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Republicans Go Big With New Tax Structures, but Status Quo Could Stifle Simplicity

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September 22: Republican candidates gather prior to a debate in Orlando, Fla.AP

With a sputtering economy and new poll showing Americans increasingly skeptical about the American Dream, "going big" on new tax policies to fix the federal government has captured the public's imagination, if not the enthusiasm of tax analysts.

But whether it's the national sales tax proposed by Republican presidential candidate Herman Cain as part of his 9-9-9 plan, or a new proposal on a flat tax to be offered by Texas Gov. Rick Perry, the challenge is determining whether the ideas are more than just new but actually doable.

"I would not argue that we need to do some overhaul" of federal tax policy, said Joan Wagnon, executive vice president of FedTax.net and a former secretary of revenue for the state of Kansas. "If you have a dramatic change in the tax structure at the federal level it's going to upset the apple cart in every single state in one way or other, so it's a tsunami.”

Publisher Steve Forbes, one of Perry's key supporters for the 2012 Republican nomination, promises the proposed flat tax will satisfy all comers.

"A very low rate and generous exemptions for adults for children," Forbes told Fox News, describing the basics of Perry's plan. "You have to make a real sum of money before the tax kicks in. ... Middle income people are not going to pay more and they are going to save huge amounts of money."

Forbes told Fox News that the plan will have a lower corporate tax, no national sales tax, as Cain's plan proposes, and no Social Security tax. He did not indicate the rate of the tax, which as a prior presidential candidate he proposed at 17 percent, but Forbes said it would be a "very low number." Sources told Fox News on Monday that the plan will be an optional 20 percent flat income tax with a $12,500 deduction per individual per household.

It's a big promise, and one that most analysts say is hard to make because the impact of such a massive change to the tax code is an unknown.

"You look at economic projections and you estimate how much it's going to fall off or grow and you're lucky if you miss it by only 1 percent," Wagnon said of traditional tax analysis. But a "wild economic swing" -- or distortion in the "tax gap" of as little as 2 to 3 percent -- can really hurt.

"The trickiest question" of any proposal is whether "you are going to be able to replace all of the income tax" and make up the same amount of revenue, she said. "It's impossible to know."

In any case, that’s the goal for Cain, who is proposing a 9 percent corporate tax, a 9 percent income tax and a 9 percent national sales tax. Modifying his plan last week to include "opportunity zones" to allow exemptions for people in high poverty and unemployment areas, Cain said critics are starting with the "wrong assumptions" when they say it won't bring in the same amount of money as the current federal system -- about $2.2 trillion annually.

But that’s exactly the point, say skeptics, arguing that assumptions are the bases for all tax plans.

Forbes argued that a flat tax gets rid of the billions of hours in paperwork, and possibly the millions of jobs that go with tax filings. Without changes to the code, he noted, the Tax Foundation estimates that by 2015, $483 billion alone will be spent on trying to interpret and understand the code.

"You put something like the Perry plan in place, that is several hundred billions in savings off the bat, that's huge," he said.

Matt Schlapp, a principal with Cove Strategies and former White House political director for George H.W. Bush, said that it's unlikely any streamlined tax structure would change the way Washington does business.

"You're still going to have a white building with lawyers and accountants. They're still going to do audits and there's still going to be complexity to it," he told FoxNews.com.

But Schlapp said the flatter system is about lowering the rate and widening the base.

The question is really whether people "would actually do more business activity if they thought that they wouldn't be taxed so much," he said. "The concept of making it simpler is actually good for business and good for families. ... If simplification encourages more people to do things, I think you're going to get more revenue. That's the Reagan thing, right?"

Ronald Reagan’s vision is also the selling point Rep. Michele Bachmann is using. The Minnesota Republican and 2012 presidential candidate said flattening taxes simplifies and creates growth.

"As a former tax lawyer, what I want to do is abolish the United States tax code and have very flat tax rates that are very simple, that are the same for all Americans and for businesses across the United States, too. So, mine is a very simple, very fair flat tax that abolishes the current tax code," she told "Fox News Sunday."

Not to be outdone, former House Speaker Newt Gingrich also has said he supports a 15 percent or less flat tax with limited deductions or the option of letting people pay according to the current code.

Proponents of the flat tax argue that a uniform rate will improve the U.S. economy because it will increase take-home wages, in essence incentivizing work. Lower taxes, they claim, will also encourage entrepreneurship.

But a flat income tax currently exists in several states, including Colorado, Illinois, Indiana, Massachusetts, Michigan, Pennsylvania and Utah, and collectively, their economic fortunes are no more or less worse than the national average. All have debt, and Illinois in particular, with a 3 percent flat income tax, has the worst financial situation in the entire union, with $120 billion in debt, according to the National Conference of State Legislatures.

The odds are low, however, that a flat tax or a national sales tax could become law, Schlapp said, because the Senate would have to be filibuster-proof, and Congress would have to be resistant to the whims of lobbyists.

That gridlock is part of what has led Americans to conclude that the American Dream may be over. A new poll by The Hill newspaper released Monday found 69 percent of respondents say the country is "in decline," while 57 percent predict today's young people will not live a better life than their parents.

But Cain's and other proposals have their fans for one simple reason -- they go back to basics.

"We want simplification, we want change, we don't want tweaking around the edges," Jack Welch, former head of General Electric, said on NBC's "Meet the Press."