Rick Perry proposes flat tax plan and corporate tax cut

Texas governor Rick Perry sought to revive his flagging presidential bid on Tuesday by unveiling a proposal to introduce a flat-rate tax of 20%, an idea inspired by the success of one of his rivals, Herman Cain.

"The way to stimulate the economy is not through temporary tax relief or government spending," he said. "It's to stimulate private spending. The flat tax will unleash growth."

But he immediately ran into criticism that his new tax rate was [You must be registered and logged in to see this link.] effectively giving more money to the wealthiest in society and that a proposed cap on spending would require hundreds of billions in cuts, much of it at the expense of welfare programmes.

The 20% rate would be a bonus for many wealthy tax-payers at present facing income and corporate tax rates of 35%.

Perry adopted the broad idea of a flat-rate tax from Cain,[You must be registered and logged in to see this link.] who has gone to the top of the polls in the battle for the Republican nomination, partly because of his championing of an easily-remembered 9-9-9 tax formula: 9% income tax, 9% corporate income tax and 9% sales tax.

Perry avoids the introduction of sales tax, the part of Cain's formula that has attracted the most hostility, and instead opted for 20% on just two taxes, income and corporate.

The governor set out his plan during a speech in South [You must be registered and logged in to see this link.] Carolina, one of the early states to vote on the Republican nominee to take on Barack Obama for the White House next year.

As a southerner and a social conservative Perry expects to do well in a state that has often proved decisive.

Perry followed the speech hours later with a rare press conference at which he produced a more composed performance than in televised debates.

His campaign message was in danger of being overshadowed [You must be registered and logged in to see this link.] by comments published at the weekend and repeated again in a television interview Tuesday morning revisiting the controversy over Barack Obama's birth certificate.

The president appeared to have brought the issue of whether he was born in America to an end earlier this year when he produced his birth certificate.

But in an interview with CNBC, Perry said: "It's a good issue to keep alive. It's fun to poke him a little bit."

Hours later, having been advised that he was distracting attention from his central message on tax, Perry finally closed off the 'birther' line. When asked about it at the press conference, he dismissed the issue. "That is one of biggest distractions going ... We need to be talking about jobs. It is a distraction and Americans do not want to talk about that," he said.

Perry jumped to the top of the polls when he joined the [You must be registered and logged in to see this link.] Republican race in August but several muddled debate appearances have undone that. A CBS News/New York Times poll published Tuesday had him well down the poll in fifth place, on 6%, trailing Cain on 25%, Mitt Romney 21%, Newt Gingrich 10% and Ron Paul 8%.

The governor is planning an advertising blitz to try to recover, and has been beefing up his campaign team, as well as making policy speeches such as today's.

The flat-rate tax was drawn up with help from Steve Forbes, the editor-in-chief of Forbes magazine who sought the Republican nomination in 1996 and 2000 on a flat-rate platform.

One of the attractions of a flat-rate plan is that it simplifies tax returns and, to illustrate the point, Perry held up a postcard size form.

One of the criticisms of Perry's plan is the flat-rate tax will run alongside the present system, giving taxpayers the choice of remaining with the present system or opting for the new. Wealthy tax-payers would almost certainly opt for the 20% rate.