House Education Committee Chairman John Kline (R-MN)

The Obama administration this week, as part of its effort to boost the economy without having to rely on congressional action, announced a new plan to help higher education students reduce their loan debt. The administration’s plan would both help students refinance and consolidate their loans, as well as lower the amount that students can be required to pay from 15 percent of their income to 10 percent.

The GOP, after refusing to even consider President Obama’s American Jobs Act in the House and filibustering it in the Senate, has come out against the student loans plan:

HOUSE EDUCATION COMMITTEE CHAIRMAN JOHN KLINE (R-MN): “Sadly, the President has once again chosen to put politics before policy, touting a plan that will do nothing to help the nation’s unemployed workers…What this plan will do instead is encourage more borrowing across the board. That means more debt for students, more debt for taxpayers, and more red ink on the government’s books.”

SEN. MIKE ENZI (R-WY): “While I agree that the rising cost of higher education is a problem that must be urgently addressed, the president has made no effort to work with Congress to find any bipartisan solutions on the student loan debt issue…Because this latest plan was literally drafted behind closed doors, we are left with more questions than answers. The president should stop campaigning and start working with Congress to get the results that the American people expect.”

SEN. LAMAR ALEXANDER (R-TN): Alexander said that “the real way to reduce the burden of student-loan debt is to slow down the growth of tuition and the best way to do that is to ‘reduce health care costs and mandates that are soaking up state dollars that in the past have gone to support public colleges and universities.’”

The right-wing media have also piled on, saying that Obama just wants to “buy some votes of the youth,” or “buy votes at the expense of the American taxpayer.”

It’s not surprising that the GOP is taking a stand against a plan that could lower loan payments for some students by hundreds of dollars per month. After all, Republicans vigorously opposed reforms that stopped billions of federal dollars from going to banks to act as unnecessary middlemen in the federal student loan program, falsely calling the end to flagrant corporate welfare a “Washington takeover” of the student loan industry.

Outstanding student loan debt is expected to hit $1trillion this year, and student debt has already surpassed total credit card debt. Reducing these debt burdens can help create jobs by freeing up money for those with loans to spend elsewhere. But the GOP is still standing against Obama’s plan, for reasons that are entirely unclear, beyond the fact that Obama proposed it

House Republicans took the government to the brink of shutdown last spring by demanding across-the-board budget cuts to many vital programs. Instead of focusing on job creation, as Americans wanted them to, the GOP turned its attention to slashing funds for programs that funded assistance for women and children, local law enforcement, the social safety net, environmental protections, and many other programs they deemed as either too expensive or unnecessary. Worse, when challenged on why they hadn’t made the effort to tackle high unemployment, Republicans insisted that their slash-and-burn budget cuts were meant to create jobs.

Not all of those cuts made it through, but the GOP succeeded in passing massive spending reductions as part of a continuing resolution that kept the government operating. According to a new report from the Center for American Progress’ Scott Lilly, those cuts didn’t result in the job creating boon Republicans insisted would follow. Instead, it has done just the opposite, as those cuts will result in the destruction of roughly 370,000 jobs.

Lilly’s report focuses on three major areas where Republicans insisted on spending cuts: funding for local law enforcement, environmental cleanup of sites where nuclear weapons were disabled and destroyed, and investments into construction, repair, and maintenance of government buildings. Cuts to just those three areas will result in the loss of 90,000 jobs, the report found — 60,000 from direct cuts, and 30,000 additional jobs lost from the secondary impacts of job losses in each community.

And according to Lilly, those three areas weren’t among the worst budget cuts forced through by the Republican House:

“Similar stories could be told about many other budget cuts made in this bill—cuts that resulted in further job losses,” said Scott Lilly, author of the report and Senior Fellow at the Center for American Progress. “All of the various 250 program reductions in the fiscal year 2011 Continuing Resolution probably eliminated more than 370,000 American jobs. The three areas selected for discussion in this paper are in my judgment neither the worst cuts made by the committee from a policy standpoint nor the best. But without a doubt they demonstrate the consequences of slashing government spending in a weak economy.”

According to the report, the $2.5 billion cut to local law enforcement funding could have prevented 36,000 police layoffs nationwide, and similar cuts made to grant programs could have prevented the loss of other state and local government jobs. Crunched by the recession and budget cuts, state and local governments shed more than 200,000 jobs in 2010 alone. Republicans not only cut such funding this spring but have now opposed the American Jobs Act — which included grants to state and local governments for the hiring of teachers, police officers, and firefighters.

