Perry’s Halloween-timed budget plan should scare the bejesus out of the middle class

Rick Perry’s out with his tax plan, and while he might be winning the “who can pander to their base the most” award—beating out strong efforts by Mitt Romney and Herman Cain—his proposal proves to be an utter disaster for the economy and the middle class.

On the tax side, the plan would do the following:

  • Replace the graduated income tax with an optional 20 percent flat rate with a slightly broader base
  • Slash the corporate tax by almost half
  • Abolish the estate tax
  • Enact a temporary repatriation holiday
  • Eliminate taxes on capital gains and dividends
  • Raise the personal exemption for households to $12,500 per person

Perry makes two basic claims about his plan. First, he says that the “net benefit will be more money in Americans’ pockets.” For corporations and high-income households, that’s certainly true, even though their tax rates are already at historic lows. But it does that by shifting the tax burden onto middle- and low-income households, whose incomes have actually fallen over the last decade.

Second, he claims that his plan will simplify the tax code, so simple that you can “file your taxes on a postcard.” Yet his tax code is optional, meaning that millions of households will have to do their taxes twice to see under which code they should file (and if they think they might be subject to the Alternative Minimum Tax, they’ll have to do their taxes three times!).  Layering another tax code over the current one makes filing taxes more complicated, not less.

From Flickr Creative Commons by Gage Skidmore

Now, it’s certainly the case that the tax code is too complex.  But it’s telling that his proposal doesn’t even attempt to tackle the issue of unfairness, which has sparked protests across the country. Most people hear that Warren Buffet pays a lower tax rate than his secretary and conclude that he should be taxed at a higher rate, one more comparable to middle-class workers. Rick Perry, however, thinks his taxes should be cut even further.

And how does he pay for these tax cuts? No surprise here: massive cuts to the social safety net and public investments. He’d raise the Social Security retirement age, potentially raise the Medicare eligibility age, eliminate all the expanded health insurance coverage in the Affordable Care Act, and take an axe to non-defense discretionary spending, which has already been slashed by the Budget Control Act.

It’s the basic conservative approach to budget and tax policy: (1) pretend that you care about deficits, (2) give huge tax cuts to corporations and the top 1 percent, and (3) slash the very programs that people depend on because now we “can’t afford them.” The rich get richer, and even more risk and cost is pushed onto the middle- and low-income households that can least bear the burden. Perry may call this tax plan “fair.” but I don’t think that word means what he thinks it means.

So this Halloween season, the middle class might want to skip Perry’s house, because for them he’s got no treats, only cruel, cruel tricks.


  • http://www.engageamerica.com David Engage America

    As the article said one of the problems with Perry’s flat tax is that because it is optional taxpayers will have to figure out which system taxes them less so they will still have to spend as much time, if not more, complying with the tax code. http://eng.am/sNjdNK

    Instead of radically overhauling the tax system, why not simplify the current tax system using the suggestions made by the Simpson-Bowles committee like many politicians have advocated for? By eliminating most tax expenditures and lowering the tax rates Congress can design a system that helps reduce the deficit and promote growth, two things Americans desperately want.