Perry calls for sweeping tax cuts, benefit changes

Those taxpayers would continue to deal with the complex tax code that Perry criticized Tuesday. They would be unable to file their returns on the postcard he waved before cameras to illustrate a flat tax's simplicity.

"Taxes will be cut across all income groups," Perry said in his 24-minute speech. "The net benefit will be more money in Americans' pockets, with greater investment in the private economy instead of the federal government."

Regarding Medicare, Perry would let Americans receive a payment or a credit for the purchase of health insurance instead of the direct benefits provided through the current program. He would gradually raise the eligibility age, and pay benefits based on people's income levels.

Perry acknowledged that many of his proposals, including the private Social Security accounts, are controversial.

"I am not naive. I know this idea will be attacked," he said. "Opposition to this simple measure is based on a simple supposition: that the people are not smart enough to look out for themselves" and invest their retirement savings prudently.

Currently, Social Security payroll taxes paid by workers go directly to today's retirees, with any surplus used for other government programs. Perry said private investment accounts would generate more money for future retirees.

Obama's campaign spokesman Ben LaBolt said Perry's economic plan "would shift a greater share of taxes away from large corporations and the wealthiest onto the backs of the middle class." Some analysts, however, said middle class taxes might be unchanged because the flat tax would be optional.

Perry seemed eager to demonstrate boldness and the ability to present a comprehensive plan on a complex issue. Distracting from his speech, however, were new comments he made questioning whether Obama was born in the United States, a debunked claim kept alive on some conservative Web sites.

In an interview with CNBC, Perry said Monday it was "fun to — to poke" at the president on the birth certificate issue. "I don't have a clue about where the president — and what this birth certificate says," Perry said. He was defending an interview he did with Parade magazine, when he said he did not have a "definitive answer" about whether Obama was born in the United States.

Republican strategist Karl Rove, speaking of Perry on Fox News, said, "You associate yourself with a nutty view like that, and you damage yourself."

Perry's policy speech Tuesday sets him to the right of chief rival Mitt Romney, who wants to make less sweeping changes to the tax code. Perry plans to air TV ads in Iowa and has hired a roster of experienced national campaign operatives to help him. Perry's chief adviser on the economic plan is former presidential candidate Steve Forbes, who proposed a 17 percent flat tax when he ran for president in 1996.

Romney released a 59-point jobs plan in early September. Romney would lower rates on corporations and on savings and investment income for middle-class Americans.

In 1996, Romney criticized Forbes' flat tax plan as a "tax cut for fat cats." In the CNBC interview, Perry said if Romney renews that criticism, "he ought to look in the mirror, I guess. I consider him to be a fat cat."

Perry chose South Carolina, where he announced he was running for president, to unveil his economic plan. The first-in-the-South primary is critical to his path to the nomination, though he has fallen in the polls here just as he has dropped nationally.

He also planned a news conference in the state capital, Columbia, and a fundraiser at the home of former South Carolina GOP chairman Katon Dawson, his top South Carolina adviser.

Charles Babington reported from Washington.