In a speech today in Greenville, S.C., Rick Perry laid out his ambitious new tax plan centered on an optional 20 percent flat income tax rate.
“It reorders the way they do business in Washington by reinventing the tax code and restoring our nation to fiscal health through balanced budgets and entitlement reform,” Perry said, according to the prepared remarks provided by the campaign. “Central to my plan is giving every American the option of throwing out the three million words of the current tax code, and the costs of complying with that code, in order to pay a 20 percent flat tax on their income.”
Under Perry’s plan, the mortgage interest and charitable deductions would remain, along with deductions for state and local taxes, as would a $12,500 exemption for individuals and dependents, for those making less than $500,000. The death tax would be axed, as would taxes on capital gains, dividends, and Social Security benefits. The corporate income tax rate would be slashed to 20 percent. For a preview of how Perry is going to distinguish his plan from Herman Cain’s 9-9-9 plan, this bullet point from his campaign’s summary of his tax plan provides a hint: “No Federal Sales Tax or Value-Added Tax.”
On the entitlement reform front, Perry wants to gradually increase the eligibility age for Social Security, tie benefits for more affluent Americans to price growth, and give younger employees the option to invest some or all of their Social Security taxes into a personal account. He would also slowly up the Medicare eligibility age, means-test Medicare benefits, and give “Medicare recipients more control to choose the plan that best fits their unique, individual needs through bundled premium support payments directly to the individual or as a credit against the purchase of health insurance coverage offered through the program,” according to his full plan. Medicaid would become more state-centric, with the federal government providing Medicaid block grants.
Spending would be limited to 18 percent of GDP by 2020, and Perry would work to cut $100 billion in non-defense discretionary spending his first year. He supports a Balanced Budget Amendment, and wants to eradicate baseline budgeting.
Perry would order an audit of all regulations passed since 2008, and would have regulations include sunset provisions. (Congress could vote to renew them.) There would also be a searchable database of all regulations currently in force. “Today the Federal Register contains 165,000 pages,” Perry said. “The index alone is eleven hundred pages long. And somehow, despite not having any of these new regulations for our first 219 years, America not only survived, we thrived.” Obamacare, Dodd-Frank, and the portions of Sarbanes-Oxley that impact small businesses would all be repealed.
“My plan does not trim around the edges,” Perry stated. “And it does not bow down to the established interests. But it is the kind of bold reform needed to jolt this economy out of its doldrums, and renew American prosperity. Those who oppose it will wrap themselves in the cloak of the status quo.”
Perry argued that Obama “simply offers larger deficits and the politics of class division,” while “others simply offer microwaved plans with warmed-over reforms based on current ingredients.”
“Americans, however, aren’t searching for a reshuffling of the status quo, which simply empowers the entrenched interests,” Perry argued. “This is a change election, and I offer a plan that changes the way Washington does business.”
More details about the plan here. Full speech below the jump.
*Gov. Perry sometimes deviates from prepared remarks
Thank you. It is great to be in the stomping grounds of a great conservative senator, Jim DeMint. I want to thank ISO Poly Films CEO John McClure for opening his business as we discuss my plan to get America working again.
Today I lay before the American People my cut, balance and grow plan. It cuts taxes and spending. It balances the budget by 2020. And it grows jobs and the economy.
It neither reshuffles the status quo, nor does it expand the ways Washington can reach into our pocketbooks.
It reorders the way they do business in Washington by reinventing the tax code and restoring our nation to fiscal health through balanced budgets and entitlement reform.
Central to my plan is giving every American the option of throwing out the three million words of the current tax code, and the costs of complying with that code, in order to pay a 20 percent flat tax on their income.
The size of the current code, which is more than 72,000 pages, is represented by this pallet and its many reams of paper.
The best representation of my plan is this post card, which taxpayers will be able to fill out to file their taxes.
Each individual taxpayer will have a choice: you can continue to pay taxes, as well as accountants and lawyers under the current system, or, you can file your taxes on a postcard, with deductions only for interest on a mortgage, charitable giving, and state and local tax payments.
Under my plan, you will no longer have to worry about paying taxes on social security when you retire, or your family members paying the death tax when you die. And you can wave goodbye to the capital gains tax, as well as the tax on dividends.
We will increase the standard exemption for individuals and dependents to $12,500, meaning families in the middle on the lower end of the economic scale will have the opportunity to get ahead. Taxes will be cut across all income groups in America. The net benefit will be more money in Americans’ pockets, with greater investment in the private economy instead of the federal government.
