wealthiest onto the backs of the middle class,” Obama campaign spokesman Ben LaBolt said Tuesday afternoon. “The belief that middle-class Americans will benefit if we just give another special break to those at the top was long ago discredited.”

Republicans, meanwhile, say that by putting out specifics Mr. Perry will now face the same sort of scrutiny that Mr. Cain has faced over his signature 9-9-9 tax plan.

The reviews started to trickle in before Mr. Perry had finished speaking Tuesday morning.

Peter Morici, former chief economist at the U.S. International Trade Commission, warned that the Perry proposal “will not jump-start the economy and is fiscally irresponsible.”

By giving taxpayers the option to continue to file under the current system, wealthy individuals will continue to forage for tax breaks, and the lower-income individuals who currently pay nothing will continue to pay nothing, Mr. Morici said. The result: Federal revenues will plummet and the federal deficit will spin “permanently into the stratosphere.”

But Chris Chocola, president of the Club for Growth, an influential fiscal conservative group, praised the plan, saying it would “unleash years of economic growth if it is passed into law.”

“Perry clearly understands that revitalizing the economy should start with a complete overhaul of a tax code that has nearly choked economic growth to death,” he said, warning that Mr. Romney would be wise to follow suit.

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