Perry's Tax Plan

[DTorrchia]

So Perry is set to announce his plan on how to get the economy turned around through his Tax plan. Leaving aside personal bias against Perry, on the merits of what he's proposing.... Can it work?

“The plan starts with giving Americans a choice between a new, flat tax rate of 20 percent or their current income tax rate,” Perry writes. “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.”
The plan also drops the corporate tax rate to 20 percent and will temporarily lower the rate to 5.25 percent to promote companies working overseas to move to the U.S. along with implementing a “territorial tax system,” which will tax in-country income.
The plan will eliminate the death tax and end taxes on Social Security, which would help an estimated 17 million Americans receiving benefits today. It would also cut taxes on qualified dividends and long-term capital gains.
Perry sets a goal to balance the budget by 2020 by capping federal spending at 18 percent of GDP, banning earmarks and future bailouts and passing a balanced budget amendment.
Until the budget is balanced, Perry’s plan would freeze federal civilian hiring and spending, and place a moratorium on all pending federal regulations, along with auditing any regulations, instituted since 2008.
Perry promises the repeal of President Obama’s health care plan, Dodd-Frank and Sarbonnes Oxley.

[F-Sharp]

Not even close. 20% of income tax only? The most current data I have is for 2009. Let's do the math:

Taxable wages paid 2009: $5,900,000,000,000

U.S. Corporate Profits 2009 : $5,000,000,000,000 (based on quarterly avg. of $1.25 Trillion

$5,900,000,000,000 * .2 = $1,180,000,000,000

$5,000,000,000,000 *.0525 = $262,500,000,000

1,180,000,000,000 + 262,500,000,000 = 1,442,500,000,000

Current yearly budget ; $3.7 trillion

1,442,500,000,000 / 3,700,000,000,000 trillion = 38%, or rather a 62% shortfall in revenue.

This of course is strictly 20%. Factor in mortgage interest deductions, charitable and state and local tax exemptions and cutting taxes on qualified dividends and long-term capital gains...and you end up with FAR less. Even if you bump the corporate tax rate up to 20%, you still fall far short. Do the math.

Also consider that repealing Obama's Healthcare plan would add another trillion dollars to our National debt over the next 20 years, assuming nothing else changes.

Remember folks, we are at 15/25/35 currently and are already coming up short by about $1.5 trillion every year.

[Pinoche]

Originally Posted by F-Sharp

Not even close. 20% of income tax only? The most current data I have is for 2009. Let's do the math:

Taxable wages paid 2009: $5,900,000,000,000

$5,900,000,000,000 * .2 = $1,180,000,000,000

Current yearly budget ; $3.7 trillion

1,180,000,000,000 / 3,700,000,000,000 trillion = 31%, or rather a 69% shortfall in revenue.

This of course is strictly 20%. Factor in mortgage interest deductions, charitable and state and local tax exemptions and his 5.25% "introductory rate" for corporate tax and cutting taxes on qualified dividends and long-term capital gains...and you end up with FAR less.

Also consider that repealing Obama's Healthcare plan would add another trillion dollars to our National debt over the next 20 years, assuming nothing else changes.

Remember folks, we are at 15/25/35 currently and are already coming up short by about $1.5 trillion every year.

Your calculations take into account only wages. There is more to taxable income than wages: interest, dividends, capital gains, retirement plan distributions, profits from sole proprietorships, partnerships, etc.

Actually, Perry's proposal to me show exactly why we will never have a flat tax or simple tax code: he is already bowing to banking and charitable special interests by keeping the deductions in for these items. This is how the tax code got so complicated in the first place, as over time all sorts of exemptions, deductions, etc. are added to the tax code to please a small (or large in some instances) segment of society.

[cckid2006]

Very fuzzy math. Based on the above we need a 60% flat tax to balance the budget. No wait that's after the 20%. Let's tax everyone at an 80% rate. I think that's a Beatles song "there's one for you 19 for me".

Just listened to two "experts" debating the merits - they had none of the detail laid out by DT here and immediately degraded into a liberal vs conservative posturing. This political posturing is pretty disgusting! Let's start a conversation not an argument.

[Billy_Saul]

Right now there is a lot of "gaming' the system by individuals and corporations who are able to exploit the multitude of deductions, write offs, exemptions etc. The most glaring example everyone is aware of being GE who paid no taxes on a $5.1B profit for 2010. Under the Perry option to file under the existing tax code going forward, it seems to me that this type of shenanigans would be allowed to continue. Without getting into it any deeper then that, I view that as a significant flaw.

[theaustinescorts]

The Republican assumption that the economy will grow with lower taxes or more investment isn't shared by a single economist.

I don't like taxes of any kind, but that's because I think government isn't entitled to wealth earned by others, NOT because doing so suppresses growth BECAUSE IT DOESN'T.

As much as I'm opposed to taxation on moral grounds, taxing and then spending the taxed monies IS JUST AS STIMULATIVE IF MORE SO than if the money would have stayed in the hands of their earners.

Furthermore the new mantra about "job creators being discouraged by taxes and regulation" is all crap.

