In a conference call today sponsored by the Heritage Foundation, Paul Ryan answered some questions regarding the Perry plan for an optional flat tax. Ryan once proposed an optional flat tax, with two brackets of 10 and 25 percent. “I can tell you this: it would grow the economy,” Ryan said of the Perry plan. “This enters the good stage of the campaign . . . where the candidates are putting forth actual ideas and bold solutions.”
Ryan made two counter-arguments, one practical and one political, against the concern raised by Shannen Coffin and others that an optional flat tax will increase the complexity of the tax code instead of reducing it. “The practical argument is, people have their lives organized around the current code . . . You’ve got to give people time to adjust and prepare. When you completely convert over to a system by halting a tax expenditure, you [introduce] a lot of economic dislocation to the economy . . . You can smooth that transition.”
Secondly, said Ryan, the optional approach blunts the power of the “tax expenditure lobby” that otherwise persuades Republicans to block fundamental tax reform. He cited an episode from the mid-2000s, when Republicans controlled the House, the Senate, and the presidency, and couldn’t pass fundamental tax reform, because lobbyists convinced Republican members of the House Ways & Means Committee to protect various tax expenditures.
Finally, a point that didn’t come up in the call is that, under Perry’s proposal, individuals who choose to file under the flat-tax process will not be able to go back into the old system. Hence, the idea is to stimulate a voluntary, but unidirectional, migration over to a flat-tax system.