Photo: Courtesy of CNN
It seems like each week another Republican contender throws some revolutionary tax plan into the presidential primary mix, and then it’s all anyone can talk about. This week it was Texas Governor Rick Perry. Last week it was the former Godfather’s pizza CEO Herman Cain.
Now you have to choose between the two (or three, or four, if you’re thinking about Mitt Romney or Ron Paul).
If you’re wondering whether Perry’s flat tax approach or Cain’s 9-9-9 proposal is better and fall in the middle income bracket, it’s a safer bet to go with Perry, according to Andrea Coombes in MarketWatch and the non-partisan Policy Tax centre based in Washington D.C.
Under Perry’s plan, their taxes won’t increase because they can choose between their current tax rate or the 20 per cent flat tax.
The high-income would benefit from the most dramatic cuts, as they also would with Cain’s proposal. Perry would eliminate the estate, dividends, and capital gains taxes, and reduce the top tax rate from 35 per cent down to 20 per cent.
The degree to which the high-income’s taxes would drop depends on several factors because Perry’s plan also gets rid of a lot of deductions and credits afforded under the current system.
Middle-income people will be allowed to maintain their various deductions, including those given for mortgage interest and state and local income taxes.
Lower-income people, for example a family of three earning less than $37,500 per year, would owe no taxes, but also lose some of the tax breaks they currently enjoy like the child tax credit. It would be best for them to stay in the current system we have now.
Although Perry’s plan proves to be pretty good for the pocketbook, the overall outcome will be a sharp slashing of government revenues, according to Tax Policy centre scholar Howard Gleckman.
Cain’s plan, on the other hand, won’t drastically alter revenues, but it would dramatically increase our sales tax. The Tax Policy centre reports the 9-9-9 plan would act as a 25 per cent national tax for most people, and the centre estimates that about 84 per cent of Americans would pay more in taxes overall.
Cain’s proposal calls for a nine per cent sales tax, a nine per cent income tax, and a nine per cent corporate tax. It eliminates the estate, capital-gains and dividends taxes, while raising taxes on the poorest Americans—which is easy because they currently pay nothing at all.
Cain recently said he would carve out tax relief for low-income people.