Perry Plan Might Not Cut Taxes Across the Board, Analysis Finds

(Wall Street Journal) - WASHINGTON -- Republican presidential candidate Rick Perry's tax-overhaul plan might not deliver on his promise to cut taxes "across all income groups," according to a new analysis by the Tax Policy Center.

The Texas governor last week proposed an either-or tax system that allows people to choose between the current system and a new, simplified flat-tax system with a single rate of 20 percent.

Perry's plan on its face would appear to be a no-lose proposition for taxpayers. The doubts arise from an important but little-discussed question: What happens to the Bush-era tax cuts that are now scheduled to expire at the end of 2012?

The analysis by the Tax Policy Center (TPC), a joint venture of the Urban Institute and the Brookings Institution, assumes they will be allowed to expire on schedule under the Perry plan. That means a lot of people would actually face a tax increase compared to current tax levels, even under Perry's seemingly generous tax plan.

Given the adamant opposition to raising taxes among congressional Republicans as well as some Democrats, the idea that Congress would allow the Bush-era rates to expire next year might appear far-fetched.

But TPC officials say this is not just their idea. They say a fiscal analysis commissioned by the Perry camp appears to make the same assumption. The Perry campaign did not immediately respond to a request for comment.

"Our assumption is that he wants people to move to the 20 percent rate, and the way you do that is by making the other alternative worse," said Roberton Williams, an Urban Institute senior fellow.

If Bush-era tax rates expired and Perry's flat-tax alternative became law, the resulting tax increases would be heaviest among moderate-income groups. But they would be felt to a significant degree by households at many income levels, the TPC says.

Almost two thirds -- or 65 percent -- of households with income between $30,000 and $40,000 would see a tax increase; about 29 percent would see a tax cut. Almost one third -- or 30 percent -- of households with incomes between $100,000 and $200,000 also would see an increase; about 69 percent would see a cut.

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