Perry Plan Would Grant Big Tax Break to Wealthiest

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Perry Plan Would Grant Big Tax Break to Wealthiest
Mr. Perry, a Republican presidential candidate, said his proposal would
also offer benefits to middle-class Americans by giving a $12,500
deduction for every member of a household while preserving exemptions
for state and local taxes, mortgage interest and charitable
contributions for anyone making less than $500,000. He said anyone could
still file under the current code, and he also pledged to lower the
corporate tax rate to 20 percent, from 35 percent.
“Taxes will be cut on all income groups in America,” said
Mr. Perry, who promised that taxes could be filed on a postcard-size
form under his plan. “The net benefit will be more money in
Americans’ pockets, with greater investment in the private economy
instead of the federal government.”
The plan represents a gamble for Mr. Perry, who is trying to
reinvigorate a once-high-flying campaign by capturing some of the energy
Herman Cain generated with his flat tax plan and by drawing a sharply
conservative contrast with Mitt Romney.
But in proposing what he called “bold reform” that may trim
Social Security and Medicare benefits for many, Mr. Perry is also
advocating potentially sweeping changes in entitlement programs that may
open him to new lines of attack from Republican rivals, all at a time
when polling shows many Americans want to see higher — not lower
— taxes on the wealthy.
The plan also proposes reducing the scope of the federal government by
requiring drastically austere federal budgets — compared with what
exists now — that spend no more than 18 percent of the
nation’s gross domestic product, which analysts said would most
likely force big cuts in government spending at almost every level. That
would equate to a cut of one-quarter of the budget from 2011 expected
levels, and it would mark the lowest level of spending relative to
G.D.P. since the mid-1960s, though rising tax receipts during the
roaring economy of a dozen years ago temporarily brought the level close
to 18 percent.
To address the projected long-term financial shortfall within Social
Security, Mr. Perry suggested raising the retirement age and potentially
changing the age eligibility for Medicare and using a sliding scale to
limit benefits based on income — two proposals that could face
significant opposition in Congress. Mr. Perry, who said his plan would
balance the budget by 2020, also proposed letting younger workers divert
some of their Social Security taxes into private investment accounts, a
longtime goal of economic conservatives.
Analysts said it would take time to examine the effects of the Perry
plan. But Roberton Williams, a senior fellow at the nonpartisan
Urban-Brookings Tax Policy Center, said: “There are two things we
can say with certainty: It will lower revenue and be a great benefit to
the wealthy.”
He said the poor who have children would most likely do better under the
current system, because refundable tax credits provide some with net
payments from the government. But Mr. Williams said it was unclear how
many among the middle class would benefit — though families with
more children or bigger mortgages would be more likely to opt for his
proposal.
Mr. Perry pledged to not cut any benefits of current Social Security
retirees or those about to tap into the system. But to do that, and cut
the budget to 18 percent of G.D.P., would require cutting at least
one-third of the remaining federal budget, said James R. Horney, the
vice president for federal fiscal policy at the Center on Budget and
Policy Priorities, a liberal research group in Washington. It would
require “a dismantling of federal programs,” Mr. Horney
said, and “draconian cuts in virtually every kind of
spending.”
Ben LaBolt, a spokesman for President Obama’s re-election
campaign, criticized both the Perry plan and one offered by Mr. Romney
as “guided by the same principle: they would shift a greater share
of taxes away from large corporations and the wealthiest onto the backs
of the middle class.”
Mr. Romney, the former Massachusetts governor, has called for extending
the Bush tax cuts, lowering the corporate tax rate to 25 percent and
exempting investment income for taxpayers who make less than $200,000.
Conservative tax activists like the Club for Growth say the Perry plan
would spur economic growth, but many economists warn that if put in
place immediately, anything that cuts the size of the federal government
as severely as Mr. Perry’s proposal would throw the nation back
into a recession.
What remains to be seen is how much appetite there is among Republican
primary voters for such an ambitious reshaping of tax policy and,
potentially, entitlement programs. A New York Times/CBS poll released
Tuesday found that 65 percent of Americans say taxes should be increased
on households earning $1 million or more, while 66 percent say money and
wealth in the country should be distributed more evenly. Another 69
percent say the policies of Republicans in Congress favor the rich,
while 67 percent say it is a bad idea to lower taxes for large
corporations.
Analysts also immediately raised questions about how many people would
actually see their taxes simplified, one of Mr. Perry’s main
claims: Many middle-class families would actually need to figure their
taxes using both systems before deciding which one would save them more
money, potentially increasing the amount of time they spend on taxes
rather than making tax preparation easier.
Another question is how well Mr. Perry and his newly revamped campaign
team can package and sell the tax proposal. That effort may have been
undermined on Tuesday, when, many media outlets, instead of focusing on
the tax plan, covered Mr. Perry’s statement in two interviews that
he was not certain Mr. Obama was born in the United States. Those
comments linked him to the “birther” movement, whose members
question whether the president is occupying the White House legally.
Given an opportunity to play down the issue in an interview Monday night
with CNBC and The New York Times, Mr. Perry refused, saying that
“it’s a good issue to keep alive.”




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