WASHINGTON (Reuters) - Republican presidential candidate Rick Perry laid out his tax reform proposal in a Wall Street Journal editorial Tuesday. Here are the specifics:
* Progressive marginal tax rates would be discarded and replaced with a single, 20 percent tax bracket. That would be the lowest U.S. income tax rate since 1916, when the top rate was 15 percent. The current top rate is 35 percent. The permanent income tax debuted in 1913.
* Perry’s tax plan is optional. That means lower-income taxpayers in the 10 percent and 15 percent brackets, those earning $34,500 or less in 2011, can keep paying those rates.
* Perry’s plan discards investment-income taxes. The capital gains and dividend tax of 15 percent is eliminated. The estate tax also is scrapped.
* Three tax deductions are preserved for families earning less than $500,000: mortgage interest, charitable gifts and the state and local tax deduction.
* The standard deduction for taxpayers who do not itemize their tax returns more than doubles to $12,500 for individuals and dependents. The Internal Revenue Service last week set the standard deduction for tax year 2012 at $5,950.
* The tax on Social Security benefits would be eliminated.
* The top corporate tax bracket would be lowered to 20 percent from the top rate of 35 percent under current law. The plan includes lower rates for smaller businesses.
* Businesses will be allowed to repatriate offshore profits to the United States at 5.25 percent.
* The plan shifts the United States to a territorial tax system, under which companies would pay little to no U.S. income tax on profits brought home from abroad, unlike the present system. As they do today, companies would keep paying tax to foreign countries where overseas profits are domiciled.
* Perry is calling for federal spending to be capped at 18 percent of gross domestic product, a key measure of the size of the overall economy. Spending was 23.8 percent of GDP in 2010. It has not been below 18 percent since 1966, according to the U.S. Office of Management and Budget.
* The plan calls for a balanced budget amendment to the Constitution.
* Perry would freeze federal civilian hiring and salaries until the budget is balanced.
* The health care law of 2010, the Dodd-Frank financial reform overhaul laws of 2010, and the accounting reform law Sarbanes-Oxley of 2002 would all be repealed.
Reporting by Patrick Temple-West; Editing by Eric Beech