Retirement Income Journal
The information forum of the decumulation industry.

Governor Rick Perry has proposed major changes to the federal tax code as part of his recently released budget plan, "Cut, Balance, and Grow." The Perry plan would retain the existing structure of the current individual income tax, but allow taxpayers the option of paying tax under an alternative system characterized by a single 20 percent tax rate.

A preliminary analysis of the Perry plan by the Tax Policy Center, based on information posted on the campaign website, public statements by Mr. Perry and his staff, and details contained in an analysis performed by John Dunham Associates (JDA) released by the campaign.

Description of Plan
Governor Perry’s individual “flat tax” proposal would create an optional alternative tax system with a single 20 percent tax rate, which effectively operates as an “alternative maximum tax.” The tax would apply to an income base similar to that in current law, with four major modifications:

1) Long-term capital gains, qualified dividends, and social security benefits would not be taxable

2) Taxpayers could claim a standard exemption of $12,500 for each individual and dependent

3) Taxpayers could continue to claim deductions for mortgage interest, charitable contributions, and state/local taxes paid but these deductions would phase out beginning at $500,000 of income

4) All other above-the-line deductions, itemized deductions, and credits would be eliminated