Forget gun control. Rick Perry needs mouth control. It’s unfortunate that the Texas governor (metaphorically) shot himself in the foot the other day with his silly birther remarks, because the furor over the comments has drawn attention away from Perry’s long-awaited tax proposals.
If I were a betting woman, I’d bet that Perry will not get the GOP nomination. But his flat tax plan is part of something very important that is happening right now: a recognition that we really do have to ditch the current tax code and do something better.
The Wall Street Journal refers this morning to the “flat-tax sweepstakes” as GOP candidates one after another put forward flat tax plans. Perry (20 percent) is just the latest, joining Newt Gingrich (15 percent), Jon Huntsman (top bracket of 23 per cent), and Herman Cain (9-9-9, unless you are poor, in which case it’s 9-0-9). GOP House members have a reform plan with a top 25 per cent rate.
This is good news because, for the first time, I think we’re looking at a flat tax not as a pie in the sky idea but as something that can really happen. What’s so great about a flat tax? The Journal notes:
A flatter tax code is both an economic and political reform. Economically, its lower rates would attract more capital from abroad, encourage more domestic investment, and increase growth and jobs. It would also minimize, if not eliminate, the tax favoritism and loopholes that misallocate labor and capital. Politically, this would reduce the legal corruption of handing out favors that has soured so many Americans on their government.
The Journal analyzes Perry’s proposals, finding much to like and some things to criticize. I am interested that in one aspect he appears to go further that Michele Bachmann in his proposals to get U.S. companies that do business abroad to come home. He endorses the territorial system:
He'd also move to a territorial tax system, in which companies would no longer have to pay the U.S. rate if they earn that money abroad. This would make it easier for U.S. companies to bring that income home and create jobs in America. By making the individual and corporate rates the same, at 20%, Mr. Perry would also reduce the risks of tax arbitrage between the two.
As I said, I don’t think Perry, for all his rude charm (okay, I’m from the deep south and I like aggies, as we call agriculture majors in those parts), will get the nomination. But, as the Journal notes, we owe him a big Texas thank-you for coming out with this plan:
The good news is that Mr. Perry and most of his competitors are thinking big, with proposals that will reverse the U.S. slide to high-debt, slow-growth stagnation. President Obama wants to portray the economic debate as pro-growth government spenders vs. the austerity of budget cutting. But the real debate is over whether government or the private economy is the main engine of prosperity. The flat tax puts Republicans on the side of private growth and government reform, a potent combination. Perhaps Mr. Perry and his comrades can even coax Mitt Romney to join the party.