NEIL CAVUTO, HOST: Rick Perry loaded for bear and now in flat-out war with Mitt. Flat tax war that is. The Texas governor unveiling today a simpler tax code he says his front running opponent Mitt Romney is too timid to offer and rising star Herman Cain is too confusing to understand. Not 9-9-9. Take just 20. That is the new flat tax Governor Perry is calling for. Still you don't like a 20 percent income tax rate. The governor says you can opt out.
But he thinks you will want to stay with him. Because his plan abolishes the estate tax. Wipes out tax on social security benefits and eliminates tax on qualified dividend, long term dividends and capital gains, stuff like that. Corporate taxes will be cut to 20 percent as well from 35 percent now. Now the devil is in a lot of the details but Rick Perry thinks the real devil is in the mess of the tax code that we have right now. The GOP presidential candidate joining me right now. Governor, good to have you.
GOV. RICK PERRY (R), PRESIDENTIAL CANDIDATE: It's good to be with you, sir. Thank you. I think that is very good descriptive term. The devil is in the details. It is in the details of the tax code we've got today.
CAVUTO: OK. You stay with this flat tax governor that if you don't like it you don't have to take it. What does that mean? But there will be rival tax systems?
PERRY: Well, basically we give people a choice. There may be some people that have set their business plan in place with the old tax code and, they look at it and say you know what? That's where we really need to stay for whatever reasons. And they can do that. Or somebody can take that piece of paper right there, fill it out, with the deductions that we talk about, 20 percent, send it back in and they're done.
I happen to think there are a lot of Americans that are relishing the day that they can get rid of all the lawyers and the accountants and have a simple, flat tax code with 20 percent tax rate. 12,500 per individual deduction and, just go forward with it. I think Americans are dying to see that type of a simplicity in their tax code. Plus, it's a tax cut for every group out there, no matter with where you are in the stratosphere. You're going to be getting a tax cut.
CAVUTO: Do you worry, though, governor, if you keep even as an option the old tax code as we have it, you're going to get the same criticism Herman Cain has gotten if you have a sales tax? You're just going to be piling it on top of income taxes we have now albeit at lower rates?
PERRY: No, not at all. As a matter of fact, there is not a sales tax in this for one thing. There is not a value-added tax. It's just a straight 20 percent flat tax on personal and corporate side. And so I think the simplicity of this is what Americans are looking for. And the rest of my plan I talked about a host of other things like pulling back all these regulations that is what is really killing the jobs in America today.
PERRY: Obamacare. Getting rid of Sarbanes-Oxley.
CAVUTO: I understand. I will get into that, governor. I just want to be clear on one thing again without belaboring this point of keeping two different tax codes in effect hoping that people, you know, are attracted to yours. What happens to charitable deductions along the way. Mortgage deductions?
PERRY: The charitable deductions stay in place. Mortgage deductions stay in place. Sales and local sales, and local taxes deductions will stay. Those deductions will still there up to 500,000. Above that they go away. But for most of the people out there those deductions that they've had before still going to be there, get rid of the capital gains. Get rid of the death tax. I mean this is simplifying the system greatly.
CAVUTO: Do you think that in the switch to it, governor, that whatever revenue it triggers along the way, most people would agree that tax cuts, down the road do trigger revenues. It's in that interim period that you have to make up for the revenues that are lost, as those tax codes come down, tax rates I should say come down.
What do you do for that and critics of yours are already saying what the governor is proposing is certainly not near term revenue neutral?
PERRY: Well, we have a model that shows this balances the budget by 2020. So eight years down the road we're going to have a balanced budget. Obviously you have a balanced budget amendment to the United States Constitution that passes during that period of time too. Listen, there's going to be some hard choices made out there. There are going to be some hard decisions made.
And if anybody stands up and says, "Listen this is all going to be easy and it is all going to be just smooth, blue sky and smooth sailing it's not." We didn't get into this problem overnight. We're not getting out of it overnight. I guarantee you Americans are looking for somebody who's got the courage to stand up and say here is how you fix our tax system to get it simpler. Here is how you fix these entitlement programs.
Here is how you deal with social security. Making sure that our people that are on social security and fast approaching that it's going to be there for them. But our younger kids give them an option of being able to have a private account. That is what Americans are looking for. They're looking for solutions. They're not looking for somebody to stand up and say everything is going to be fine, everything is going to be easy. Let's just kick the can down the road. They are looking for a leader who will stand up and look them right in the eye like I'm doing right now and saying "Here is how to balance the budget. Here is how to get our tax system fair and flat and simpler." That is what Americans are looking for. Get this country back working.
CAVUTO: Well, you know, governor, your fellow Texan and presidential contest opponent Ron Paul says actually you're not being tough enough. That if you talk about balancing the budget by the year 2020. He says he has a plan to do it by the third year if he became president. This is from Ron Paul earlier today. I want to give you a chance to respond to this.
CAVUTO: Rick Perry, detailing a flat tax plan of his own. This of course comes on the heels of Herman Cain's 9-9-9 campaign but the, Perry plan is said to be an effort to jump-start his campaign, too little, too late. What do you think of that plan of is, what?
