Flat-tax a gamble for Perry, Cain?
posted at 10:05 am on October 21, 2011 by Ed Morrissey
Rick Perry will roll out his new plan for tax reform that adopts the flat tax, a concept most associated with Steve Forbes’ presidential runs in the 1990s and still a favorite among fiscal conservatives. Not surprisingly, Forbes himself believes that this will shake up the presidential race and breathe new life into Perry’s campaign:
Steve Forbes, whose flat tax plan helped make him an unlikely contender for the Republican presidential nomination 15 years ago, is praising a new version of the idea from Rick Perry. And Forbes, who says he helped devise Perry’s plan, left little doubt that he’ll formally back the Texas governor before long.
In an interview with Yahoo News, Forbes called Perry’s proposal,announced in a speech Wednesday, “the most exciting tax plan since Reagan’s,” in 1980.
Asked whether that included his own 1996 plan, Forbes said it did, because unlike him in 1996, when he fell short of upsetting front-runner Bob Dole, Perry “is going to win.”
The Washington Post isn’t so sure. They call the reliance on a flat tax by both Perry and Herman Cain “politically treacherous,” and that it tends to “flame out” presidential campaigns much like it did with Forbes, Phil Gramm, and even Democratic hopeful Jerry Brown:
The flat tax is appealing at first to voters for its simplicity, but the very thing that makes it popular also makes it politically treacherous.
The allure of the flat tax is that it promises to wipe clean the complicated tax code. But it does this by throwing out some popular tax deductions, including breaks for mortgage interest payments, charitable giving and employer-paid health care.
The details of each flat-tax proposal differ — the overall rate, whether some low-income families would be exempt and which deductions might be spared on the chopping block. But experts say they invariably increase taxes on lower-income households and cut them for the rich, a potentially dicey proposition for voters worried about the country’s decades-long trend of growing income inequality.
There’s a whole lot of mythmaking in this passage, not the least of which is the supposed “growing income inequality,” which economist James Pethokoukis unravels at The American. Also, Herman Cain’s reliance on a flat tax is transitional, not permanent, as his web site clearly states. It’s Phase I of a two-phase plan; the second phase is the Fair Tax, which would eliminate the income tax altogether, flat or not.
Lastly, this analysis assumes that Forbes, Gramm, and Brown were on a trajectory to victory that only got interrupted by their adoption of the Flat Tax. That’s simply absurd. Forbes had no prior electoral office experience, and was very much a long shot — very similar, in fact, to Herman Cain, except with a vast personal fortune behind him. Gramm, while a favorite of conservatives, was a House member [see update], and no House member has won a major party nomination for President in the primary era, stretching back to the turn of the last century. Brown had been governor but always considered a bit of a fringe character (at least until Californians in their supposed wisdom gave him a third term 28 years after his second term). None of these men won the nomination, but the Flat Tax had little to do with their losses. The best causation case that can be made is that it didn’t give them such a boost as to exceed expectations.
Can Perry get the kind of boost from the Flat Tax that eluded longer-shot candidates? Perhaps. At least Perry will finally have some specifics to offer on the campaign trail and in debates, rather than just platitudes and promises that his plans are in the oven and should be out soon. A flat tax (presumably in both personal and corporate tax codes) would boost the economy through simplifying the compliance process and establishing the kind of certainty that allows for long-term investment.
However, there’s a devil or two in these details as well. In fact, Matt Lewis points out that Cain specifically rejected the flat tax as a permanent reform because of all the exceptions that would have to be added to it. At what level of income should the tax start? The first dollar? Twenty-five thousand? Thirty-six thousand? Do we still include exemptions for children and the disabled? Until we actually see Perry’s plan — on which Forbes is apparently consulting — we can’t score whether it’s better than other proposals in the field.
But even that doesn’t address the real concern about Perry. Even if his plan is outstanding, can we trust Perry to defend it with enough eloquence in a general election? Perry did an awful job of expressing his successes in Texas in the first four debates, and his relatively successful performance this week almost entirely relied on attacking Mitt Romney. Imagine Perry having to explain in a debate with Barack Obama the complicated differences in tax burdens between the current and Flat Tax models for a family of four. If Perry can improve his performance to accomplish that effectively, then the Flat Tax will be a boost to his campaign. If not, then Perry would remain a weak candidate even if he had the best tax reform policy ever created.
Update: My good friend Michael Koolidge reminds me that Gramm was a US Senator by the time he ran for President. That’s just sloppy memory on my part, and I apologize. As I recall, Gramm wasn’t getting any traction in the race with or without the Flat Tax, though.
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