Texas Governor Rick Perry released his plan for spending reform and altering the American tax code this week. Here are the highlights of the plan, called Cut, Balance and Grow:
- Cut, Balance and Grow gives Americans a choice between the current tax code and a 20% flat rate tax.
- The flat tax plan preserves some deductions for families earning less than $500,000 a year, like those for mortgage interest, charity, and state and local taxes.
- The standard deduction is increased to $12,500.
- Perry estimates that Americans will save up to $483 billion in compliance costs because of the simplified system.
- Cut, Balance and Grow abolishes the estate (a.k.a. death) tax.
- The corporate tax rate is dropped to 20% in Perry’s plan.
- The plan aims to temporarily lower the repatriation tax to 5.25% to encourage American companies to bring home dollars they have kept offshore.
- The plan will make the American tax system a “territorial system” that only taxes in-country incomes.
- The plan eliminates the taxation of Social Security benefits for recipients who are still working.
- The plan eliminates taxes on dividends and long-term capital gains.
On the spending side of the ledger, Perry plans to balance the budget by 2020. He would:
- Cap federal spending at 18% of GDP.
- Ban earmarks.
- Ban bailouts.
- Pass a balanced budget amendment to the U.S. Constitution.
- Freeze federal civilian hiring and salaries until the budget is balanced.
- Put a moratorium on federal regulations and institute an audit of all regulations created since 2008.
- Plan to repeal Obamacare, Section 404 of Sarbanes-Oxley, and Dodd-Frank.
- Stop Congress from raiding the Social Security fund, using the Federal Highway Trust Fund as a model.
- Give young workers the chance to own their Social Security contributions in their own accounts, allowing them to seek a market return, and to pass on the benefits to their heirs.
This plan makes good sense for America.