Rick Perry’s Modified, Optional Flat Tax

Rick Perry’s campaign continued its roll-out of his tax plan with a morning conference call from his economic advisers. Here are the basics, many of which appeared in Perry’s preview op-ed in the Wall Street Journal.

- The current tax code will survive, if people want it, but the can choose to pay a 20 percent flat tax. Why 20 percent? Because even in the new code, the popular mortgage interest and charitable deductions survive for families earning less than $500,000, and the overall rate needs to be higher than previous flat tax plans to make up the difference. But the earned income tax credit, a Milton Friedman brainstorm and one of the big reasons why “47 percent of Americans don’t pay income taxes,” would go away.

- The corporate tax rate is lowered to 20 percent, but for a short period it will fall to 5.25 percent in order to bring corporations back to the states. Almost all loopholes are swept away, with the exception of the R&D tax credit.

- The taxes on Social Security benefits, dividends, and capital gains are all eliminated.

- Perry would cap spending at 18 percent – no details on what this would entail, although congressional Republicans have been trying out versions of it – and put a moratorium on all regulations to allow a “top to bottom review” of all regulations. All regulations will sunset unless Congress approves them again.

The plan largely lives up the “tax the poor” ethos Perry launched his campaign with – people who don’t pay net income taxes now would do so, and wealthy people would pay lower rates. But the lack of a sales tax, which Perry’s advisers stressed again and again, allow them to sound more populist than Herman Cain, with his temporary 9 percent levy on everything you buy.

Cold water time: This is the plan of a candidate who’s crashed to fourth or fifth place in the polls. He’s stepping on his launch by talking about Barack Obama’s birth certificate. All true. But this is big, sweeping, somewhat sloppy reform that says a lot about what the GOP base demands.