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Forbes: Why Perry's Right on Taxes

Barter is a cumbersome process, money makes it easier. But if you don't have a standard-- like if you are driving and you don't know what the mile is so you don't know if you are going only 60 mph or 120 mph or 30 mph it just makes life infinitely difficult. The key thing is when you have a stab le measure of value, people do more things people invest more. When people don't invest, when people don't consume, then you know something is artificially blocking it. In this case the Federal government.

Would you opt for Perry's optional flat tax or the current income tax code?

I think everyone 99% would go for a flat tax simply because you can do it in 5 minutes instead of 50 hours of gathering all your papers and all that kind of junk. It makes life infinitely easier. Hong Kong's had a variation of this for years. You can go with a flat rate or you can go with their progressive system with various deductions. You figure it out for yourself. We have a two tier system today with the code and that crazy alternative minimum tax. This way you can do the 15% or 20% or if you want to punish yourself, if you have low self-esteem, you can stick with the old code and go through all that rigmarole.

So you personally would choose the 20% with no deductions versus a higher rate with deductions?

I would choose Perry's or almost anyone else's.

Let's get to spending cuts then. Perry proposes slashing government spending to 18% of GDP that's requiring about $900 billion in annual spending cuts. Where are three places we can cut right now that won't destroy our economy in the short-term?

Well, returning resources to the states. You see it in education. There are a lot of functions in the government that could be easily put back to the state level. Medicaid would be much better run on the state level than Washington having a one size fits all system which is collapsing in of itself. And remember we were at 18%-20% of GDP spending just three or four years ago so it isn't like we are going back to something we did in 1929. You could phase it in within three or four years and it could get back there. Not only because of a little bit of belt tightening or returning things back to the people but also you get a huge boost from growth. As the growth goes up, spending as a proportion of the economy starts to drop.

-- Written by Alix Steel in New York.



>To contact the writer of this article, click here: Alix Steel.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
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