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Which GOP flat tax plan is fairest of them all?

So far, Herman Cain, Rick Perry, and Newt Gingrich have all introduced flat tax plans, which would lead to less revenue and broader spending cuts, analysts say.

By Ron SchererStaff writer / October 26, 2011

Republican presidential candidate Texas Gov. Rick Perry holds up his version of the tax form that American's would fill out as he outlined a broad economic proposal of a flat 20 percent income tax rate during a news conference on Tuesday.

Mary Ann Chastain/AP


Three Republican presidential candidates have put forward flat tax plans so far, but their proposals would not affect US taxpayers in the same way. All, however, would probably lead to less revenue for the US government, analysts say, meaning spending cuts of a sizable magnitude would be in order.

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Businessman Herman Cain’s "9-9-9" plan – a 9 percent income tax, 9 percent sales tax, and 9 percent corporate tax rate – is perhaps best known. But Texas Gov. Rick Perry has now introduced his own vision for a 20 percent flat tax on income and a 20 percent tax rate on corporations. Moreover, Newt Gingrich, now running third or fourth in some polls, has proposed an optional 15 percent flat tax on personal income.

What would these various flat tax plans mean for you? What would they do to the nation’s budget deficit?

Tax experts are struggling to answer those questions, noting that the candidates, except for Mr. Perry, have not spelled out their plans in detail. For example, Mr. Cain has already changed his 9-9-9 proposal to exempt people below the poverty line from paying taxes, but he hasn't said exactly how that will happen.

“Anybody who is in the tax world will say the devil is in the details,” says Michael Graetz, a professor at Columbia University in New York and an expert on taxation. “None of the candidates want to get too detailed.”

Nonetheless, from what is known, here is how some tax experts view the three plans.

The Perry proposal

Governor Perry would allow individuals to choose between his flat 20 percent income tax and the current tax code. As a result, no one would be worse off, says Ted Gayer, a senior fellow at the Brookings Institution in Washington. “You are pretty much capping how much you would pay at 20 percent and anyone paying less than 20 percent would stick to that,” says Mr. Gayer.

However, under the Perry plan, low-income wage earners who currently qualify for the Earned Income Tax Credit and the child care tax credit would lose them. Thus, according to the Urban-Brookings Tax Policy Center, a married couple earning $31,000 a year with two children would get back $5,147 under 2011 tax law. Under Perry’s proposal, they would owe nothing but get nothing back.

“The Perry plan would not help people who currently benefit from refundable tax credits and are mainly moderate to low income,” says Roberton Williams, a senior fellow at the Tax Policy Center.


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