Sunday, October 30, 2011

Dropping all pretense

Last week, in an attempt to reclaim some newspaper headlines, Rick Perry finally presented the coutry with an economic plan, the centerpiece of which is a 20% flat tax proposal. This isn't that unusual for a Republican candidate, one will recall that it was also the centerpiece of Steve Forbes economic proposals when he ran for president. What's different about Perry's proposal, however, is a curious twist he's added. In an apparent attempt to assuage fears that a flat tax would constitute a tax increase on poorer Americans, Perry has decided that his flax tax should be optional. If you like it, you pay 20% of your income to the Federal Government and you're done (well... except for your state taxes), but if you remain unconvinced, you can stick with the current system.

This little twist apears to have received little scrutiny among the commentariat. Perhaps this is due to the fact that Perry has largely faded from the scene, his numbers dropping precipitously after a series of dissappointing debate performances. Perhaps it is because it apears too gimmicky to merit serous consideration. Still it is suprising how little attention has been paid to the "optionality" feature, because it implies a significant departure from the standard arguments that have, till now, been employed to promote the flat tax. Students of the various and sundry GOP tax proposals that have been floated over the last few decades are no doubt aware that one of the justifications that Republicans frequently provide for their flat tax proposals is the claim that under current law, the super rich are able to exploit loopholes allowing them to shelter much of their income from taxation. The flat tax, proponets have often argued, would actually increase taxes on those wealthy Americans who rely on an army of tax lawyers to help them escape taxation.

And then here comes Rick Perry with another flat tax proposal, however, unlike previous proposals, wealthy individuals are under no obligation to pay a flat 20% of their income to Uncle Sam. They can continue to employ their army of accountants to pay little or nothing. In the end, Perry's proposal represents a tax increase only on those who don't want to go through the hassle of calculating exemptions and looking up tax tables. One wonders what the point is.

Of course, in the end, skeptics are more than justified distrusting Republican candidates' justifications and projections of the effects of their flat tax proposals. If tax loophole allow the super rich to escape taxation, why not simply close those loopholes? And given that most flat tax proposals tend to exempt capital gains from taxation altogether, the idea that these tax plans would repesent an actual tax increase on wealthy Americans is as fanciful a tale as stories about the lost continent of Atlantis.

What we have in Perry's plan, then is just the latest example of GOP policies that are completely divorced from arithemetic and empricial reality. Currently, the U.S. borrows some 40 cents of every dollar it spends. The idea that you can institute a tax plan that is guaranteed to decerase government revenues and still balance the Federal budget in six years... well that's akin to caliming, not merely that you've discovered the lost continent of Atlantis, but that it was inhabitted by Faeries and unicorns.

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