Our guest blogger is Seth Hanlon, director of fiscal reform for the Doing What Works project at the Center for American Progress Action Fund.

Billionaire investor Warren Buffett would pay barely any taxes under Perry's 'flat tax.'

Republican presidential candidate Rick Perry released a tax plan this week that he and many media reports called a “20 percent flat tax.” But Perry’s new alternative tax scheme is hardly “flat.”

Leaving aside the fact that it is layered on top of the existing tax code, it establishes not one but two different tax rates: 20 percent for wages, and zero percent for investment income. Because capital gains and dividends would be sheltered from taxes under Perry’s plan, some of the wealthiest Americans would wind up paying nowhere near 20 percent overall.

In fact, billionaire Warren Buffett, who has lamented the fact that he currently pays only 11 percent of his adjusted gross income in federal income taxes, would pay as little as 0.2 percent under Perry’s plan.

Perry’s campaign has helpfully released a sample of the tax form that wealthy people would use under his plan. We’ve taken the liberty of filling out this form for four high-income Americans whose tax information is public: Buffett, Dick Cheney, Barack Obama, and Perry himself. By computing their tax bill using Perry’s sample tax form and the income reported on their most recent actual tax returns, we can calculate just how big a tax cut Perry is proposing to give them.

Here are the results [CLICK ON THE FORMS FOR A LARGER IMAGE]:

BUFFETT: Since the legendary investor receives most of his income from capital gains and dividends, Perry’s plan wipes out most of his already-low tax bill. Buffett reported $62,855,038 in income on last year’s tax return while receiving only $600,000 in compensation from Berkshire Hathaway and the Washington Post Co. (where he is a director). If, aside from that $600,000, all of his other income is from capital gains and dividends, Buffett’s effective federal income tax rate under the Perry plan would be a microscopic 0.2 percent. Buffett’s tax bill would be slashed from the $6.9 million he actually paid in 2010 to $120,000. (Even if Buffett had two-thirds of his income in the form of capital gains and dividends, the average for the richest 400 people in the country, he’d get a $2.7 million tax cut and pay a 6.8 percent effective rate.)

CHENEY: Former Vice President and Halliburton CEO Dick Cheney fares almost as well under Perry’s tax plan. Cheney reported $3.1 million in income on his 2007 tax return (the most recent available), including $2.1 million in dividends and capital gains. Since he’d only pay Perry’s 20 percent tax on his other income, his tax bill would be reduced by about two-thirds — a $387,000 cut. Cheney’s effective rate, which was 19.1 percent in 2007, would be 6.4 percent under Perry’s plan. Of course, this is probably fine with Cheney, since he believes that deficits don’t matter.

OBAMA: Even though President Obama has said that “people like me don’t need another tax cut,” Perry’s plan would give him a big one. The Obamas reported relatively little investment income on their most recent tax return. Still, they would get a $60,000 tax cut from Perry’s plan because they paid more than 20 percent on their other income ($1.8 million from the President’s salary, book sales, and other items). President Obama has proposed the polar opposite of Perry’s plan by suggesting the “Buffett rule,” which would ensure that millionaires can’t pay lower taxes than middle-class families.

PERRY: Perry himself would receive a tax cut of $6,310, based on the income reported on his most recent tax return. That would drop his effective rate from 18.6 percent to 15.8 percent. (If Perry has another large capital gain like he did from selling land in 2007, he’d benefit even more. Had his tax plan been in effect that year, the Perrys would have saved more than $150,000 in taxes on $1.1 million of income and paid a minuscule 3.8 percent effective rate.)

The bottom line: It’s pretty clear from crunching some numbers on his proposed tax form that Perry is not proposing a 20 percent flat tax (nor would a flat tax be a good idea in any event). Far from flat, Perry is proposing an upside-down tax that delivers more tax cuts for the wealthy on top of the ones they’ve already received in recent years — exploding the deficit and shifting a greater share of the tax burden onto the middle class.

Our guest blogger is Laura Pereyra, special assistant for communications at the Center for American Progress Action Fund.

Flickr photo by Saad Akhtar

In a speech yesterday, House Budget Committee Chairman Paul Ryan (R-WI) claimed that President Obama created “class resentment” by calling for slightly higher taxes on the wealthiest Americans. At the same time, Occupy Wall Street protesters continue to speak out in favor of an economy that works for everyone, not just those at the top of the income scale.

