Rick Perry has issued an economic plan that has a large tax cut as its centerpiece. The tax cut seems to have been designed so as to enable Perry to say that his proposal is a “flat tax” while also avoiding one of the political disadvantages of the flat tax: the fact that most versions of it would increase tax payments for many millions of people. Perry’s plan holds taxpayers harmless by letting them choose whether to file under the new 20 percent flat tax or the current system.
That flat tax would, like the current system, allow deductions for mortgage interest, charitable contributions, and state and local taxes. That last feature is disappointing: It means that under Perry’s plan, Texans would continue to subsidize the political mistakes of Illinois voters. But the flat tax is in other respects structured well. It eliminates the present system’s bias against saving. It also includes generous personal exemptions that partly offset the current bias against parents.
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