Rick Perry to propose a 20% flat tax rate

Rick Perry’s tax plan, which he is to unveil Tuesday in a speech in South Carolina, calls for an optional 20% flat rate, something that the candidate says will allow Americans to “file their taxes on a postcard,” and will spur innovation and job creation.

Perry released details of the plan in an Op-Ed article in the Wall Street Journal.

“By eliminating the dozens of carve-outs that make the current code so incomprehensible, we will renew incentives for entrepreneurial risk-taking and investment that creates jobs, inspires Americans to work hard and forms the foundation of a strong economy,” Perry wrote.

Perry has settled on a flat-tax plan to try to jump-start his flagging campaign, which saw an initial burst of enthusiasm but has since dropped in the polls. It’s a bid to try a steal some of the thunder from Herman Cain, whose 9-9-9 plan has drawn massive interest and sparked a debate over tax policy.

Perry’s plan would slice the corporate tax rate from 35% to 20% and eliminate taxes on dividends and long-term taxable gains. He would drop the corporate rate even further temporarily to encourage repatriation of income from overseas, and would tax companies only for income generated in the United States. Perry also would eliminate the estate tax, a longstanding bane to Republicans, and do away with taxation of Social Security benefits.

The plan would retain deductions for mortgage interest and charitable giving, while increasing the standard deduction for individuals to $12,500.

Under the plan, however, taxpayers apparently would have the option to be taxed under the current system and continue to take advantage of the same tax breaks and loopholes Perry vows to get rid of.

Perry’s plan was attacked by President Obama’s reelection campaign even before details of it were made public. James Kvaal, the Obama campaign’s policy director, argued in a memo that Perry’s plan would increase the tax burden on the middle class, benefit the wealthy and widen the federal deficit.

The Texas governor Tuesday also will call for a cap on federal spending set at 18% of the country’s gross domestic product and will pledge to balance the budget by 2020 — which he concedes will not be easy if his tax plan becomes law. While the plan has yet to be analyzed by experts, it appears highly possible it would generate less revenue for the federal government than the current system.

Perry rival Mitt Romney has come short of supporting a single-rate tax, saying he doesn’t want a plan that would provide tax breaks for the wealthy.