Oct. 25 (Bloomberg) -- Republican presidential candidate Rick Perry said he will propose a tax overhaul that would slash corporate rates and give individuals the option of paying a 20 percent flat tax on their income.
“Taxes are too high, too complex, and too riddled with special interest loopholes,” Perry wrote in a Wall Street Journal opinion piece previewing the proposal, which he will unveil today in Gray Court, South Carolina. A flat tax “will allow Americans to file their taxes on a postcard,” wrote Perry, who plans to speak at ISO Poly Films, a plastics company.
The plan would lower the corporate tax rate to 20 percent from 35 percent and give multinational companies a temporary incentive to bring home foreign-earned income at the far lower rate of 5.25 percent, Perry wrote in the article.
The Texas governor, seeking to recapture momentum for his 2012 bid, is trying to harness Americans’ distaste for the complicated tax code and capitalize on enthusiasm -- evident in Herman Cain’s surge in the polls as he promotes his 9-9-9 tax plan -- for major changes.
Perry wrote that his plan, which also calls for balancing the budget by 2020 and capping federal spending at 18 percent of gross domestic product, would revive the economy and spur job creation.
The plan “restores American competitiveness in the global marketplace and provides strong incentives for U.S.- based employers to build new factories and create thousands of jobs here at home,” the governor wrote.
Advertising in Iowa
The overhaul, an attempt to distinguish himself from his Republican primary rivals, comes 10 weeks before the first voting in Iowa, where Perry is starting a major advertising campaign this week.
Perry’s plan sets him apart from Mitt Romney, the former Massachusetts governor and second-time presidential candidate who is leading in Republican primary polls. Romney proposed a 59-point, 160-page jobs proposal that keeps the existing tax system while extending income tax cuts now set to expire and reducing investment taxes and the corporate rate.
Perry drafted his proposal with help from Steve Forbes, who proposed a flat tax when he ran for the Republican presidential nomination in 1996 and 2000 and has endorsed the Texan’s candidacy. It also echoes a plan promoted by Dick Armey, a Texas Republican who was U.S. House majority leader from 1995 to 2003 and now leads the Tea Party-aligned group FreedomWorks.
Forbes, in an Oct. 23 interview with Fox News, said voters “love the idea of radical simplicity” in the tax code. He said that because Perry’s plan wouldn’t include a federal sales tax, it would be “more appealing” than Cain’s proposal.
Cain’s campaign said it is opening a new Internet site and starting radio advertisements on Rush Limbaugh’s show in Iowa today. His proposal to create 9 percent income, business and sales taxes has come under criticism from Republican candidates and independent groups who say it would require middle-income earners to pay more.
A flat tax -- even an optional one -- by definition would be less progressive than the current system where the top individual income and corporate tax rates are 35 percent. The highest earners currently pay a higher percentage of taxes while those who earn less owe a lower percentage, with the lowest earners paying no income taxes.
Perry’s proposal would let individuals continue under that system or opt for a 20 percent tax on income, while preserving popular deductions including those for mortgage interest and charitable contributions and exempting $12,500 for each individual and dependent. The plan also would eliminate taxes on Social Security benefits, inheritances, dividends and long-term capital gains.
Perry’s bid for the Republican nomination surged after he entered the race Aug. 13, though he has lost momentum in recent weeks following lackluster debate performances and as Cain’s tax plan captured support from fiscal conservatives.
--Editor: Laurie Asseo, John Brinsley.
To contact the reporter on this story: Julie Hirschfeld Davis in Greenville, South Carolina at Jdavis159@bloomberg.net.
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