October 26, 2011

NO ONE COULD HATE IT BUT LAWYERS AND LOBBYISTS:

The Flat-Tax Sweepstakes: Perry's 20% optional rate joins the GOP debate over pro-growth tax reform. (WSJ, 10/26/11)

A flatter tax code is both an economic and political reform. Economically, its lower rates would attract more capital from abroad, encourage more domestic investment, and increase growth and jobs. It would also minimize, if not eliminate, the tax favoritism and loopholes that misallocate labor and capital. Politically, this would reduce the legal corruption of handing out favors that has soured so many Americans on their government.

Mr. Perry has struggled since he announced his campaign, so his proposal can be seen as a chance to rejuvenate his candidacy. He'd offer individuals a choice of tax systems: Keep the current code, with all of its deductions, the alternative minimum tax and a top rate of 35%. Or go with a flat rate of 20%, with far fewer deductions and no AMT. Mr. Perry is assuming that most filers would choose simplicity and a low rate over deductions and complexity.

Based on a National Taxpayers Union study, Mr. Perry believes that this plan will reduce economy-wide compliance costs by as much as $483 billion a year by 2015. The flat tax also eliminates the double taxation on savings and investment, by zeroing out taxes on capital gains and dividends as well as the death tax.

Posted by at October 26, 2011 4:36 PM
  

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