Des Moines, Iowa -- Presidential candidate Rick Perry wants a new optional income tax system that would let people choose a flat tax with a rate of 20 percent or stick with the existing tax code, his aides told The Des Moines Register on Monday.
In South Carolina on Tuesday, Perry unveiled his "Cut, balance and grow" plan -- a government overhaul that he says would reduce taxes and spending, balance the budget by 2020 and give the economy a significant lift.
Perry said his plan "doesn't trim around the edges, and it doesn't bow down to the establishment."
Many low- and middle-income Americans would see no benefit from choosing the flat-tax plan, an Iowa economics professor said, but higher-income filers would see big tax cuts.
Perry's wide-ranging plan calls for letting younger workers invest in personal retirement accounts, gradually increasing the Social Security retirement age to reflect longer life expectancy, handing Medicaid over to states and reforming Medicare.
Perry, the governor of Texas, also wants to reduce non-defense spending by $100 billion in the first year he's in office. And he wants no more earmarks, no more bailouts and an automatic sunset on all federal regulations unless Congress reauthorizes them.
The big highlight of Perry's plan is a flat tax that would preserve some of the most popular current deductions -- for charitable giving, mortgage interest, and state and local taxes.
There would be a $12,500 standard deduction for each person in a household. Exemptions and deductions for taxpayers with incomes above $500,000 would be phased out.
"That's what makes this flat-tax proposal different from some of those that increase taxes among the middle class," said Deirdre Delisi, Perry's policy director.
Asked if the plan is revenue-neutral, Delisi said the government would take in less under this plan, coupled with spending cuts and entitlement reform. "The goal is to balance the budget at 18 percent of GDP by the year 2020," she said.
Unlike rival GOP'er Herman Cain's much talked about "9-9-9" tax reform, Perry's plan wouldn't have a national sales tax.
And in contrast to Republican candidate Mitt Romney's economic plan, Perry's Iowa campaign co-chairman Robert Haus said, it's "substantive and deep."
Several provisions pushed by rivals
Perry wants to get rid of taxes on Social Security benefits, capital gains and the so-called death tax on the inheritance of large estates. Many of his Republican rivals have called for those steps, too.
Perry also would reduce the corporate income tax rate to 20 percent, which his aides said would help businesses be more competitive. Other candidates, too, have called for cutting corporate taxes.
And Perry would allow overseas capital to be brought back to the United States at a one-time reduced tax rate of 5.25 percent.
"The dynamic of freeing up all this capital that goes back into job creation will have a huge impact on the economy, thereby increasing our growth rate and bringing more filers into the system," Delisi said.
Some popular deductions or credits wouldn't exist if someone chose the optional flat tax, such as contributions to retirement accounts and traditional IRAs, student loan interest, home equity financing, medical and dental expenses, job search expenses and child care.
But that doesn't mean people have to give them up, Delisi said. "They can stay in the current system -- that's the beauty of this proposal," she said.
People who have planned their investments with the current tax code in mind shouldn't be penalized, Delisi said.
Perry campaign spokesman Robert Black said the package of proposals is an aggressive plan to invest in the economy.
And one conservative well-known to Iowans has already endorsed it: Steve Forbes, who ran for president in 1996 and 2000, with a campaign centered on a pitch for a flat tax.
Newt Gingrich, former U.S. House speaker, also has proposed a plan that would let Americans choose to file using a flat tax or the current system. He published a commentary in the Quad-City Times on Monday that said the idea could save taxpayers $400 billion a year in tax preparation costs.
"We think it accelerates economic growth," Gingrich said at a Davenport appearance Monday.
Source: JENNIFER JACOBS, Des Moines Register