After telling former pizza magnate Herman Cain — proponent of the 999 tax plan — that he’d be glad to “bump plans with you, brother,” Texas Gov. Rick Perry (R) is set to release his own flat tax plan tomorrow. While many details of the plan are still unknown, it is expected to take similar form to the flat tax pushed by Steve Forbes, CEO of Forbes Media, when he ran for president in 1996. Forbes officially endorsed Perry today and helped draft Perry’s version of the flat tax.
The flat tax proposal will likely fall short of generating the same amount of government revenue as the current tax structure, as most all flat tax plans do. What it will do, however, is provide a huge windfall to wealthy individuals like Forbes, whose net worth is already about $430 million. In fact, Citizens for Tax Justice analyzed the plan Forbes’ proposed in 1995 and found that it would give him a total tax break worth $1.9 billion over 30 years:
Taking Forbes up on his suggestion, Citizens for Tax Justice, a non-partisan research group, has updated its earlier analysis of Forbes’s personal tax savings from his proposed 17% flat tax. CTJ’s new, more “dynamic” analysis looks not only at Forbes’s current annual savings from his flat tax, but also at his long-term tax savings. Over the long term, CTJ estimates that Forbes’s tax savings from his flat tax would total approximately $1.9 billion.
At the time of CTJ’s analysis, Forbes earned about $1.6 million annually, and his flat tax plan would have cut his annual tax liability by more than half. But the bulk of Forbes’ savings would have come from investments., as the Forbes plan exempted interest, dividends, and capital gains from taxation. Meanwhile, the 17 percent flat tax Forbes proposed would have blown a$200 billion hole in the federal budget, and its benefits wouldn’t have been shared by low- and middle-income Americans — two-thirds of its proposed tax reductions would have gone to those earning more than $200,000 a year. In order to avoid adding to the deficit, the Forbes plan would have had to include a massive tax hike on the poor.
Perry’s plan won’t come out until tomorrow, but if it is similar to the Forbes plan, the implications are clear: it will be yet another Republican plan that requires poor and middle-class Americans to shoulder the cost of a humongous tax cutfor the rich.