On the corporate tax side, I am offering equally bold reform. My plan closes corporate loopholes, ends the special breaks for special interests, and stops the gravy train of lobbyists and tax lawyers at the Washington trough.
In exchange for a corporate tax free of carve-outs and exclusions, I offer a much lower rate of 20 percent that represents the average corporate rate among the developed nations, and that will make our corporations more competitive on a global scale.
We will shut down the cottage industry of corporate tax evasion by creating a tax that is broad, fair and low.
And my plan offers incentives for corporations to invest in America again, with two major reforms. First, we will transition to a territorial tax system on corporate income earned overseas. This means companies pay the appropriate corporate tax in the country where income was earned, but aren’t taxed a second time when that income is moved back into the United States.
Second, for all corporate profits currently languishing overseas, I will offer a one-time reduced tax rate of five and a quarter percent for a limited period of time on repatriated earnings.
The U.S. Chamber estimates this one-time tax reduction would bring more than $1 trillion in capital back to the U.S, create up to 2.9 million jobs, and increase economic output by $360 billion.
In other words, it’s the kind of economic stimulus President Obama could have achieved if he wasn’t hell-bent on passing big government schemes that have failed American workers.
Today, America’s combined corporate tax rate of 39.2 percent is the second highest in the developed world. It is time to overhaul our tax code so companies like ISO Poly Films can invest more in their people and their products.
Tax rates have consequences. The liberals myopically ignore the realities of human nature. They think in raising rates they will raise revenue. But they don’t understand large employers have choices, as do wealthy individuals, and that includes moving money off-shore. When they try to take too much, they end up hurting the very people they seek to help: the working class.
We need tax policy that embraces the world as it is, and not what liberal ideologues wish it to be.
The goal of my cut, balance and grow plan is to unleash job creation to address the current economic crisis, while generating a stable source of revenue to address our record deficit and put our fiscal house in order.
My plan should not be viewed in a vacuum, but in comparison to the continuation of the status quo. It provides employers and investors certainty, which is critical to getting capital back into the economy. The president’s plan provides temporary tax relief, which does nothing to encourage long-term investment because it doesn’t provide the private sector certainty.
The way to stimulate the economy is not through temporary tax relief or government spending; it is to stimulate private spending through permanent tax relief.
The flat tax will unleash growth. But growth is not enough. We must put a stop to the entitlement culture that risks the financial solvency of this country for future generations.
The red flags are alarming. Our children are born into $46,000 of federal debt. Our credit was downgraded for the first time this past August, in part because of a lack of seriousness about deficit reduction. According to the White House Office of Management and Budget, by year’s end our debt will exceed the size of America’s economy for the first time in 65 years. We are on the road to ruin paved by state serfdom.
Freeing our children from financial disaster requires the courage to reform entitlements. My plan establishes firm principles to preserve Medicare and Social Security for today’s beneficiaries, while saving it for tomorrow’s.
I am putting forward five principles to save Social Security for the long-term. First, we will protect existing benefits for current retirees, and work with Congress on the exact age where those nearing retirement are grandfathered out of changes to the program.
Second, we will end the current pillaging of the Social Security Trust Fund by Washington politicians. Here is the hard truth: the trust fund is full of IOU’s, without a single dime of money left over from what workers have paid in. The politicians have borrowed against it for years. And in order to redeem the IOU’s in the fund, they will have to either raise taxes or cut spending on other programs to replenish it.
Here is the other hard truth: if we don’t act, in 25 years benefits will be slashed 23 percent overnight. Protecting Social Security benefits begins with protecting the solvency of the fund, and stopping all current borrowing from the fund, just as we have done with the highway trust fund.
The third principle of reform is to allow young workers to invest a portion of their payroll taxes into private accounts if they so choose.
I am not naïve. I know this idea will be attacked. But a couple of facts are worth stating: one, the return on investment in Social Security is so small it is like an interest bearing savings account. Over the long-term, the markets generate a much higher yield.
Second, opposition to this simple measure is based on a simple supposition: that the people are not smart enough to look out for themselves. The liberals think the American people cannot be trusted to safeguard even a portion of their own retirement dollars. It is time to end the nanny state and empower our people to exercise greater control over their money.
The fourth principle is to return to pre-1983 law and allow state and local governments to newly opt out of Social Security and instead allow their employees to pay solely into state or locally run retirement programs. This has been done around the country, with better results. We ought to allow it again.
Lastly, we ought to work to raise the retirement age for younger workers – on a gradual basis – to reflect the longer life-span of today’s Americans. I will work with Congress to determine the right formula, beginning at the right age. But this is common sense, and it can help save Social Security for future generations.
