Recall that Rick Perry’s so-called “flat tax” plan isn’t flat at all, but rather an alternative tax system that would constitute a massive tax cut for the rich. For people above a certain income, his plan would be worth opting into, and for the rest of earners, it would make sense to stay in the current tax system.
The Tax Policy Center has posted data neatly illustrating this bug (or feature, depending on your point of view). Here it is in handy graph form.
Above about $200,000 a year in income, Perry’s plan would be hard to refuse. Once you exceeded that threshold, your effective tax rate would actually drop modestly, falling below people who make less money than you, and more still the richer you get. It would be like codifying the opposite of the Buffett Rule.
That’s true whether you assume the current Bush tax rates and other tax policies remain in effect permanently for the non-rich, or whether they expire, as scheduled by law.
In dollar terms, people with income over $1 million a year would receive, on average, a $637,418 tax cut compared to current law (which assumes the Bush tax cuts expire) and a $495,558 tax cut compared to current policy (which assumes the already-generous Bush tax cuts are extended permanently).
It’s a separate, simple, and extremely generous tax plan — if you’re part of the “one percent.” If you’re not, it won’t necessarily cause your taxes to go up, but it will starve the government of so much revenue that social services you depend on will likely take a huge hit — either that or deficits explode and the country suffers a massive fiscal crisis. Per the Tax Policy Center: “The Perry plan would reduce federal tax revenues dramatically. TPC estimates that on a static basis, the Perry plan would lower federal tax liability by $995 billion in calendar year 2015 compared with current law, roughly a 27 percent cut in total projected revenue. Relative to a current policy baseline, the reduction in liability would be roughly $570 billion in calendar year 2015.”
Brian Beutler
Brian Beutler is TPM's senior congressional reporter. Since 2009, he's led coverage of health care reform, Wall Street reform, taxes, the GOP budget, the government shutdown fight, and the debt limit fight. He can be reached at brian@talkingpointsmemo.com.
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