Could their frustration be a product of the increasing inequality rather than Obama’s “divisive rhetoric?” Absolutely. In fact, a New York Times/CBS News poll released yesterday found that two-thirds of Americans believe “that wealth should be distributed more evenly in the country.”

As noted by the Half in Ten Campaign’s new report, “Restoring Shared Prosperity: Strategies to Cut Poverty and Expand Economic Growth,” the hourly wage of a typical worker grew from $14.73 in 1973 to $15.96 in 2009, for a raise in real terms (after accounting for inflation) of $1.23 over 36 years. Yes, you read that right. Only $1.23, an 8.4 percent increase over the last 36 years.

Top earners, meanwhile, saw a gain of $12.70 per hour gain (30 percent) over the same time frame. The growing gaps between the wealthy and everyone else could not be more stark.

Even 68 percent of millionaires, according to a survey from the Spectrem Group, agree that the rich should get taxed more. It’s not in the interest of America to have people fall out of the middle class and into an increasing population living in poverty, as the economy continues to suffer through a slow recovery. The middle class is the engine of America’s economic growth.

A report released this week by the Congressional Budget Office found that between 1979 and 2007, income grew 275 percent for the richest one percent of Americans, but by just 18 percent for those at the bottom. The federal government can do something about this — from investing in our infrastructure to improving education. It can help bolster demand and the Half in Ten Campaign offers some good ideas to get us started.

House Budget Committee Chairman Paul Ryan (R-WI) yesterday gave a speech in which he attacked President Obama for sowing “fear and envy” with his “divisive” call for raising taxes on the wealthy by a few percentage points. “He is going from town to town, impugning the motives of Republicans, setting up straw men and scapegoats, and engaging in intellectually lazy arguments, as he tries to build support for punitive tax hikes on job creators,” Ryan said.

Today, Ryan appeared on CNBC to continue his tirade. After Gov. Jack Markell (D-DE) told Ryan, “I thought your speech was very divisive,” Ryan tried to defend himself by claiming that he is “not worried about” those at the top of the income scale:

But this was a speech about taxes, in large part because it is the venue through which they’re using this class warfare rhetoric, which is extremely divisive. This notion that we should tax and redistribute toward prosperity has been tried so many times in so many different countries and it just doesn’t work. We should be focused not on worrying about wealthy people, I’m not worried about them, I’m worried about people who are not wealthy who want to get up, make something of themselves, rise, succeed, create businesses, go to work, and have a life that they want. To me, it is about removing the barriers to upward mobility. This rhetoric and these policies add new barriers toward upward mobility.

Watch it:

Of course, if Ryan isn’t worried about wealthy people, he has a pretty odd way of showing it. After all, the House GOP approved budget that he wrote cuts taxes for those in the top income bracket by ten percentage points and pays for it with a middle-class tax hike.

And that plan is positively tame compared to Ryan’s much-ballyhooed “Roadmap for America’s Future,” which would have raised taxes on a full 90 percent of the population in order to give the richest one percent of Americans an annual tax break of more than $200,000.

Even Ryan’s own constituents have slammed him for defending tax breaks for the wealthy. Instead of facing up to growing income inequality paired with plunging tax rates for the rich, all Ryan can do is promulgate the false talking point that taxing those at the top of the income scale would hurt small business and then claim that others are engaging in class warfare.

Touting “shared sacrifice,” New Jersey Gov. Chris Christie (R) slashed $3 billion from the state budget in his first two years, taking out half of the legal aid for poor New Jerseyans, shutting down a hospital for the mentally ill, closing health clinics for thousands of low-income women, and putting 4,000 police officers out of a job. Now, Christie’s cuts are leaving as many as 15,000 low-income children without “a structured and supervised after school environment” supported by the non-profit agency NJ After 3. When Christie completely eliminated funding for the agency, NJ After 3 had to pull the plug:

State funding had dwindled from a high of $15 million in 2007 to $3 million last year. Christie eliminated funding for the program in the budget that took effect July 1.

Democrats tried to restore the money, but Christie vetoed the budget they sent him.

Founding President Mark Valli said the organization could not raise enough private money to keep the program going once the state bowed out.

As he once told a legislative Budget committee, “if Bill Gates pulled his money out of Microsoft — if your largest investor pulls out — others will wait and see. Private investors needed to see a state commitment.”

As state Assembly Speaker Sheila Oliver (D) noted, “this program has kept children safe and away from gangs and other ill-advised activities” and has “improved student achievement” while helping working families.

