Perry wants flat tax with some popular deductions

GRAY COURT, S.C. — Republican presidential candidate Rick Perry proposed a sweeping economic plan Tuesday that includes a flat tax proposal, private retirement accounts for Social Security, a lower corporate tax rate and reforms aimed at keeping Medicare solvent.

In a pitch to right-wing conservatives, the Texas governor outlined a proposal he calls "Cut, Balance and Grow" that he says is bolder and more aggressive than what his Republican rivals or President Barack Obama would do.

Republican Presidential candidate, Texas Gov. Rick Perry speaks at the ISO Poly Films plant, Tuesday, in Gray Court, S.C.

"America is under a crushing burden of debt, and the president simply offers larger deficits and the politics of class division," Perry said. "Others simply offer microwaved plans with warmed-over reforms based on current ingredients."

In his speech, Perry outlined a broad plan that would make fundamental changes to the tax code and to the nation's entitlement programs.

After weeks of calling Social Security a "Ponzi scheme," he offered five concrete principles for reforming the program. Perry said he wants to keep benefits intact for current retirees, but allow younger workers to choose to put their income into private accounts instead. He wants to allow states and local governments to opt out of the federal program and invest in different funds instead. And he wants to raise the retirement age for younger workers.

Perry also wants to make major changes to Medicare. His plan would allow Americans to receive a payment or a credit for the purchase of health insurance instead of the direct benefits provided through the current program. He would also gradually raise the Medicare eligibility age and pay people benefits based on their income levels.

Perry's plan sets a flat 20 percent income tax rate, but also gives taxpayers the option of sticking with their current rate. He would also maintain popular deductions for families making less than $500,000 a year and end taxes on Social Security benefits. Perry would end corporate loopholes and lower the general corporate tax rate to 20 percent.

Many elements of Perry's plan are controversial — and others have tried and failed to pass them. President George W. Bush tried to add private accounts to Social Security, but the proposal was widely condemned and did not pass.

"I am not naïve. I know this idea will be attacked," Perry said of the proposal. "Opposition to this simple measure is based on a simple supposition: that the people are not smart enough to look out for themselves."

President Barack Obama's campaign immediately criticized Perry's plan as hurtful to middle class Americans. Perry's plan, Obama spokesman Ben LaBolt said, "would shift a greater share of taxes away from large corporations and the wealthiest onto the backs of the middle class."

The major policy rollout is a critical part of Perry's efforts to right a struggling campaign. It's an opportunity to demonstrate a heft and seriousness that wasn't on display during recent debates.

Distracting from Perry's speech, however, were new comments he made questioning whether Obama was born in the United States, a debunked controversy that centered on Obama's birth certificate.

In an interview with CNBC, Perry said it was "fun to — to poke" at the president on the birth certificate issue. "I don't have a clue about where the president — and what this birth certificate says," Perry said. He was defending an interview he did with Parade magazine, when he said he did not have a "definitive answer" about whether Obama was born in the United States.

Republican strategist Karl Rove ripped Rick Perry for casting doubt on Obama's birth. "You associate yourself with a nutty view like that, and you damage yourself," Rove told Fox News.

But the comments do appeal to a segment of the Republican Party's right wing — a group Perry is clearly trying to court. Perry's policy speech Tuesday sets him distinctly to the right of chief rival Mitt Romney, who wants to make less sweeping changes to the tax code.

The birth certificate comments and policy rollout comes as Perry prepares to air TV ads in Iowa and has hired a roster of experienced national campaign operatives to help him. Perry's chief adviser on the economic plan is former presidential candidate Steve Forbes, who proposed a 17 percent flat tax when he ran for president in 1996.

It's taken Perry about 2 1/2 months to put together an economic policy package, and he's had to attend the series of debates without his detailed proposal. Romney also has attacked him repeatedly for not having a plan. Romney released a 59-point jobs plan in early September, about three months after officially announcing his bid.

Perry's plan would make more dramatic changes than Romney's. While Perry's plan includes the flat tax, Romney would lower rates on corporations and on savings and investment income for middle-class Americans.

Back in 1996, Romney criticized Forbes' flat tax plan as a "tax cut for fat cats." In the CNBC interview, Perry said if Romney renews that criticism, "he ought to look in the mirror, I guess. I consider him to be a fat cat."

Perry chose South Carolina, where he announced he was running for president, to unveil his economic 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.