Gov. Perry Unveils 20 Percent Flat Tax Plan: 'Cut, Balance, and Grow

Republican presidential candidate Rick Perry has rolled out his economic plan that includes a flat tax proposal, private retirement accounts for Social Security and a lower corporate tax rate.

The Texas governor on Tuesday outlined a proposal he calls "Cut, Balance and Grow" that is aimed at creating jobs and fixing the struggling economy, voters' top concerns heading into the 2012 election. Perry's plan sets a flat 20 percent income tax rate, but also gives taxpayers the option of sticking with their current rate.

"My plan restores American competitiveness in the global marketplace and provides strong incentives for U.S.-based employers to build new factories and create thousands of jobs here at home," Perry said in an opinion article published online in The Wall Street Journal Monday night.

Perry's plan maintains popular deductions for families making less than $500,000 a year, and eliminate taxes on Social Security benefits.

His plan also drops the corporate tax rate to 20 percent, and eliminates taxes on qualified dividends and long-term capital gains.

Basically, Gov. Perry’s plan will give individuals the option of paying a 20 percent flat-rate income tax. It will also cap federal spending at 18 percent of GDP. Another selling point – the simple 20 percent flat tax will allow Americans to file their taxes on a postcard, saving up to $483 billion in compliance costs, according to Gateway Pundit.

During an interview on CNBC, Perry dismissed accusations that his plan would be a giveaway to the wealthy, saying, "I don't care about that."

In fact, the Obama administration has already rushed to criticize the plan.

"Both the Romney and Perry economic plans embrace a far-right vision for our tax code," wrote James Kvaal, policy director for Obama for America. "They share elements with plans offered by congressional Republicans, which independent economists believe would fail to accelerate job creation now. Both plans would cut taxes on wealth and investment income, shifting the tax burden onto work and wages. Both plans are likely to be costly, driving up the deficit at a time of historic fiscal challenges. And under both plans, the most fortunate Americans would pay less while the middle class would pay a higher share."

Perry said he wants to give business people incentives to invest in their companies and start new ones. He said he rejects "this idea that we've got to have a tax system in this country where you take more away from those that have the ability to create jobs. ... What I'm interested in is getting America working."

The major policy rollout is a critical part of Perry's efforts to right a struggling campaign. And it sets Perry to the right of chief rival Mitt Romney, who wants to make less sweeping changes to the tax code.

"It will be an extremely difficult task exacerbated by the current economic crisis and our need for significant tax cuts to spur growth," Perry said in his Journal article. "But that growth is what will get us to balance, if we are willing to make the hard decisions of cutting."

Perry chose South Carolina, where he announced he was running for president, to unveil the plan. The first-in-the-South primary state is critical to his path to the nomination, though he has fallen in the polls here just as he has dropped nationally.

He also planned a news conference in the state capital, Columbia, and a fundraiser at the home of former South Carolina GOP chairman Katon Dawson, his top South Carolina adviser.

The National Journal had an interesting perspective on the proposed plan:

...the most significant feature of Perry’s plan is his call for a flat tax rate of 20 percent. Taxpayers who don’t want to pay a 20 percent flat income tax, he said, can keep their current rate. Current marginal income tax rates range from 10 percent to 35 percent, depending on taxpayers’ income.

Perry offers several proposals that appear designed to sweeten the offer — and to counter criticism that the flat tax is regressive, taking a proportionally bigger bite from smaller incomes. His plan would preserve popular deductions for mortgage interest and donations to charity for households earning less than $500,000 a year. It would increase the standard deduction to $12,500.

But Perry would eliminate other tax breaks. He argues that a streamed-down tax code (so simple, he says taxpayers can file on a postcard), along with spending cuts and entitlement changes, will stimulate the economy.

The Associated Press contributed to this story.