Christie tried to justify the elimination as a consequence of “difficult times. “We had to make a lot of very difficult decisions and I think programs like that that can be funded through private funds should be encouraged to do so during very difficult, tough economic times,” Christie said. “That may not have been a choice that I would have otherwise made if we weren’t confronted with the difficult times we’re confronted with, but we are, and so I have to make a lot of very difficult decisions.”

But Christie’s decision to protect the state’s wealthy seems to have been very easy. Last year, the state legislature passed a tax on millionaires that would help alleviate the “difficult times” Christie faces. By agreeing to a millionaire’s tax, Christie could entirely reverse his education cuts that were so severe they were ruled unconstitutional. However, Christie vetoed the tax — twice. Christie’s decision to make New Jersey’s most vulnerable face the music while protecting New Jersey’s wealthiest is not a reflection of “difficult times,” it’s a reflection of his terrible priorities.

House Ways and Means Committee Chairman Dave Camp (R-MI)

House Ways and Means Committee Chairman David Camp (R-MI) today released his long-promised plan to overhaul the country’s corporate tax code. As he’s been hinting, the plan not only cuts the corporate income tax rate from 35 percent to 25 percent, but also implements what’s known as a “territorial system,” which exempts U.S. corporations from paying taxes on money they earn overseas.

Currently, U.S. corporations pay to the Treasury the difference between the tax rate of the country in which they earn money and the U.S. rate. (So money earned in a country where the rate is 25 percent would require a corporation to pay 10 percent — the difference between 35 percent and 25 percent — to the U.S.) However, corporations are allowed to defer paying their U.S. share of taxes until the bring the money back to the U.S., giving them every incentive to shift and keep money (and jobs) offshore.

Instead of fixing this problem, Camp’s plan to shift to a territorial system, as Citizens for Tax Justice explained, will make it even worse:

First, [under a territorial system] corporations would have a greater incentive to engage in profit-shifting, meaning practices used to disguise U.S. profits as foreign profits. A common example is the manipulation of transfer pricing to shift corporate profits into tax havens (countries that do not tax, or that barely tax, certain types of profits).

Second, corporations would have a greater incentive to shift actual operations — and jobs — to other countries.

Our current system already encourages these practices because U.S. corporations are allowed to “defer” their U.S. taxes on their offshore profits. But the incentives would be even greater under a territorial system, in which corporations would NEVER pay U.S. taxes on their offshore profits.

Camp said today during an interview that “the rest of the world has gone to a lower corporate rate and a territorial system of taxation. So our employers are really at a competitive disadvantage when they try to do business around the world.” However, governments with territorial systems are “having tremendous problems enforcing their existing international corporate tax rules, particularly the transfer pricing rules.” It’s such a problem, in fact, that “the European Union is considering moving away from the territorial system for determining how corporate profits are allocated among its member states.”

Camp has already proven that he is not concerned with actually having corporations pay taxes, saying that corporate tax dodging is all the more reason to cut the corporate tax rate. But U.S. corporations already pay the second-lowest taxes in the developed world and are sitting on record amounts of cash, so there’s little reason to slash their taxes any further.

A leading Republican Senate candidate broke with her party on the issue of labor rights at a GOP conference late last week. Former Hawaii Gov. Linda Lingle (R), running for Senate in 2012, told ThinkProgress in an interview that she opposes her party’s support for right to work laws, particularly the proposal from leading presidential candidates Mitt Romney and Rick Perry to enact national right to work legislation:

KEYES: There’s been a push, particularly among the leading presidential contenders of the Republican Party, in favor of a national right to work law. [...] Where do you come down on the issue?

LINGLE: I think I’d put that in the category that it’s up to the individual state. It’s not something I supported at home and wouldn’t feel as important part of a platform for a candidate such as myself.

Listen to it:

Lingle is right to oppose right to work laws, both at the national level and for states as well. Studies have shown that while right to work laws provide no discernible boost to economic growth, they do act as a punitive measure towards unions. Also known as “right to work for less,” such laws would drive down wages, union membership, and erode health and safety regulations.

Lingle’s bid to become just the second Republican senator from Hawaii (and first since 1977) will no doubt continue to be complicated by the Republican Party’s hard right shift over the past few years. Though Lingle distanced herself from GOP support for right to work laws, she embraced her party’s orthodoxy on protecting the wealthy, telling ThinkProgress that she could “never” support a tax on millionaires.

Our guest blogger is Elon Green, a freelance writer living in Brooklyn.

This week, in an attempt to boost the economy without having to deal with Congress, the Obama administration announced an overhaul of its mortgage refinancing program known as HARP. The changes will allow more people to take advantage of low interest rates, freeing up more money for them to spend elsewhere.

