Wednesday, October 26, 2011

Rick Perry’s Tax Plan – Brilliant in Budget Reform – and “Optional” – A short tutorial on Government and Taxes – Congress will be the Key


Rick Perry, Tax and Budget Plan Worth Second Look - photo: borowitz report dot com


With all the hoopla and horror surrounding the various tax plans that GOP Presidential Candidates have proposed, the single biggest misconception is that any “plan” proposed will be written immediately into law. Taxes are essentially subject to the will of the Congress and its Ways and Means Committee. Simply put, the Ways and Means Committee oversees Social Security, and Revenue, two of the largest targets of both political parties. The Subcommittee of Select Revenue Measures is especially important and who is on that Committee, makes the calls regarding our current tax structure. Currently, Congressman Richard Neal (D-MA) is the ranking member. Neal’s approach to taxes has earned him the moniker of ”Nancy Pelosi’s and Ireland’s Tax Man”. Neal, a staunch, straight party line voting, Progressive Democrat, is able, regardless of which party in currently “power” to influence taxes across the board – from individual to corporate.

It is true that when Congress is “flipped”, and either the Republicans or Democrats are in control, that influence is either enhanced or capped, however, the fact is that the individual sitting in the Oval Office has less input than a strong Speaker of the House when it comes to one’s income. It is a strong leader in the Oval Office in concert and more media savvy than a Speaker that will get the job of tax reform accomplished, if, and only if, that speaker has control of the Ways and Means Committee.
If Perry or any other GOP candidate can exert that kind of influence, then and only then, will change occur.

Perry’s plan is simple, in so far as it eliminates a load of paperwork and places a flat tax into place, with standard individual deductions, deductions for state and local taxes, capital gains, mortgage interest and charitable contributions. The key words are ”choice” (see Business Week article here, and “optional”. From the Rick Perry campaign website:


By implementing a simple and optional flat tax that will allow Americans to file their taxes on a postcard, up to $483 billion a year could be saved by American families and businesses in reduced compliance costs alone.13 A simpler, flatter tax code – free from the dozens of individual carve-outs that make the code so incomprehensible – will remove the disincentives to work, entrepreneurial risk-taking, and investment that form the foundation of a strong and vibrant economy.

Lower- and middle-income families will be able to take advantage of an optional 20% flat tax rate that includes generous standard exemptions of $12,500 for individuals and their dependents, as well as deductions for mortgage interest, charitable contributions, and state and local taxes.
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Not, unlike Cain’s 9-9-9 plan, Perry’s approach is Reaganesque, putting tax cuts in place that would encourage corporate growth and job creation, however, the option to revert to the current code is included in Perry’s.

The key however, in Perry’s plan is a moratorium on regulations that affect the tax code, a review of all regulations that are obsolete, and a mandatory review of each government agency’s annual budget. The agency budget review and mandatory approval by Congress for additional funds measure, would be a vast improvement over the current system, and one for which Perry and his Economic Team should get high praise.

Overall, there are elements of both Perry and Cain’s plan that are commendable, and either would be an improvement on the current system, however, Perry’s addition of specific tax cuts and Departmental Budgetary regulations is superb. Under the current systems, each Department is awarded an annual budget, a budget that if not spent in its entirety results in a cut in budget funds for the following year. Departments are literally forced to overspend, by millions of dollars, in order to receive future funding – a change in this ridiculous system, would eliminate waste, and go a long way towards balancing the budget.
Finally, Social Security would be treated to an overview, a repeal of the current tax on Social Security benefits, and a charge to Congress to stop “raiding” Social Security Funds. It does not change the way benefits are delivered to those who are now receiving or near receiving Social Security.

Therefore, Perry’s plan should receive an A+ from the public, and although the Governor noted that the plan would reduce government income, when queried by news agencies, apparently no-one took into account the provisions for departmental budgetary controls. That is especially true of two strange bedfellows: Fox and CBS, who alternately called the plan a “disaster for America” (Fox), and a “substantial revenue loss for the U.S. government”(CBS).

The one individual, who ends up taking on the task of the President of the United States, will have to be a strong enough leader to work with and encourage tax code changes through the Congress and specifically its Ways and Means Committee. Ronald Reagan was the last President to achieve that goal, and the economy, under Reagan’s plan, improved vastly within the span of a few short years. Rick Perry, to his credit, notes that this is not an overnight solution, and any one candidate, who offers a solution suggesting change would be immediate, is simply playing with fire. Consider Obama’s plan for Health Care Reform, a plan that was crafted in the House, by Senior Democrats, and Nancy Pelosi at the helm, in haste – and pushed through Congress (one must give that woman credit, she ruled with a whip – whether on agrees with her politically or no.) It is now one of the least popular plans to come out of a White House, and it is doubtful that the Act will stand as waivers are granted, and challenges to the Constitutionality are brought by States are won in the Supreme Court. It was the promise of immediate Hope and Change, lack of experience and a Congress packed with Progressive (Socialist) Democrats in complete power, which led to this horrific mess we now face. (Include in that equation the Republican controlled Congress spending spree going back through he Bush administration.)

Tax reform is essential, but more essential is the reform of the budget regulations for each Department of the U.S. Government.

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