Bloomberg News

Perry Promises Flat Tax Plan as Romney Produces Video Attack Ad

October 20, 2011

(For election news, see ELECT <GO>.)

Oct. 20 (Bloomberg) -- Texas Governor Rick Perry says he will soon offer a flat-tax proposal, his latest bid to draw distinctions with Mitt Romney in a Republican presidential race that is becoming increasingly contentious.

Romney, the former Massachusetts governor, made clear that he views Perry as the biggest threat to his quest for the party’s nomination by releasing a video yesterday that mocks his debate performances, including one this week in Las Vegas.

The video features unflattering close-ups of Perry appearing irate, uncomfortable and confused. It pointedly asks whether Perry is “ready to lead.”

Perry, who trails Romney and businessman Herman Cain in national polls of the nomination contest, told the Western Republican Leadership Conference in Las Vegas that his tax proposal will be part of a jobs plan he will unveil next week.

He also used the occasion to throw a verbal jab at Treasury Secretary Timothy F. Geithner, who came under criticism during confirmation hearings for having to pay back taxes.

“It starts with scrapping the 3 million words of the current code, starting over with something simple, a flat tax,” Perry said of his proposal. “I want to make the tax code so simple that even Timothy Geithner can file his taxes on time.”

Perry gave no other details of his plan.

Single Tax Rate

Under most flat-tax proposals, a single rate applies to business and individual income, while deductions, credits and taxes on investment income are removed. Households typically get a per-person exemption, designed so that a significant portion of earnings by low-income families wouldn’t be taxed.

Perry’s embrace of the flat tax banks on a desire on the part of taxpayers for simplicity and recalls proposals from Steve Forbes, who ran for the Republican presidential nomination in 1996 and 2000, and Dick Armey, a Texas Republican who was the majority leader in the U.S. House from 1995 to 2003.

Flat taxes operate like a broad levy on consumption, said Alan Auerbach, an economics professor at the University of California at Berkeley.

The impact of Perry’s proposal would depend on the income level where the tax takes effect, the taxes it replaces, the revenue target and the rate, Auerbach said. Under some formulations, middle-income taxpayers would pay more than they do now. Under others, he said, low-income people would pay more.

Shifting the Burden

“At the top, it’s definitely going to shift the burden away from the highest-income people,” Auerbach said.

Perry’s proposal would follow one offered in September by Romney that would reduce U.S. corporate taxes and eliminate them on interest, dividends and capital gains for individuals making $200,000 or less per year.

Romney, 64, released his video the day after he and Perry traded sometimes-angry exchanges at the debate. Romney, objecting that Perry was interrupting him there, at one point lectured his rival about being presidential.

“I suggest that, if you want to become president of the United States, you got to let both people speak,” he said.

The video also promises a new website, www.careerpolitician.com. Romney, in his second bid for the presidency, has been stressing his background as a businessman before he entered politics and notes that most of the other Republican candidates lack such experience.

Fresh Evidence

The video provides fresh evidence that Romney views Perry as his chief competitor for the Republican nomination, even as the Texan’s standing has dropped in the polls in the wake of poor debate performances while Cain’s support has risen.

Perry, 61, during his speech yesterday made a joke about the Federal Reserve, as he talked about a movie called the “The Italian Job,” where thieves make off with gold.

“That’s enough about the Federal Reserve,” he said.

In a swipe at Romney, who has been criticized for changing his views on issues including abortion rights, Perry said, “I come by my conservatism very authentically, not by convenience.”

That reprised the line he used in introducing himself at this week’s debate, indicating his campaign will be focusing on questioning Romney’s conservative credentials and credibility.

“I am not the candidate of the establishment,” Perry also said. “I’m going to give the American people a huge, big old helping of unbridled truth.”

Surge in Polls

Cain, 65, a former chief executive officer of Godfather’s Pizza whose surging poll numbers have put the national spotlight on him, continued to pitch his 9-9-9 tax plan at the conference.

“The American people get it,” he said. “It’s the ones in Washington, D.C., that have a vested interest in the current tax code that they don’t want 9-9-9 to succeed.”

All six of the other candidates in this week’s debate criticized the proposal. Some of Cain’s rivals cited a study released the same day as the debate that said his plan would raise taxes on those with low and middle incomes, while most wealthy taxpayers would pay less.

The 9-9-9 plan would translate into a tax cut for almost 71 percent of Americans with cash income between $200,000 and $500,000, according to an analysis by the nonpartisan Tax Policy Center in Washington that was built around the assumption that the 2001 and 2003 federal tax cuts will be extended permanently.

About 95 percent of Americans with income between $30,000 and $40,000 would pay more in taxes under Cain’s plan, the analysis said, while about 95 percent of Americans with income exceeding $1 million would receive a tax cut.

Foreign Policy

Cain also addressed what he says has been criticism about his lack of foreign policy experience.

“I have consulted with foreign policy experts,” he said. “Let me tell you what they have told me: ‘Herman, all you need is character and commonsense and intelligence, and we’ve got plenty of people who can fill out the details.’”

Perry, as part of a bid to regain political momentum, trained his fire at Romney during much of the debate. He accused Romney of taking a hard rhetorical line on illegal immigration while once having hired undocumented workers.

“You hired illegals in your home, and you knew about it for a year,” Perry said to Romney. “And the idea that you stand here before us and talk about that you’re strong on immigration is on its face the height of hypocrisy.”

Denies Illegal Hiring

Romney rejected the charge, which surfaced during his failed presidential run in 2008, saying a lawn-care company he hired to work on his property had employed the illegal immigrants, not him.

He scolded Perry, saying, “This has been a tough couple of debates for Rick, and I understand that. And so you’re going to get testy.”

Jim Messina, President Barack Obama’s re-election campaign manager, highlighted on a conference call yesterday another comment Romney made during the exchange at the debate: “I’m running for office, for Pete’s sake, I can’t have illegals.”

That statement, Messina told reporters, shows Romney cares more about advancing his career than what is right and wrong.

“He will say and stand for anything to get elected,” Messina said. “He objected because he thought it would hurt his political career.”

Speaking after Perry at yesterday’s conference, former U.S. House Speaker Newt Gingrich of Georgia scolded his fellow presidential candidates for their debate performances.

“I’d like to see us get away from the bickering,” he said to applause. “I will say to my fellow candidates, I think that they are better off to be positive, tell us what they will do, and not worry all that much about being negative.”

Reince Priebus, chairman of the Republican National Committee, told the conference he views the 2012 election as a fight over America’s future.

“Our stimulus plan is to fire Barack Obama and put a Republican in the White House,” he said.

--With assistance from Julie Hirschfeld Davis, Richard Rubin and Steven Sloan in Washington. Editors: Don Frederick, Jim Rubin.

To contact the reporter on this story: John McCormick in Las Vegas, Nevada, at jmccormick16@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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