Entrepreneurs and investors have no way of making money other than to play at their entrepreneurial and financial games, much of which is purely speculative and some of which is actually productive. But they're going to do it anyway even if they grumble about the inconvenience of complying to government regulations. None of the things "job creators" have to deal with from this government actually causes them to throw in the towel and go become wage earners somewhere, or restrict their investing.

What does cause employers to restrict their investing is their PESSIMISM ABOUT FUTURE GROWTH, which can only be remedied under these conditions by encouraging spending from any and all sources, including government spending.

ps....

The US economy adjusted for population growth has only grown at a rate of 1% per year for the last thirty years....ever since we began running large trade deficits. Full employment with high wage jobs will never return until we have a balance trade account again.

[F-Sharp]

Try again, there's nothing "fuzzy" about it as these are actual numbers from 2009. The actual number based on taxable wages and corporate profits alone is 33%, assuming everyone actually paid 33%. Again, this is just to break even, and doesn't even begin to dive into the $14.3 trillion + interest we already owe.

Originally Posted by cckid2006

Very fuzzy math. Based on the above we need a 60% flat tax to balance the budget. No wait that's after the 20%. Let's tax everyone at an 80% rate. I think that's a Beatles song "there's one for you 19 for me".

Just listened to two "experts" debating the merits - they had none of the detail laid out by DT here and immediately degraded into a liberal vs conservative posturing. This political posturing is pretty disgusting! Let's start a conversation not an argument.

[F-Sharp]

I realized I neglected to include corporate profits, which I revised shortly after saving the post. Perry wants to cut taxes on interest income, so I didn't include it.

Originally Posted by Pinoche

Your calculations take into account only wages. There is more to taxable income than wages: interest, dividends, capital gains, retirement plan distributions, profits from sole proprietorships, partnerships, etc.

[theaustinescorts]

The only tax cuts which will create wealth are the elimination of all corporate taxes.

Other than that it doesn't make any difference who pays for government so long as government has money to spend when no one else is willing to.

[F-Sharp]

Wealth for whom?

Originally Posted by theaustinescorts

The only tax cuts which will create wealth are the elimination of all corporate taxes.

[cckid2006]

So 1 for you 19 for the gov? Is that your proposal?

[F-Sharp]

Under Perry's "plan" (and I hesitate to call it such), 33% is what's needed to break even, this is without question based on the readily available numbers presented. That is unless you want to cut 62% of our current budget.

You could cut Social Security, Medicare, and National Defense in its entirety, and perhaps you might have just enough left over to cover the interest payments on our National Debt.

http://www.nytimes.com/interactive/2...us/budget.html

Originally Posted by cckid2006

So 1 for you 19 for the gov? Is that your proposal?

[cckid2006]

Show me the math - I'd pay 33% - this isn't consistent with what you said before when you did what I called fuzzy math - what is your growth rate assumptions? Which candidate is proposing this?

[Booth]

Originally Posted by DTorrchia

So Perry is set to announce his plan on how to get the economy turned around through his Tax plan. Leaving aside personal bias against Perry, on the merits of what he's proposing.... Can it work?

“The plan starts with giving Americans a choice between a new, flat tax rate of 20 percent or their current income tax rate,” Perry writes. “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.”
The plan also drops the corporate tax rate to 20 percent and will temporarily lower the rate to 5.25 percent to promote companies working overseas to move to the U.S. along with implementing a “territorial tax system,” which will tax in-country income.
The plan will eliminate the death tax and end taxes on Social Security, which would help an estimated 17 million Americans receiving benefits today. It would also cut taxes on qualified dividends and long-term capital gains.
Perry sets a goal to balance the budget by 2020 by capping federal spending at 18 percent of GDP, banning earmarks and future bailouts and passing a balanced budget amendment.
Until the budget is balanced, Perry’s plan would freeze federal civilian hiring and spending, and place a moratorium on all pending federal regulations, along with auditing any regulations, instituted since 2008.
Perry promises the repeal of President Obama’s health care plan, Dodd-Frank and Sarbonnes Oxley.

He tripped all over his feet while trying to roll out the plan. That's not a personal bias - it's fact. Instead of focusing attention on his tax plan he spent the day defending his birther comments.

[DTorrchia]

Originally Posted by Booth

He tripped all over his feet while trying to roll out the plan. That's not a personal bias - it's fact. Instead of focusing attention on his tax plan he spent the day defending his birther comments.

I have to be honest and say at this point, I don't care WHAT comes out of ANY of these politician's mouths anymore when it comes to anything OTHER than the Economy. What I care about and the one thing I want to hear from all candidates, Republican, Democrat or Independent, is a logical plan for reducing our debt. Not a plan that is obviously lip service but a plan that works. I want to see concrete answers on what is to be cut, how much is to be cut and how much of a tax raise it will take to reduce our debt. Just some straight forward answers to those simple question. It seems ALL of them, current President included, are incapable of doing so.

I threw Perry's plan out there because other than Cain's 999 plan, there seem to be few candidates that are actually coming out and saying how much of a % taxes need to be set at, what programs SPECIFICALLY that they will cut and HOW MUCH they will cut them etc. I just seem to constantly hear..."raising taxes is not the answer" or "we can't cut Social Security", "we need to address the entitlement programs"......all that tells the American voter NOTHING. We need detailed specifics to make an informed choice. No candidate seems willing to go out on the limb and provide those answers however.