Texas governor Rick Perry has united a divided country with his not-so-flat tax plan: no one really gets it. The left and right corners of the blogosphere began picking it over last night when he outlined its design in an op-ed in the Wall Street Journal. In essence, the plan gives people a choice: pay a 20% flat tax or keep your current income tax rate. "The new flat tax preserves mortgage interest, charitable and state and local tax exemptions for families earning less than $500,000 annually, and it increases the standard deduction to $12,500 for individuals and dependents," he wrote. It also gets rid of the tax on Social Security benefits, qualified dividends, the estate tax and long-term capital gains taxes. What's so difficult to understand about that? Well, quite a lot.
Is this actually more simple? The appeal of a flat tax is to overhaul and simplify the tax plan. But this plan doesn't seem to simplify anything, as taxpayers are allowed to op-out of the plan. Michael Brendan Dougherty at Business Insider notes the confusion. "Perry's tax plan would preserve all the confusion, waste, and market distortions in the current code, and add another layer. The politicians who manage that would get a new tax code to fiddle with as a bonus — one that has little substance beyond massively cutting taxes for the wealthy."