As we noted yesterday, this idea is supported by 2012 GOP presidential hopeful Mitt Romney’s top economic adviser, Columbia University’s Glenn Hubbard. Hubbard called Obama’s refinancing plan “a big deal.” “It looks like a good plan; I’m glad they’re doing it,” he said. And as it turns out, Romney himself supported a refinancing plan when President Bush announced one in 2007.

In late August 2007, as the subprime mortgage crisis built up, Bush introduced an initiative overseen by the Federal Housing Authority to “help struggling homeowners find a way to refinance” and stem foreclosures. According to Bush, while it was “not the government’s job to bail out speculators,” there were a lot of homeowners “who could get through this difficult time with a little flexibility from their lenders or a little help from their government.”

A week later, during an interview with Hugh Hewitt, Romney professed no concerns about the program:

Well, the President has taken action that should calm a good portion of the market, which is he said look, these people who borrowed money from the sub-prime world with these reset provisions, where the payments go up in later months, and they were told by their mortgage banker in many cases don’t worry about that, we’ll refinance it when that time comes, well, now the mortgage banker’s gone, they can’t refinance it. And so he’s saying, the President’s saying let’s have the FHA refinance these mortgages. It’s not a bailout, but it is a setting which gives people stability, and will calm the markets to a certain degree.

In an interview last week with the Las Vegas Review Journal, Mitt Romney opined that the Obama administration has no right to provide assistance to homeowners facing foreclosure, saying that the foreclosure process ought to “run its course and hit the bottom.

However, he did add, “I think the idea of helping people refinance homes to stay in them is one that’s worth further consideration.” So given his prior support for the idea, is Romney on board with the administration’s effort?

Republican lawmakers have been raking President Obama over the coals due to what they call a “tsunami” of new government regulations. “Business owners are reluctant to create jobs today if they’re going to need to pay more tomorrow to comply with onerous new regulations,” said Sen. Susan Collins (R-ME). Obama’s “excessive regulations that unnecessarily increase costs” just “make it harder for our economy to create jobs,” said House Speaker John Boehner (R-OH).

As with most GOP talking points, the facts tell a different story. A Bloomberg analysis of regulations reveals that Obama has approved fewer regulations than President George W. Bush “at this same point in their tenures, and the estimated costs of those rules haven’t reached the annual peak set in fiscal 1992 under Bush’s father.” Indeed, the record for the most expensive regulations still belongs to the GOP:

Obama’s White House approved 613 federal rules during the first 33 months of his term, 4.7 percent fewer than the 643 cleared by President George W. Bush’s administration in the same time frame, according to an Office of Management and Budget statistical database reviewed by Bloomberg. [...]

In the last 12 months through the end of September, the cost range of new regulations is estimated to be $8 billion to $9 billion, a decrease from 2010, according to non-partisan Government Accountability Office reports analyzed by Bloomberg…The record [cost of regulations] came in 1992 under George H.W. Bush when that total hit $20.9 billion in current dollars. In the last year of Ronald Reagan’s term it was $16 billion in today’s dollars.

We certainly don’t remember Republicans crying about the “excessive” Bush regulations.

More of Obama’s regulations may cost more than $100 million as compared to previous administrations. But many of them help prevent outcomes that would cost exponentially more. For instance, the Department of Interior’s new controls on deep-water oil drilling may cost the industry $180 million, but one oil spill like that caused by Deepwater Horizon could cost the industry $16.3 billion. Some of the administration’s rules, like those governing coal ash, will actually help create thousands of jobs.

The impact of these regulations on small businesses is incredibly minimal. In fact, of the 10,361 mass layoffs last year, only 61 were attributed to regulations. When McClatchy asked small business owners why they have been hesitant to hire, “none of the business owners complained about regulation in their particular industries, and most seemed to welcome it.”

A new report from the Congressional Budget Office released Tuesday added to the evidence that the income gap between the top American income earners and the middle- and lower-classes continues to grow, as the top one percent saw its average after-tax income grow by 275 percent between 1979 and 2007. During the same time period, it grew just 18 percent for the bottom 20 percent, resulting in a “substantially more unequal” distribution of wealth than there was three decades ago.

