Economist's thoughts on GOP tax plans - WSFA.com Montgomery Alabama news.

Economist's thoughts on GOP tax plans

MONTGOMERY, AL (WSFA) -

A Montgomery economist says he's doesn't think either Texas Governor Rick Perry's or former Godfather's Pizza CEO Herman Cain's tax plans would work if implemented.

Dr. Keivan Deravi is a professor of economics and assistant to the chancellor at Auburn University Montgomery. He consults with the governor and legislative leaders on crafting the state's two budgets, the Education Trust Fund and the General Fund.

"It's really made for the campaign issues" Deravi said of both Perry's 20% optional flat tax proposal and Cain's 9-9-9 idea. "It's not really made for real economic issues that we have."

Under Perry's new proposal, it would give all taxpayers an option of either keeping their same taxes that they already pay or they would have the option of paying a one-time 20% flat tax instead.

Cain, now the frontrunner in the GOP presidential race, has gained much of his momentum on the heels of his 9-9-9 plan which would set corporate income tax, individual income tax, and a national sales tax at 9% each.

Deravi says both ideas would lead to less revenue going toward the federal government and would have to be made up in spending cuts elsewhere in the future.

"What is simple is not necessarily the answer and there's a reason for it to be simple is because it's not well thought and it's not practical" Deravi said. "The 20% flat tax again is very very regressive in nature."

According to Deravi, who's worked at AUM for nearly 30 years, income taxes are not a solution for generating revenue.

Deravi says, "Income should not be taxed. You know it provides disincentives to make more income."

In regard to Cain's plan, Deravi specifically points out that the 9% national sales tax proposal is not necessarily a bad idea. He even referred to it as "fresh." 

"The act of making income doesn't burden society" Deravi says. "It's the act of consumption. That's where the tax should be."

Deravi says that in theory, the people who spend more on things that are common purchases should also in theory pay more in sales taxes. It would be a tax on the purchase, not the individual.

Perry's 20% flat income tax idea Deravi says would not help revenues.

One thing is for certain Deravi says, the federal tax code needs to be scrapped and rewritten.

"Our tax system is what I call a Frankenstein because you know the nose came from somewhere else the ear came from somewhere else, the brain came from somewhere else. Now what we have is a huge ugly product that we can't tackle"

Deravi also says many corporations hire lobbyists in Washington to ensure the tax code stays the same.

He says whoever wins the presidential nomination, that a look at the tax code must be considered.

Copyright 2011 WSFA. All rights reserved.

 

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