Perry argues these tax cuts will spur economic growth by creating a more favorable environment for wealthy individuals and corporations to start or expand their businesses. But without significant spending reductions, the tax cuts could drastically increase the federal budget deficit.
“Taxes will be cut across all income groups in America, and the net benefit will be more money in Americans’ pockets with greater investment in the private economy,” Perry said to an audience of more than 200 inside the factory at ISO Poly Films, Inc. in this South Carolina town.
The “Cut, Balance and Grow” plan, which Perry first unveiled Tuesday in an op-ed in the Wall Street Journal, puts Perry firmly to the political right of former Massachusetts governor Mitt Romney in terms of economic policy.
As he releases the tax plan, Perry seems determined to re-energize his campaign and reassert himself as a candidate after weeks of struggles. In an interview with John Harwood, a reporter with CNBC and the New York Times, the Texas governor cast Romney — the GOP frontrunner — as a “fat cat”. He said he likes mentioning conservative falsehoods about President Obama’s birth because “It’s fun to poke him a little bit.”
Perry is clearly looking to woo tea party conservatives who have been reluctant to back Romney. In almost every way, he presents policies that are slightly more conservative than those of the former Massachusetts governor.
Romney has called for capping federal government spending at 20 percent of GDP, for example; the Texas governor proposes capping at 18 percent. (This year, under President Obama, spending is at 24 percent of GDP). Romney has proposed raising the retirement age to reform Social Security; Perry adopts an idea even more beloved by conservatives and hated by liberals: allowing young people to put their money into private savings accounts outside the traditional retirement system.
Romney would cut corporate taxes to 25 percent; Perry, 20. Although Romney has said one of his goals is a “flatter” American tax code, under Perry’s plan, Americans could either choose to pay taxes under the current system, or pay a 20 percent national flat tax.
Conservative activists have long called for the adoption of a flat tax. Indeed, Perry’s proposal for such a tax as an option is similar to one by former House Speaker Newt Gingrich, who would set the optional flat tax at 15 percent. Gingrich is also seeking the 2012 nomination.
Overall, Perry’s vision would call for much larger tax cuts and spending cuts than Romney’s proposals. It creates an even larger divide between him and Obama. If enacted, Perry’s plan probably would result in huge cuts to domestic spending programs and major tax cuts, particularly for the wealthy.