Posted on 10/26/2011 6:49:13 AM PDT by SeekAndFind
p>As I wrote in an earlier post, an outside consulting firm hired by the Rick Perry presidential campaign has analyzed the revenue and growth impacts of his flat tax plan as follows:
1. Under static scoring — assuming no growth impact from a more efficient, pro-investment tax code — the Perry Tax Plan (call it PTP-SS) would raise $4.7 trillion less than the Congressional Budget Office baseline forecast from 2014-2020. Of course, that forecast assumes all the Bush tax cuts expire, which is highly unlikely. Yet even under that scenario, revenue-to-GDP would be back to its historical average of around 18 percent of GDP by 2019. (Interestingly, income taxes as a share of the economy would be the same in 2020 as they are now, but corporate tax revenue would double despite cutting the corporate tax rate to 20 percent from 35 percent.)
2. Under dynamic scoring, the Perry tax Plan (call it PTP-DS) would raise $1.7 trillion less than the unrealistic CBO baseline. But revenue would move above 19 percent — a historically high number — of GDP in 2019 and 2020.
3. Under PTP-DS, the U.S. economy would be $3.5 trillion bigger in 2020 than under the CBO baseline forecast. And this gap would widen since CBO has some pretty sluggish growth forecasting moving forward. As consultants John Dunham & Associates put it:
Overall, based on the type of static analysis generally used by government tax estimators, JDA found that the tax plan would generate $2.781 trillion in federal income in 2014 the first year that it would be assumed to go into effect and as much as $5.138 trillion by 2020. The revenues in 2020 would be equal to approximately 19.5 percent of GDP. Based on a dynamic tax analysis, revenues would be $406.8 billion higher than those currently assumed in the Congressional Budget Offices forecasts and will equal approximately 19.5 percent of the forecast GDP, under a static analysis, revenues would be about $588.9 billion lower, and equal about 18.1 percent of GDP.
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.
Bottom line: If a President Perry could balance the federal budget by 2020 and cap spending at 18 percent of GDP — and if you buy the JDA analysis — the result would be a more financially stable America and a richer America than the current economic and budgetary trajectory would indicate.
WOW a REAL economic plan. Now let’s see how many people REALLY care about their children and grandchildrens future.
It’s STILL an income tax and that makes it a non starter for me but they did acknowledge that the governments method of scoring (static analysis) is deeply flawed and I DO agree with that.
This is probably the answer O’Reilly was looking for with his first question to Perry last night.
If Perry could have spouted off this analysis, I wonder if Bill would have interrupted 15 seconds into it.
The great last words, just a few short years ago, clintoon and the gop said we would have a balanced budget in 2014.
Somehow, hired by Perry and outside do not seem to belong together. :) Still, it is good to see that at least one other candidate is following Cain's lead and bringing an alternative to the table.
No. Why do you think it would?
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.
Problem with Perry’s tax plan are numerous.
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 pla
I agree with you. It is good to see Governor Perry at least try to follow Cain’s lead. Without someone starting the conversation, there will never be any change.
It requires fewer people to work in the old plan department and the new plans will be far, far easier to process. No new hirees needed.
It is the way government works.
The idea is to change that.
Regarding post 11 those are mostly rehashes of the Fair Tax vs. Flat tax argument. If you want a national sales tax you are going to support Cain's plan.
That concerns that by allowing the option to file under the existing code, the benefits for special interests will remain is going to have to be addressed. OTOH, Perry is getting heat that his plan is too beneficial to the rich, so it's probably not going to be that big an issue.
The option to file under the old code is mostly designed to assuage the concerns of the middle class.
He explained yesterday that there are some corps and businesses that are locked into amortization tax plans. Apparently the consequences of switch before the amortization is finished would be cost prohibitive.
The option gives these businesses and Corps the opportunity to retire the amortization and then switch to the 20% flat (which is much more cost effective)
For the majority of normal working Americans the flat 20% is the best answer.
I asume how long and how much the total amortization is makes the difference.
Hardly, Cain doesn’t have a clue how taxes work in the real world. (he forgot to pay his STATE taxes)
The Cain plan is a joke, more taxes and expand government programs.
The point is to lessen BOTH.
Perry’s real world plan does both.
Cain’s plan will never be adopted, and Obama, if it isn’t modified, will beat Cain polemically with it like a rented mule.
Adding a VAT and an NSRT to the income tax will never sell once people figure it out. The VAT is extremely dangerous.
If Cain doesn’t find a way to walk it back or substantially modify it, 999 will eventually sink him. I say that as someone who would be very pleased to have him as President.
Perry’s (borrowed) real world plan begins by expanding the IRS. How are they going to handle two distinct systems without doing so? It leaves the payroll taxes in place, so it is really a 20% of net + 5% of gross income tax. It appears it would raise the effective corporate tax rate from 13.2% to a higher number for most businesses (only the largest have to manipulate the top rate of 35% to pay less).
Perry’s plan does nothing to tax the “cash market” that is hurting us so badly, requiring some smaller segment of society to pay all the bills. How soon before that 20% is 30% or 40%?
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