We will also reform Medicare to save it for future generations of Americans. We will do this by working with Congress on several options, including giving patients greater flexibility in choosing the plan that best fits their unique needs through bundled premium support payments to the individual, or as a credit against purchase of health insurance.
Second, we should look at gradually raising the age of Medicare eligibility. Third, we should consider adjusting Medicare benefits to be paid on a sliding scale based on the income of the recipient. And lastly, we must tackle the $100 billion in annual waste and fraud to save this valuable program as Americans live longer.
My plan also restructures Medicaid, returning control over the program and the dollars needed to administer it to states. One-size-fits-all health care doesn’t work for people on private plans in the form of Obamacare, and it doesn’t work with public plans, such as Medicaid. Washington has broken it, and shown no will to fix it. We must give state leaders the flexibility to fix Medicaid and control its costs.
These reforms are essential to balancing the budget. My plan balances the budget as fast as any serious plan offered, in the year 2020, with reforms to entitlements, with greater economic growth, and with cuts to discretionary spending.
I do not take the tack of the current President, with arbitrary cuts to defense spending. The question we must ask is not what we can afford to spend on our national defense, but what does it cost to keep America secure.
At the same time, we will reform the way we spend money in Washington so we can balance the budget in eight years. But to truly protect taxpayers, we need the extra protection of a Balanced Budget Amendment to the United States Constitution.
I will reduce spending in the Department of Education, the Department of Energy, the EPA, and a whole host of other agencies, returning greater control to the states.
My plan reduces non-defense discretionary spending by $100 billion in year one, and builds on those savings in the years to come.
I will also institute several principle reforms to the budgetary process, which are contained in my Cut, Balance and Grow Plan on my website.
It is not the length of a “War and Peace” novel, and is easy to understand, yet bold in its approach.
Included in my budget reforms are elimination of baseline budgeting that assumes previous expenditures are sacrosanct, an end to non-emergency spending in emergency bills, and a permanent stop to “bridge to nowhere” projects through the elimination of earmarks. I will couple these budgetary reforms with an overhaul of the regulatory process.
When federal agencies like the NLRB are dictating to companies where they can create jobs and where they cannot, they have over-stepped their bounds and undermined our free market system. On my first day in office, I will freeze all pending federal regulations and immediately begin a review of all new regulations since January of 2008.
Today the Federal Register contains 165,000 pages. The index alone is eleven hundred pages long. And somehow, despite not having any of these new regulations for our first 219 years, America not only survived, we thrived.
The federal nanny state’s heavy-handed regulations are keeping our economy in the ditch. It is time to review and scrap regulations that harm jobs and growth.
Lastly, one of the greatest impediments to investment in America are the Dodd-Frank banking regulations, and I will lead the charge to eliminate them.
Dodd-Frank is killing small banks, and freezing access to credit just when small businesses need it most. It enshrines bailouts and the notion of “too big to fail” in federal law, benefitting Wall Street while killing Main Street. It’s wrong. It’s unfair. It must go.
My plan does not trim around the edges. And it does not bow down to the established interests. But it is the kind of bold reform needed to jolt this economy out of its doldrums, and renew American prosperity. Those who oppose it will wrap themselves in the cloak of the status quo.
America is under a crushing burden of debt, and the president simply offers larger deficits and the politics of class division. Others simply offer microwaved plans with warmed-over reforms based on current ingredients.
Americans, however, aren’t searching for a reshuffling of the status quo, which simply empowers the entrenched interests. This is a change election, and I offer a plan that changes the way Washington does business.
The great issue facing this nation is whether we have the courage to confront spending and the vision to get our economy growing again. We need a tax code that unleashes growth instead of preventing it; that promotes fairness, not class warfare; that sparks investment in America instead of overseas interests.
It is time to create incentives for American companies to invest in American workers. It is time to end the corporate loopholes, end the special tax breaks for special interests, end the gravy train for lobbyists and tax lawyers.
It is time to pass a tax that is flat and fair, that frees our employers and our people to invest, grow and prosper.
We will set our employers and our people free by slashing the cost of government, cutting taxes for middle class families, balancing our budget and growing our economy.
The future of America is too important to be left to the Washington politicians. To get America working again, we must cut taxes and spending, balance the federal budget, and grow our economy and jobs.
My plan unleashes American ingenuity for a new American Century. Restores the hopes and dreams of our people. Renews our great promise. And entrusts the fate of this nation into the hands of our People, setting them free.
Thank you, God bless you, and God bless America.