Close, but no cigar

25 October 2011 By Martin Hutchinson

The Republican presidential contender’s 20 pct flat tax is a sensible plan with some nice new features and structured to avoid being too regressive. But the capital gains exemption is a silly loophole and making it optional wrecks Uncle Sam’s yield. It’s a missed opportunity.

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Texas Governor Rick Perry unveiled a “flat tax” proposal on Oct. 25, including a 20 percent individual income tax, with housing, charitable contribution and state income tax exemptions retained for those with incomes up to $500,000 and a $12,500 personal and dependents exemption. Taxpayers would have the option to stay on the present system. The current tax on Social Security payments would be eliminated, as would taxes on dividends and capital gains.

The plan also contemplates reducing the corporate tax to 20 percent and eliminating most loopholes.

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