REP. RON PAUL (R), PRESIDENTIAL CANDIDATE (ON THE PHONE): Everybody knows my position on taxes. They're too high and I would like to get rid of the income tax. But my plan didn't talk as much about taxes. We talked about spending. Because that's where the problem is. And I think they do this almost to stay away from the difficult choices, how many others have really offered any significant cuts?
CAVUTO: Now what he is saying governor, he is proposing a trillion dollars in spending cuts right up front his first year. Gets the whole thing balanced by his third year. What do you think of that?
PERRY: Well I think, you know everybody has got their own plan but the fact is we make some substantial spending cuts. $100 billion in the first year. I think heads us in the right direction. But it is the spending. Everybody understands it is the spending. And you know, we may argue about, do you do this much spending reduction at first or do that much spending reduction. We know we're one of the places that Mr. Paul's going to talk about cutting and that is in defense.
And I will tell you I'm not ready to put our national defense on the line to that kind of a meat cleaver. So there is obviously places we can cut. You look at Tom Coburn's back in black plan where he talked about I believe $9 trillion worth of cuts. You look at what Paul Ryan is doing on Medicare. There is some great members of the Congress that have some plans that can help us reduce the spending and let me tell you that's what we need to have. But you have to have a president that will stand up and when a bill comes forward that spends more money than we've got, reach in that pocket, pull out that veto pen and use it.
And I'll tell you one thing I vetoed 82 bills my first year as governor of the state of Texas. I'm not afraid to veto bills. And I will do it with this Congress. I'll do it because Americans want a president that will look them in the eye, and tell "Here's the hard choices." But also lay out a plan that shows where we get this country back growing. Moving that offshore money for instance, back over here - 5.25 percent tax rate on that. It will create $360 billion worth of economic impact in year one.
CAVUTO: So you're with some of these blue dog democrats who have been urging the president to do just that, a temporary tax holiday at the very least for that $1.4 to $2 trillion that's kept offshore?
PERRY: Absolutely. I think it makes all the sense in the world. We need to get Americans working. We need the confidence in this country again that we're not going to overtaxed, over regulated.
CAVUTO: But would you say governor would have to do that. I'm sorry, sir. Would you say they have to do that? That in other words, it's just not a free pass that all right I'm going to lower your tax rate but you have to make a commitment to me, that you're going to hire people? What do you say?
PERRY: I basically say that you get a choice, if that's what you're talking about between my flat tax or the staying with the old system. If you're talking about that money that is offshore because I didn't quite catch -
CAVUTO: No, I'm sorry I wasn't clear. What I'm saying is that the blue dog democrats has said to the e corporations we'll give you a tax cut on this money held offshore with no provisos. No quid pro quo. You don't have to, you know, hire people with this money. The president is saying essentially it is dead with me. That I'm not open to giving corporations a big tax break if they don't provide jobs with that. How would a President Perry handle that?
PERRY: Well, I would say bring this money back. We have a president that's more interested in playing class warfare and pitting different groups against each other. I'm for bringing this money back in. I guarantee you it's not creating one job sitting in account somewhere.
CAVUTO: But you wouldn't attach a litmus test to it?
CAVUTO: You wouldn't attach a litmus test to it?
PERRY: Absolutely not. Bring the money back in.
CAVUTO: Fair enough.
PERRY: Bring the money back in. Charge 5.25 percent. That is kind of the prevailing thought process if that is the right amount. And give them one year to bring it back in and create that jobs and create the economic impact. That is what this president is missing.
CAVUTO: All right. Now you mentioned as president you would take out that veto pen if spending got out of control. The criticism of another Texas governor who became president, George Bush, is that he didn't do that. In retrospect do you think that was a huge mistake and of the reasons why people are leery of electing another Texan to the White House?
PERRY: Well, I don't think, you know, there is any leeriness if you will about electing some someone to the White House that lays out their plan. I know what I'm going to of to do. I can't say what happened seven or eight years ago. I'll tell you what I will do. I tell you what I did as a governor of the state of Texas. I vetoed bills. I've signed 65 different bills.
CAVUTO: And he didn't. And he didn't. You say their concern, governor he didn't.
PERRY: Lower tax.
CAVUTO: He didn't. And the concern is, you know, Rick Perry might talk a good game. George Bush talked a similar game running for president, that he would veto runaway spending. Now we know issues came up in his presidency that changed things remarkably. But having said that what is to stop folks listening to this, watching you right now, governor, been promised that, but disappointed by that?
PERRY: Because I've got a record in Texas of doing what I said I would do from the standpoint of spending. $14 plus billion cut in property taxes I signed. Sixty different bills that lowered taxes. First time since World War II Texas spent less money this biennium than they did the previous biennium. And I signed that budget. I don't just talk about it. This isn't rhetoric out of me. I have a record of keeping the spending under control. Taking out the veto pen when it needs to be pulled out and the members of the Texas legislature understand and respect how I govern.
So mine is not about rhetoric, Neil. Mine is about a clear plan of action that I have implemented in the state of Texas. It is the reason THAT we're the number per one economy. People know they will not be overtaxed, over regulated. You get to come to the state of Texas keep more what you work for. It is THE reason we created a million jobs while I've been the governor.