Perry places hopes on flat tax

COLUMBIA, South Carolina Tue Oct 25, 2011 6:38pm EDT

1 of 6. Republican presidential candidate Texas Governor Rick Perry speaks during a visit to plastics manufacturer ISO Poly Films in Gray Court, South Carolina October 25, 2011. Perry proposed a broad economic plan on Tuesday centered on letting Americans pay a flat 20 percent income tax rate that he hopes will reinvigorate his fading presidential campaign, during a visit to the plastics manufacturer.

Credit: Reuters/Mary Ann Chastain

COLUMBIA, South Carolina (Reuters) - Republican Rick Perry on Tuesday placed his hopes for a comeback in the U.S. presidential race on a plan for a 20 percent flat tax that would give the richest their lowest tax rate in almost a century.

Perry's roll-out of his tax proposal, part of a broad economic plan, came as a poll showed him struggling in the race to decide the Republican presidential nominee.

The Texas governor's plan would also slash taxes for corporations and could mean a tax cut for low- to middle-income households.

Speaking at a plastics plant in the rural town of Gray Court, Perry waved a postcard-sized form that he said would be the same size as a tax return under his plan to simplify the huge U.S. tax code.

"It is time to pass a tax that is flat and fair and frees our people to invest and grow and prosper," Perry said in South Carolina, where conservative voters are dominant and a state Perry would need to win for any chance at the nomination.

A new CBS/New York Times poll of Republicans said Perry stands at only 6 percent, down from 12 percent earlier this month. He trails four other contenders led by businessman Herman Cain with 25 percent support and former Massachusetts Governor Mitt Romney at 21 percent.

Perry's flat tax proposal is his answer to Cain's simple 9-9-9 plan.

Perry would cut corporate taxes from 35 percent to 20 percent and encourage U.S. corporations that collectively have socked away $1.4 trillion in profits overseas to repatriate the money by letting them pay a reduced 5.25 percent tax for a limited time.

A 20 percent top individual income tax rate would be the lowest U.S. levy on the richest Americans since 1916, when it was 15 percent. The current top rate is 35 percent.

But Perry rejected charges that his plan would mostly benefit the wealthiest, saying he is interested in creating jobs, and "if folks who have money are going to be creating those jobs, I don't have a problem in the world with that."

Taking questions from reporters, Perry dismissed polls saying he is lagging behind his rivals and said once Republicans look at his economic plans they will decide, "that's where we want to go."

"I've always said polls are going to go up and down," he said, while suggesting he may make some tactical changes. "There is a long time until this campaign is over."


Perry's plan reflected the conservative goal of less government involvement in Americans' affairs. He would cut government spending, roll back regulations and attempt to balance the budget by 2020.

He would overhaul the Social Security program for retirees by letting younger workers invest a portion of their payroll taxes in a market-based pension system. Republican President George W. Bush attempted a similar Social Security reform but could not get it through Congress.

Perry rests most of his plan on tax cuts, giving Americans an option of a 20 percent flat tax or keeping their current tax rate. To blunt criticism that it would hurt the middle class, he would allow Americans making less than $500,000 a year to keep popular deductions on home mortgage loan interest and charity donations.

Perry would also eliminate the tax on qualified dividends and long-term capital gains.

"To do the kind of tax cuts he's talking about implies massive cuts in government spending," said Howard Gleckman, a fellow at the Tax Policy Center, a non-partisan think tank. "I don't quite see how he could possibly balance the budget."

President Barack Obama's re-election campaign said Perry's tax plan seemed guided by the principle of shifting the tax burden from large corporations "onto the backs of the middle class."

Perry proposed the plan after consultations with Steve Forbes, the Republican who offered a flat tax plan in his 1996 bid for the party nomination. Forbes endorsed Perry on Monday.

Perry shot to the top of Republican voter polls when he launched his campaign two months ago but has fallen back after shaky debate performances and a series of distractions.

He seemed to get caught up in yet another distraction on Tuesday when he brought up the largely discredited issue of whether Obama was actually born in the United States, a constitutional requirement to being president.

Obama produced his Hawaii birth certificate earlier this year and the storm over the issue seemed to have calmed. But in a CNBC interview, Perry said: "It's a good issue to keep alive," saying it was fun to poke at Obama on the topic.

He changed his tune a bit when asked about it in Columbia, calling the birth certificate issue a "distraction."

(Additional reporting by Patrick Temple-West and Stella Dawson; Editing by Eric Beech)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see
Comments (47)
Peripeton wrote:
The patient is poisoned and the antidote proposed is a larger dosage of the same poison. Ingenious…

Oct 24, 2011 12:01am EDT  --  Report as abuse
doggydaddy wrote:
LOL… “Perry would give Americans a choice: pay a 20 percent flat tax or keep their current rate.” Who’s he think he’s kidding? Why not just say lower all tax rates over 20% down to 20%? I mean, if your tax rate is over 20%, of course you’re going to want the 20% tax rate and if your current tax rate is below 20%, of course you’re going to want to keep your current tax rate. He got this idea from the very wealthy Steve Forbes. I guess Mr. Forbes wants another tax cut.

And just how are we going to afford these tax cuts? Didn’t we go through this with Bush? Can’t people see how that worked out? Why do people who support the Republican Party care more about getting Republicans elected to office than they care about seeing our country improve? Do they just think that the country automatically does better under Republicans and worse under Democrats, so there’s no need to pay attention or understand anything, just vote Republican? What’s this guy Perry got up in his cranium, Texas seaweed? He seems like a moron. Frankly, none of them seem too bright.

“Perry said he would move the United States to a “‘territorial tax system” — as in Hong Kong and France, for example — that only taxes in-country income.”

Ahh, copying the country conservatives love to hate, France, and a communist country. If we did that, then all companies would have foreign “home office” addresses, so they’d never have to pay corporate taxes. And this would be unfair to smaller companies who don’t have businesses outside of the US. Don’t smaller companies have enough of a competitive disadvantage?

This Republican competition is looking a little bit too much like Dancing With the Stars. Our politicians are just too pre-packaged complete with gimmicks and catchphrases, but no substance. It’s no way to run a great country. Maybe that’s why we’re no longer so great.

Oct 24, 2011 12:07am EDT  --  Report as abuse
Jzyehoshua wrote:
I am very much opposed to Obama, Pelosi, and Reid, but I recognize a corporate puppet when I see one. A tax break to support outsourcing of U.S. jobs, a flat tax to take from the poor to give to the already rich, hiking up taxes on working Americans so corporations can get discounts – this guy’s just another big business crony.

Oct 24, 2011 12:13am EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.