Posted on 10/26/2011 7:01:11 AM PDT by Cincinatus' Wife
A lot of people are wondering: Given that Rick Perrys flat-tax plan would effectively lower tax rates for nearly every American, what will it do to the budget deficit? We have at least one initial answer to that question.
The Perry campaign has enlisted economist John Dunham to estimate the fiscal impact of the governors new tax plan. According to Dunhams analysis, a CBO-style static analysis of the tax plan will yield revenues $588.9 billion lower than those currently assumed in the Congressional Budget Offices forecasts, with total revenues equaling 18.1 percent of GDP.
Using a dynamic scoring system that makes more optimistic assumptions of the plans impact on economic growth, revenues would be $406.8 billion higher than the CBO baseline, amounting to 19.5 percent of GDP.
Ive posted the seven-page analysis here.
Ive also published my thoughts on the health policy aspects of Perrys plan on my Forbes blog. Overall, I pretty much agree with what Yuval says below. Heres what I wrote yesterday about Perrys Medicare reform proposal:
On a conference call this morning, members of Perrys domestic policy team explained that they are deciding between three approaches to Medicare reform: Paul Ryans Path to Prosperity, which was incorporated into the 2012 House budget; Jim DeMints Retirement Freedom Act, which would allow seniors to opt out of Medicare and obtain private insurance; and the bipartisan reform proposal put forth by Sens. Tom Coburn (R., Okla.) and Joe Lieberman (I., Conn.), which preserves traditional Medicare but reforms the programs cost-sharing, means-testing, and eligibility-age features.
The three arent incompatible with each other; one could easily incorporate the Coburn-Lieberman plan into Paul Ryans framework. The DeMint proposal that allows seniors to opt out of Medicare is attractive philosophically, though it will be important to consider the adverse-selection issues associated with such a plan: healthy people are the ones most likely to opt out, leaving the sickest and most expensive patients on the government rolls.
I spoke with the Perry domestic team this morning to ask how they were planning to choose between these three plans. The idea appears to be not to choose among the plans, but rather to lay out principles, goals, and guidelines that can be used to work with Congress to formulate a bill.
While Perrys Medicare plan is not fully formed, it is more specific than those put out by his competitors. It will be interesting to see where it goes.
[snip] “Dynamic Tax Score for RickPerry.org, Inc. Proposal:
Based on the higher GDP estimates forecast by the dynamic scoring exercise, the Perry proposal will not only lead to an increase in overall economic activity and jobs, but will also lead to higher federal revenues in the long term. In fact, the analysis suggests that revenues could be as much as $406.8 billion higher than under the static model by 2020, and could be as high as 19.5 percent of GDP.
The dynamic score of the proposal suggests that lower flatter taxes could generate both more revenue than the current tax code, and significantly more economic growth over time. With increasing demands on the Federal government from growing entitlements, higher pension expenses and interest on the debt, it will be necessary to increase the size of the economy and the tax base in order to generate significantly higher revenues. Table 7 shows how the Perry proposals would do this over a seven year period.’ [snip]
http://blogs-images.forbes.com/aroy/files/2011/10/Perry-Tax-Proposal-Score.pdf
Perry's plan is a "what do I need to say to get votes" plan rather then "what do we need to do to fix the tax code" plan. It does not broaden the tax base thus leaving the current system of payers and payees in play for future political exploitation. It keeps in place the corrupt practice of playing favorites in the tax code by still granting special exemptions. This is the greatest flaw in Perry's plan. He leaves in the politically popular exemptions to pander to certain voter blocks. It the best example of where his plan is not a serious attempt to address the fundamental problems in the tax code but a political gimmick designed to rejuvenate his flagging campaign. It maintains the current focus on taxing income instead of consumption thus punishing the producers at the expense of the users. It leaves in place the current ability for trust funds and the massively wealthy to avoid paying any tax by structuring their payouts in forms other then income. It does nothing to tap the underground off the books economy. So while Perrys sort of flat tax is an improvement over the current system, it is merely tinkering with the existing tax code while leaving in place the same corrupt, flawed foundation. Of the two, Cains 9-9-9 is the better plan.
You’re posting spam.
You didn’t read the article.
You didn’t look at the links.
You didn’t study the Dynamic Tax Score charts and analysis.
Come back after you learn something.
You are EXACTLY right Johnnie!
Anything that leaves the income tax in any form in place is NOT real tax reform and is a non starter with me!
The problem here is that there is still a focus on the revenue side of the equation (tax code).
Our problem now is first and foremost a spending problem.
When I hear candidates talking tax cuts, and not talking about spending cuts, I start to smell b.s..
If you fix the spending, other things begin to fall in place naturally.
With a spending cut, you can take existing revenues and begin to pay off debt. When enough is paid off, you can afford to lower the tax burden.
Absolutely.
We need to get away from the government forcing citizens to keep financial records and then challenging those records absent a jury of the citizen’s peers to assess outrageous penalties.
Cain is willing to take this on, Perry falls flat.
Sounds like a budget surplus, to me. His plan also calls for spending not to exceed 18% of GDP. It will only take a few decades to start significantly paying down the $17 trillion Obama debt.
Didn’t watch the speech, didn’t read the content, didn’t hear or see the title, “CUT, Cap and Balance”, I take it?
There’s still time for doing that...
When you have a person that has been dealing with budgets and taxes for millions of citizens, you get a more mature and realistic view of solving the problem at hand.
I have found it interesting that the media is really digging on Perry’s plan trying to find any little thing they can tear it down with. But hey 999 and expansion of fed program is just sooooooooooooo catchy and an eye opener.
I guess the msm media likes the idea of giving D.C even more ways to tax Americans.
That and the fact that the government would still get to define what is, or is not “income”. The main cottage industry in among Washington politicians these days surrounds THAT seemingly insignificant little decision!
Interesting tagline...”I’m from the government and I’m hear to help”...fearsome words as RR said.
Per your tagline philosophy -
You haven’t realized it yet, but it’s possible one day you will see that allowing PEOPLE TO CHOOSE between the old code and the new flat tax is far superior than GOVERNMENT FORCING PEOPLE to the new flat tax if they didn’t want to go, primarily because it would, in their cases, cause them to pay more.
Allow people to pay the lesser amount. If and when they benefit from the new flat tax and move to it voluntarily, in their case the old code is dead.
If millions upon millions move off the old code voluntarily, and if the old code is not tinkered with again but remains the static, dying monstrosity that it is...which is what would happen by creating a new flat tax...you would not change and tinker with the old code anymore...it would become like a dying language that a few people still speak...
...then what a great world that would be, here in the good old USA.
Until they place themselves on Medicare and pay into it, and until they go after the $60 BILLION if fraud with a BIG HAMMER, it won't get fixed.
We will never again be a truly FREE people for so long as we continue to abide the communist inspired, class warfare inducing, hidden tax riddled income tax and the IRS!
If Rick Perry had come out four square for the Fairtax, for which he indicated strong support in his book, he would be the next president of the United States! He didn’t and thus he won’t!
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Only when the average citizen can pay his taxes in a manner that keeps him completely anonymous to the government, as our founders CLEARLY intended, will the people of this once great republic be truly FREE again! That cannot happen under any form of income tax but would be instantly in place with the fairtax as the law of the land!
Unfortunately there is no controlling the fraud in government. The only way to kill the beast is to starve it. :(
Senate rules require CBO scoring relative budget issues for 51 votes vs required 60 as with Bush tax cuts. OOOPS
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Great point, and belies Perry's propensity to cherry pick his plans and sound bites to haul in those votes. It works so well for him here in Texas getting elected.
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