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ThePlumLIneGS whorunsgov plumline
Posted at 11:08 AM ET, 10/25/2011

Rick Perry’s `flat tax’ — not so flat after all

Rick Perry finally released his “flat tax” and budget plan today. Boil it down and what you’re left with is tax cuts for the rich and tax returns they can do on postcards — while offering nothing but more complexity for everybody else.

The trick to moving towards a flat tax is that if you make it revenue-neutral, you’re going to have winners and losers. And the losers are apt to care a lot more than the winners, so you probably can’t pass the thing. Or, you can give up the goal of revenue neutrality and make sure that no one pays more than current policy; if that’s the case, it will be easier to pass unless you care about federal budget deficits.

Perry has clearly chosen the latter path for his “flat” tax, which as Dylan Mathews explains isn’t particularly flat, and is clearly a revenue loser. After all, Perry would give every taxpayer the choice between the flat tax rate of 20 percent and the current system, which guarantees that the overall plan would take in a lot less money (and of course there would still be winners and losers, since some people would get a tax cut and others would get the status quo — but at least in Perry’s telling of it, no one would pay more). See Kevin Drum for more.

My favorite thing about Perry’s plan is that not only would it shift the tax burden from the rich to middle-class and poorer taxpayers, but it would also shift the burden of tax preparation away from the rich. It is, after all, presumably wealthy Americans who would opt for the “flat” choice. Middle class Americans will be far less likely to opt for it, because their current effective tax rate — once you figure in deductions and exemptions — is lower than it would be under Perry’s plan. So the wealthy will get the simplified “postcard” system, while most in the middle class will be stuck with the current complex system.

So the Perry plan boils down to tax cuts and tax simplification for the rich, while everyone else gets extra complexity and, for most people, no change (except that if the Earned Income Tax Credit is also repealed, the poor will be worse off). It’s hard to believe that’s a winner, even among Republican primary voters. All “flat tax” proposals wind up favoring the rich in some way. The genius in Perry’s proposal is that he manages to extend that even to the paperwork.

By  |  11:08 AM ET, 10/25/2011

 
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