published Saturday, October 29th, 2011

A Texan's slow draw

Rick Perry's proposed flat-tax plan reflects the same approach he apparently takes to science: He likes things to look simple, never mind the errors, chaos and harmful impacts that he has to hide to achieve that thin veneer of superficiality. Much the same, of course, could be said for the flat tax plans of Herman Cain and Michele Bachmann. But Perry's tax plan is especially noteworthy because, as governor of the one the nation's largest states, he should have a better idea of what would actually work in governance than most of the other GOP presidential aspirants, save his nemesis, former Massachusetts governor Mitt Romney.

In introducing his 20 percent flat tax idea this week, Perry -- his iconic clenched fist raised in the air -- claimed it to be a "bold reform." Boldly blind would be a better description. Experts' analyses of his tax plan generally pan it. As an economic analyst with the non-partisan Urban-Brookings Tax Policy Center said: "There are two things we can say with certainty: It will lower revenue and be a great benefit to the wealthy."

For starters, his very preference for a flat rate income tax would immediately fail the test of fairness for the bottom 80-to-90 percent of American households and taxpayers. The iron rule here is that flat tax rates are regressive: The less you earn, the less you can save, and the higher the proportion of your disposal income that is consumed by a flat tax.

Wealthier citizens, on the other hand, can save a much larger proportion of their income, so a flat tax gives them a major break. That's why most tax policy experts favor higher marginal rates for tax equity as incomes climb, especially for the nation's mega-millionaires and billionaires who possess such a stunning percentage of the nation's wealth.

It is a fact that most Americans would be hurt by a flat tax (and also by a flat national sales tax) because they simply can't afford to save much money. The average income for the bottom 90 percent of America's earners is not quite $32,000. To break into the top 20 percent of income, you have to earn at least $111,660 annually. So the bottom 80 percent, at best, end up spending, and paying taxes on, most or all of their net disposable income. Given the deductions that Perry would allow taxpayers to keep, the biggest and most disproportional tax savings under his plan would go to the top 1 percent of earners. Conversely, low, middle and upper-middle income earners would pay more than they currently pay in income taxes.

Other flaws in the Perry plan are considerable. His plan would generate far less revenue -- total federal spending as a percentage of GDP would fall from over 21 percent to 18 percent -- so there would have to be wholesale cuts in virtually every major area of government, including Social Security and Medicare/Medicaid, even as the poor and middle-class paid more in taxes, and the rich and corporations paid less. The pain of all that would be immense, as well as inequitable.

The chaos factor would stem from his transitional step, in which taxpayers could choose to base their tax payments on either the 20 percent flat rate, or the existing IRS schedules.

Perry's loose-cannon policies and views, to be sure, are bound to keep attention focused away from his inept tax plan. Recently, for example, his administration's functionaries deleted an esteemed scientist's references to man-made global warming as a cause of rising sea levels in Galveston Bay in the Gulf of Mexico, and the bay's declining aquatic health. Galveston advocates attributed the state's censorship to the governor's official anti-science doctrine: He refutes the broad scientific consensus that current climate change and global warming are man-made.

It's also widely acknowledged that proceeds from the state's industrial recruitment funds have gone mainly to Perry supporters and campaign donors, and that Texas's stronger economic growth owes mainly to a fast-rising immigrant base, exceedingly low wages and exceedingly high rates -- the nation's highest rate -- of children and families without health insurance.

Indeed, it's hard to pick the best of the many reasons to avoid a replication at the national level of Perry's governing policies Texas. But his misguided tax proposal is as good a place as any to start avoiding Perry.

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EaTn said...

Perry reminds me of another Texan I used to work with, all hat and no cattle, a true legend in his own mind.

October 29, 2011 at 7:11 a.m.
conservative said...

The facts of history clearly have shown that when tax rates are reduced MORE revenue flows to the federal government not less. Tax cuts spur economic activity. A tax is collected on every dollar spent which obviously means more total revenue collected. Lieberals, Socialists and Marxists can't stand the notion of someone keeping more of their hard earned dollars and thus accumulating wealth, so they ignore this fact and instead exploit the ignorance of the sheep they have corralled.

October 29, 2011 at 8:09 a.m.
EaTn said...

conservative--yeah, the Bush tax cuts to the wealthy still in place worked so well they are still overflowing our internal revenue, pumping out the jobs and increasing the middle class incomes. For every dollar we borrow, we can increase tax revenue by twenty cents.

October 29, 2011 at 8:22 a.m.
ITguy said...

Conservative, We are not living in 1980 anymore. We now have the lowest tax rates since the 1950s and we are living within a global economy. Tax cuts for the 'Job Creators' are more likely to stimulate the economy of China, or Mexico than the economy of America. The 'trickle down' has transferred wealth from the middle class of America to the emerging middle classes in the third world.

If you look at history, you will see that America is most prosperous when we spend on education and infrastructure, and tax the wealthy to pay for it.

October 29, 2011 at 9:01 a.m.
conservative said...

"Conversely, low, middle and upper-middle income earners would pay more than they currently pay in income taxes". I'm sure the writer did not purposely omit disclosing the fact that under the Perry plan one has a choice to pay the flat rate OR the current graduated system, so they would NOT pay more. I'm also sure that lieberal and socialist thinkers will chose to pay the higher of the two.

October 29, 2011 at 10:23 a.m.
EaTn said...

Anyone care to guess who would most benefit from any right-wing tax code changes? Anyone care to guess what group would be hit in spending cuts to offset these changes? Yeah, let the gullible of the 99% vote right-wing.

October 29, 2011 at 10:44 a.m.
conservative said...

Another advantage of the Perry plan the writer accidently omitted is the proposal to RAISE the standard deduction to $12,500! This will add to the 47% of American households who pay no federal income taxes when they chose the option of the current system, so the writer's concern about low wage earners paying more taxes just doesn't hold water. Some could begin to pay federal income taxes if they foolishly elected to pay the flat tax. Not going to happen.

October 29, 2011 at 12:32 p.m.
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