Tuesday, October 25, 2011

Perry's "flat tax"

First of all, you can reject Perry's tax plan simply because it doesn't tax capital gains. Any plan that taxes income from work but doesn't tax income from investment is a scheme to transfer money from working people to fat cat investors.

This is not to say that working people don't own stock, simply that such a tax effectively takes money from people whose principal source of income is productive work and gives it to people whose main income is derived from playing with money.

Republican like to describe investors -- all investors, it would seem -- as job creators. This is a false generalization. For example, Mitt Romney headed a rapacious company -- Bain Capital -- whose main activity was buying and looting companies for their cash. Jobs at "Bainified" companies were either terminated or shipped overseas. When Romney ran against Ted Kennedy, he started the race way ahead, but when people in Massachusetts found out about Bain, Romney went down like a lead balloon.  Of course,  Romney at least had a company. Large numbers of "investors" are speculators, who buy and sell stock without any interaction with the companies involved. Many make thousands of trades a week (or even per day) and are solely interested in taking in dollars. They are social and economic parasites who should pay more not less tax than people who actually do productive labor.

As far as the rest of Perry's plan is concerned, we don't know enough details. (Cain, by contrast, has no details: his website and public utterances are total gobbledygook, unintelligible to either economists or linguists.). Perry claims that taxpayers will have a choice of filing under his plan or using the old tax structure. This seems disingenuous because wealthy people will clearly pay less under a flat tax of 20%. If everyone else pays at most what they are paying now, the government will clearly be collecting far less that it currently does, even though Perry suggests his plan is revenue neutral, which is mathematically impossible. My suspicion is that either Perry hopes that people will end up filing under his plan in order to avoid the "complications" (read: math) of the current tax code, or that he really doesn't intend to give the choice option for more than a year or so.

Other aspects of the plan are unclear at this time. He claims that taxpayers will get a $12,500 personal exemption. That would be much more reasonable than Cain's nasty plan, but I couldn't find a specific statement from Perry that this would be for each person in a family. If a family of 4 were to get a $50,000 exemption from income tax that would be decent. I can't see how he can do this and also cut taxes for wealthy people, and still afford to run any sort of government -- maybe he doesn't intend to.

There is a preliminary estimate of how various taxpayers would fare under Perry's plan in the NY Times; here's a link. The figures make it clear that the personal exemption would help middle class families with children. Retired people would also be helped  -- provided Perry doesn't eliminate Social Security and Medicare, in which case it would be a total disaster for seniors. The people who would be helped the most are the wealthy -- as usual for Republican plans.

Perry makes noises about cutting programs that we citizens directly pay for -- sometimes called "entitlements" -- but it is unclear how he will cut them. He has said some scary things about Social Security and Medicare, and he doesn't like unions, consumer protection, and environmental laws. Sounds like life under the Texas governor would be nasty, brutish and short -- at least for people of modest wealth.

If your taxes go down somewhat, but important services related to education, health and safety are drastically cut, how is your life better?

Given the fact that the Republicans have been the Party for The Rich (PTR as I hope we will start calling it) for more that a century, we will not see any of their presidential candidates deviate from their policy of taking from the poor and middle class and giving to the rich. In the case of their tax plans, the Devil is not just in the details but in their whole philosophy.

1 comment:

  1. It's not just people who own stocks and mutual funds (which is a large piece of America) - it's also people who own their own businesses. In most cases, capital gains are not traditional income. And capital gains taxes apply not just to stocks and bonds but also homes and businesses.

    By keeping the capital gains tax rate at high levels relative to other countries, you are hurting a lot of people, not just those who "play" with money.