October 26, 2011
The Washington Post left readers with the impression that Governor Perry’s flat tax proposal would give people the option of staying under the current tax code. It favorably cited a Heritage Foundation analyst comment that:
“it will be difficult for analysts to accurately predict what its economic and fiscal impact would be.”
Actually, it should not be very difficult to project the economic and fiscal impact of the plan.
If people are given the option of paying $2 for a gallon of gas or $4 we would usually assume that they would opt to pay $2. Undoubtedly there will be some people who would make mistakes under Governor Perry’s plan and end up paying more in taxes than necessary, but presumably most people will get it right and the ones who get it wrong are not likely to be off by much.
As the NYT showed, an analyst of the plan by the Tax Policy Center of the Urban Institute and the Brooking Institution showed that the flat tax would imply a substantial tax increase for most low and middle-income households. These people would presumably keep paying tax at their current rate. However, the Perry plan would provide large reductions in taxes for the highest income taxpayers. Undoubtedly these people, all of whom have professional tax preparers, would take advantage of the large tax cut offered under the Perry plan.
It is a very simple exercise to project the revenue from a tax plan that is likely to leave the tax bill of the bottom 80 percent little changed and provide large tax cuts to top 20 percent and especially the top 1 percent. The result is a large fall in revenue and a big increase in the deficit. The Post misled its readers by implying otherwise.
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