Tuesday, October 25, 2011
PERRY'S TAX PLAN
Republican Presidential candidate Rick Perry has announced “My Tax and Spending Reform Plan” in an op-ed piece in the Wall Street Journal.
Perry begins his piece with a statement of fact -
“The folks in Washington might not like to hear it, but the plain truth is the U.S. government spends too much. Taxes are too high, too complex, and too riddled with special interest loopholes. And our expensive entitlement system is unsustainable in the long run.”
And goes on to propose a “’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 portion of Perry’s plan that concerns 1040 filers includes the following provisions -
· Give 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.”
· “Eliminate the tax on Social Security benefits, boosting the incomes of 17 million current beneficiaries who see their benefits taxed if they continue to work and earn income in addition to Social Security earnings.”
· “Eliminate the tax on qualified dividends and long-term capital gains to free up the billions of dollars Americans are sitting on to avoid taxes on the gain.”
· Abolish “the death tax once and for all, providing needed certainty to American family farms and small businesses”.
· Repeal ObamaCare.
· Give “younger workers the option to own their Social Security contributions through personal retirement accounts that Washington politicians can never raid. Because young workers will own their contributions, they will be free to seek a market rate of return if they choose, and to leave their retirement savings to their dependents when they die.”
My reactions –
1) I support his flat tax proposal, keeping only the deductions Perry suggests. But I would not limit the deductions based on AGI. I do not see why we should offer taxpayers a choice between a flat tax and the current tax – shred the current tax system completely and establish the flat tax. This is not the first time a choice has been suggested, and I opposed it the first time around. And, as I have said when this idea was first proposed (I think by Obama), I doubt a “postcard” tax return would be sufficient to properly report income. At best there would be a one-page 1040-EZ.
2) While I am not against exempting Social Security and Railroad Retirement benefits from taxation if it fits into the plan, I have in the past suggested that we instead tax these benefits the same as any other retirement plan distribution under the current Simplified Method.
3) I do not support completely eliminating tax on “qualified” dividends and long-term capital gains. As I have said in the past, I would allow corporations a “dividends paid deduction”, tax all dividends received by individuals as ordinary income, and allow a 50% “capital gain deduction”.
4) I would support abolishing the so-called “death tax” as long as we maintain the stepped-up basis of inherited property. Keeping the stepped-up basis is more important to me than repealing the estate tax altogether.
5) I do believe that the current “Obamacare” system is too convoluted and would support its repeal, as long as Congress looked at other ways to provide relief for high health insurance costs.
6) I am all for allowing new workers entering the Social Security system to “own” their accounts. I would support employee and employer contributions to Social Security being deposited into an actual account, untouchable until age 62, which allows workers to select either a money market, US Treasuries, or an index fund, or a combination thereof, and allows balances to be transferred to the separate Social Security accounts of beneficiaries upon death.
So what do you think?