That feeds the core message of inequality that has driven the 99 Percent Movement protests, now in their second month in New York City and gaining steam in cities across the country. And while Republicans continue to either dismiss or pay lip service to the protests and the changes they seek, a new poll from the New York Times and CBS has found that Americans not only view the protests positively but also support a more equal distribution of wealth and higher taxes on top earners while opposing corporate tax breaks that have been protected by the GOP:

Almost half of the public thinks the sentiment at the root of the Occupy movement generally reflects the views of most Americans.

With nearly all Americans remaining fearful that the economy is stagnating or deteriorating further, two-thirds of the public said that wealth should be distributed more evenly in the country. Seven in 10 Americans think the policies of Congressional Republicans favor the rich. Two-thirds object to tax cuts for corporations and a similar number prefer increasing income taxes on millionaires.

It’s no wonder 70 percent of Americans think Congressional Republicans favor the rich, as the GOP continues to either ignore the problems of the middle- and lower-classes or directly assault the programs that help them most. Even though the top income earners have seen their tax rates halved over the last decade, Republicans continue to oppose efforts to raise their taxes. Meanwhile, they have taken an axe to the federal budget, proposing to cut programs like Pell Grants, assistance for women and children, and foreclosure prevention, while preserving the very corporate tax breaks the NYT/CBS poll shows two-thirds of Americans oppose.

The same poll found that Congressional approval has slipped to another new all-time low, with just 9 percent of voters approving of the job Congress is doing. That should be a clear message to Republicans who continue to gut vital programs and block proposals that have popular support, but judging by their response to previous polls showing similar results, it won’t be.

Our guest blogger is Michael Linden, director of tax and budget policy at the Center for American Progress Action Fund.

Yesterday, 2012 GOP presidential candidate Rick Perry released an outline of his tax and budget proposals. In brief, Perry would allow people to opt in to a 20 percent tax rate, with no deductions except for mortgage interest, charitable donations, state, and local taxes and a standard exemption. Perry’s alternative tax would also entirely exempt capital gains and dividends from taxation.

Perry is touting this as a simple, flat, and fiscally responsible tax system. But none of those things are true. What Perry is actually proposing is a separate tax system for rich people, but absolutely no reforms for anyone else. Here are the three things you need to know about Perry’s tax and budget plan.

1. It’s not simple: Perry complains loudly that the current tax code is too complicated. He points out that the code contains over 3 million words! So how many of those words would Perry’s reforms eliminate? Not a one. That’s because, for all the talk of simplification, Perry’s plan doesn’t reform the tax code, it just adds a second layer on top of the existing system. Under the Perry tax code, most Americans will actually have to do their taxes twice: first under the old system, and then again under Perry’s, then they’ll pay under whichever one results in a lower tax bill. That means no one will get a tax increase, but it also means that Perry’s claim of radical simplification is complete nonsense.

2. It wouldn’t come close to balancing the budget: Perry calls for a balanced budget amendment to the U.S. constitution, but doesn’t appear to have done the math on his own plan to see if what he’s proposed would fit the bill. On the spending side, Perry says that he’d cap all federal spending at 18 percent of GDP, a level of spending the U.S. hasn’t had since 1960. Just as a point of comparison, the House Republican budget — the one that slashes Medicaid, abolishes Medicare as we know it, guts food stamps and child care, and dramatically curtails investments in education, transportation, scientific research — doesn’t even get spending down close to 18 percent of GDP until 2040. And, of course, Perry doesn’t say what he’d cut to get there.

But even if he did, it still wouldn’t be enough. That’s because his tax plan is sure to raise far less than 18 percent of GDP, and you don’t even need a complicated tax model to understand why. Perry’s plan is to let people choose between the current tax code and Perry’s new 20 percent rate. Of course, people will choose the one that produces the lower tax bill. Under normal economic conditions, the current tax code only generates about 18 percent of GDP in revenue. So unless Perry’s alternative 20 percent rate wouldn’t give anyone a tax cut, then his plan will lose revenue.

3. It would deliver a huge tax cut to the very wealthy: Perry’s plan to exempt capital gains and dividends from any taxation means that most extremely wealthy people — who get most of their income from those sources — will be able to get away with extremely low tax rates. In 2007, for example, nearly 75 percent of the income among the wealthiest 400 taxpayers came from capital gains and dividends. Even if they paid Perry’s 20 percent rate on every penny of the rest of their income, they’d still end up with an overall effective tax rate of just 5 percent — lower than what someone making between $50,000 and $75,000 currently pays. For the average taxpayer in this illustrious group, that would amount to a tax cut of about $40 million. Of course, the rest of American households, the ones without massive investment income, won’t benefit at all from Perry’s new alternative tax code for rich people.