Perry argues these tax cuts will spur economic growth by creating a more favorable environment for wealthy individuals and corporations to start or expand their businesses. But without significant spending reductions, the tax cuts could drastically increase the federal budget deficit.
“Taxes will be cut across all income groups in America, and the net benefit will be more money in Americans’ pockets with greater investment in the private economy,” Perry said to an audience of more than 200 inside the factory at ISO Poly Films, Inc. in this South Carolina town.
The “Cut, Balance and Grow” plan, which Perry first unveiled Tuesday in an op-ed in the Wall Street Journal, puts Perry firmly to the political right of former Massachusetts governor Mitt Romney in terms of economic policy.
Nia-Malika Henderson previewed the speech by posing five questions for Perry to answer about his flat-tax proposal on the new Elections 2012 blog:
1. Will the poor pay more? Perry’s plan, which keeps the national flat tax at 20 percent, comes with an opt-out provision, which means if you like your current tax rate, you can keep it. And deductions for mortgages and charitable contributions, etc, remain, possibly blunting the usual criticism that flat tax plans get.
2. Can he keep it simple? Cain’s plan caught on because it had the catchy 9-9-9 slogan. Then Cain went all apples and oranges and muddied up the simplicity of his plan. Perry doesn’t have a slogan so far and having to figure out whether to opt in or opt out offers its own complications.
3. Will it be revenue neutral? Lower taxes for the rich spur growth, creativity and job creation, or so the argument goes. But under Cain’s plan, for instance, government coffers would be in the red by $300 billion less according to the Tax Policy Center analysis.
4. Will the tea party like it? Dick Armey, the tea party king, is a big fan of the flat tax and says the flat tax system would be so simple that people could do their taxes on an index card. Yet, to quote Michele Bachmann, the devil has been in the details, and flat tax rates, once examined, have often ended up looking like a tax hike.
5. What will Mitt say? Romney has largely been opposed to the flat tax, saying at one point that it was a “tax cut for fat cats.” But now that the plans are all the rage, the former Massachusetts governor has a tightrope to walk on the issue. This could be his chance to frame the flat tax as a middle class issue.
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