Tax Reform, Is It Coming?
by Tom Donelson on October 29, 2011 at 10:43 AM
Rick Perry has released his tax reform and the GOP primary voters have one more idea yet to consider. Since Herman Cain’s 9-9-9 plan, the word is tax reform and changing the whole system. Newt Gingrich has his tax reform plan, Jon Huntsman has his plan, and now Perry has joined the party with his plan. The biggest problem that these candidates will have is a number thing to deal with. With 15 trillion dollars of debt and federal government spending at 25% of the GNP, we are drowning in red tape, and so there are three arguments that Perry and others have to deal with. The first argument is that Republicans will have to make a supply side argument that economic growth will increase as result of reducing marginal tax rates, thus helping to reduce the deficit. The second argument is that tax reform will broaden the tax base, thus collecting taxes or more taxes than presently being collected. Cain's sales tax portion of 9-9-9 have the potential of raising more revenues from the underground economy and Perry's tax plans actually raise more revenues from the wealthy for he will eliminate deductions including mortgage deductions for those making over half a million. So he is actually broadening the tax base among the wealthy while lowering their tax rates.
The left will note the elimination of the death tax and capital tax will benefit the rich, but elimination of mortgage deductions and deduction for state and local taxes will broaden the tax base. Under the Perry plan, everyone will be treated the same when it comes to capital gains tax and the death tax and in a nation where nearly half of America are members of the investor class; this is important. Perry plan will encourage the wealthy to invest more in capital and less in a big home. Here is a question, would you rather have a wealth individual buy a 2 million dollar home or maybe a 200,000 dollar home and invest the other 1.8 million dollars on a startup company that creates jobs?
The Perry plan, along with the Cain Plan and the Gingrich plan, encourages less consumption and more savings and investments, which should be goal of any tax reforms. Realtors may not like the plan, in particular, those who deal with higher priced homes, but those of us who live in areas with lower price homes, this reform will not hurt at all, like those who lives in Cedar Rapids where the average home price ranges from $140,000 to $150,000 dollars. Perry did include additional items including a goal of reducing the portion of Federal government spending to 18% and his plan includes longer term savings in which his plans to reform entitlements will produce.
When it comes to tax reforms, Republicans have presented plans that are in line with what experts claim is needed to reform the system: lower marginal tax rates, the reduction or elimination of deductions, and broadening the tax base. Cain's plan does this by his sales tax and it adds the provision that his bill will include a supermajority to raise taxes. While much of the debate in the early campaign has centered on tax reforms and less on cutting spending, the spending part is coming as well. The key issue will be entitlement reform in which everyone outside of the White House and Nancy Pelosi’s office says is needed.
The Republicans are developing plans that are part of the mainstream. Read the President's commission report and what do you see? Lower marginal tax rates, entitlement reforms and reduced federal spending as part of the GNP even though they are satisfied with that ratio of Federal spending to GNP being 20% as opposed to 18% that Paul Ryan's plan has called for, and Perry has set as a goal. The real idea to take away is that almost everyone believes that Federal spending needs to be smaller! Even many liberals believe that marginal tax rates should be reduced as part of any tax reforms and the President's commission saw liberals signing on a plan to lower marginal tax rates. Former Mondale campaign manager Bob Beckel of the Fox News Network came out for a tax reform with lower marginal tax rates on the talk show "The Five." So while Obama is talking of raising tax rates among the wealthy, the rest of common sense Americans from left to right understand tax rates matter!
National Review called the Perry Plan the first draft, and in many ways they are right, for the GOP is now debating economic plans that call for entitlement reforms and tax reforms that lower marginal tax rates. Perry's plan, along with the Cain plan and the Gingrich plan, will be debated and somehow, if the Republicans take over Congress and the White House; these plans will be the backbone of the Republicans' agenda.