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Perry Backs Radical National Sales Tax Plan To Starve Federal Government

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Most Republicans advocate for flattening and simplifying the code. Few call for a single-rate income tax.

But the Fair Tax is a zombie policy that refuses to die in some quarters of the right. It was advocated most famously and persistently by former Arkansas Governor Mike Huckabee.

A Perry spokesman did not return a request for comment on whether Perry had a substantive or political preference for either policy. Fair Tax is a version of a national retail sales tax of 30 percent, though using sleight-of-hand its supporters claim the rate would be 23 percent. If implemented as envisioned it would eliminate individual and corporate federal income taxes, the estate tax, and the payroll tax.

National sales taxes are highly regressive, so the Fair Tax compensates by tracking monthly household income and disbursing partial rebate checks to the poor and middle class. On paper, it takes in about as much revenue as the federal government does now, but that's because it doesn't subtract this rebate or other associated expenditures from that figure. For instance, as Bruce Bartlett once explained, the Fair Tax applies to government purchases -- in other words, it juices revenue figures by making the government pay a 30 percent surtax on all of its purchases. That higher spending isn't factored in to the Fair Tax.

At 60 percent it might work. At 30 percent (or 23 percent, to grant advocates their premise) it would slash revenues by hundreds of billions of dollars.

But for Perry, that's the point -- it's what he means when he writes about "the basic constitutional functions of the federal government." He envisions a federal government that's highly circumscribed. The book is a root-and-branch critique of post-New Deal America, from which Perry calls for a "renaissance" -- to a government that eschews direct services like Medicare and Social Security (programs he says are Constitutionally dubious) and provides mainly for the national defense.

But the government would likely have to be downsized before either of those tax reforms were implemented. Currently, the Treasury collects less revenue as a percent of GDP than it has at any time since the 1950s, and yet its obligations haven't shrunk. Without consensus on these massive cuts, his tax reforms would dramatically hasten a fiscal crisis.

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About The Author

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Brian Beutler is TPM's senior congressional reporter. Since 2009, he's led coverage of health care reform, Wall Street reform, taxes, the GOP budget, the government shutdown fight and the debt limit fight. He can be reached at brian@talkingpointsmemo.com