Dropping All Pretense

Last week, in an attempt to wrest a headline or two from Herman Cain, Rick Perry finally presented voters with an economic plan, the centerpiece of which is a 20% flat tax proposal. This sort of thing isn’t that unusual for a Republican candidate, one will recall that the flat tax was also the centerpiece of Steve Forbes’ short lived 1996 primary campaign. 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 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 the twist appears too gimmicky to merit serous consideration. Still it is suprising how little attention has been paid to the “optionality” feature since 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 (the flat tax, by this argument, would actually be “fairer” and more progressive than the current system).

And then here comes Rick Perry with another flat tax proposal. Unlike previous proposals, however, under Perry’s plan wealthy individuals are under no obligation to pay 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 are too lazy to go through the hassle of calculating exemptions and leafing through tax tables. One wonders what the point is.

Of course, in the end, skeptics are more than justified in distrusting Republican candidates’ projections of the effects of their flat tax proposals. If tax loopholes 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 arithmetic and empirical reality and which display an utter contempt for the true economic concerns of the vast majority of Americans (the argument that the wealthy aren’t paying their fair share in taxes has been completely sidelined). 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 decrease government revenues and still balance the Federal budget in six years (as Perry insists he can)… well that’s akin to claiming, not just that you’ve discovered the lost continent of Atlantis, but that you did so while riding a unicorn.