While I applaud Governor Rick Perry's efforts to radically reform the tax code, his proposals for a flat tax will not lead to the needed simplicity, and most importantly will lower tax revenues dramatically while doing nothing to curtail out of control government spending. In other words, he will blow another enormous hole in an already dangerously unbalanced budget.
Knowing this, the governor's pledge to balance the budget down the road should be seen as a pure fantasy.
The Perry plan preserves all the sacred cow deductions and still requires many Americans to calculate taxes in the cumbersome system we have all come to hate. Tax accountants and accountants still get to keep their non-productive jobs. But by setting a cap of 20% on income he is proposing what amounts to an inversion of the hated "Alternative Maximum Tax." Instead, Perry substitutes an "Alternative Maximum Tax," that mostly benefits high income earners.
By scrapping the idea for a national sales tax, the keystone of Cain's 9-9-9 plan, no one will see a tax increase under Perry's plan. If you paid less than 20% before, your taxes will not change significantly. However, many wealthy people (those that pay more than 20% personal income tax) will see a huge tax cut. The plan also eliminates taxes on Social Security benefits while reducing the number of people paying into what Perry correctly calls a bankrupt system. As a result, the plan will bring in significantly less revenue than our current code.
Reducing the amount of wealth the government sucks out of the private sector should be the goal of all sensible economic policy. But the process must start from meaningful reductions in government spending. Cutting taxes alone will simply increase deficits, which is just another, more dishonest, form of Keynesian stimulus. The unfortunate fact is that deficits damage an economy more than taxes. The sooner we admit this, the sooner we can have a meaningful discussion.
New Time 11:20 AM PT: Get the Market Movements in Advance: William's Edge Webinar for Wednesday April 23rd, 2014 | John Ransom
New Time 11:20 AM PT: Get the Market Movements in Advance: William's Edge Webinar for Tuesday April 22nd, 2014 | John Ransom