Presidential hopeful, Rick Perry, has proposed a massive overhaul of the current tax code. His idea isn’t new, but it is very compelling to conservatives like me. Perry proposes a so-called Flat Tax to replace our current 60,000+ page tax code. His proposal is as follows:
- 20% flat tax for all taxpayers – individual and corporate (taxpayers who want to keep their current marginal rate are free to do so).
- Keeping mortgage and charitable deductions for households earning less than $500K per year and increasing the standard deduction to $12.5K.
- Cap on federal spending to 18% of GDP.
Perry’s plan is pretty interesting. It takes a huge bite out of opponents of a flat tax – i.e. that it hurts middle class people who pay less than 20% today (a very small group) by allowing them to opt out of the new flat rate. It makes our corporate rate competitive with other countries – making it more likely companies will choose to earn their income here rather than in Ireland or other low corporate tax havens.
I can’t tell you how excited I am that tax policy is now in the debate – Cain, Perry and Newt all have plans that attempt to reform the tax code. I would love to see Congress pick this up and see if we can come up with something – oh, and by the way, you don’t have to elect Perry to get this done.