Last night, at yet another Republican presidential candidate debate, Herman Cain was roundly criticized for his simplistic 9-9-9 tax plan by his fellow Republicans. I have to admit, it was a little bizarre (in a "Nixon goes to China" sort of way) to see Republicans disparaging a tax plan for being "regressive." Ron Paul was unafraid to actually use this word, and while several other candidates avoided the term they in essence leveled the same charge: 9-9-9 would wind up increasing taxes on the poor and the middle class. Being Republicans, though, they didn't also speak of the other side of this coin -- the fact that 9-9-9 would lower taxes on the wealthy and really lower them on the ultra-wealthy. But still, it was odd enough to see candidate after candidate speak of their concern for the tax burden of the lower-class and middle-class, since this is usually a Democratic argument. Perhaps all those 99 Percenters out there demonstrating in the streets are getting through to the Republican politicians? Stranger things have happened.
Herman Cain is becoming increasingly boxed in by his 9-9-9 plan. To his credit, he's done his best to push what is unquestionably a bold idea onto the public's consciousness. The problem for him is that every economist who does the math (who is not actually in Herman Cain's employ) concludes pretty much the same thing: this plan would massively raise taxes on the lowest earners, and massively slash taxes on the highest earners.
Rick Santorum even pointed this out in the debate:
[R]eports are now out that 84 percent of Americans would pay more taxes under his plan. That's the analysis. And it makes sense, because when -- when you don't provide a standard deduction, when you don't provide anything for low-income individuals, and you have a sales tax and an income tax and, as Michele said, a value-added tax, which is really what his corporate tax is, we're talking about major increases in taxes on people.
He also doesn't have anything that takes care of the families. I mean, you have -- you have a situation where, under Herman's plan, a single person pays as much in taxes as a -- as a man and a woman raising three children. Ever since we've had the income tax in America, we've always taken advantage of the fact that we want to encourage people to -- to have children and not have to pay more already to raise children, but also pay that additional taxes -- we gave some breaks for families. He doesn't do that in this bill.
And we're going to -- we've seen that happen in Europe. And what happened? Boom, birth rates went into -- into the basement. It's a bad tax for -- again, it's bold. I give him credit for -- for starting a debate, but it's not good for families, and it's not good for low-income....
If you ignore the babbling about low European birth rates, Santorum makes several very good points. Cain's response, as always, revolved around: "Don't look at anybody else's analysis, because they're all wrong -- look at our analysis, where every little girl gets a pony and every little boy gets a dirt bike, and everyone lives happily ever after."
Cain's problem is that it's pretty easy for just about every American to see through his tax plan. Sure, 9-9-9 sounds catchy and all, but upon consideration, most folks realize that what it is going to mean is a large tax hike on them, personally. After all, if a tax plan is "revenue-neutral" (meaning that it'll raise exactly the same amount of money that the current tax policy does), then some people are going to wind up paying more, and some paying less. With a new sales tax on everything, it's going to hit most Americans hard in the pocketbook.
Cain's plan is going to mean everybody who makes money paycheck-to-paycheck is going to be taxed at a rate of 27 percent. Income and payroll taxes will either go up or down (depending on how much money you make) to 9 percent. But businesses aren't going to be paying any income taxes at all. Instead, they're going to have a 9 percent "value-added" tax on all the products they sell -- meaning the consumer will be paying that tax, not the business. On top of this, there will be a new federal sales tax at the cash register of 9 percent. When you go into a business with the 91% of your after-tax income, you will be hit with a new 18 percent tax on everything you want to buy.
Cain is right about calling "foul" on one criticism, but it's not going to do him any good. His fellow candidates have been pointing out that the new federal sales tax will be on top of any state sales tax. Cain tried to use the "apples and oranges" metaphor to point out the silliness of holding his new plan responsible for what each state does (Cain's right -- the federal government has nothing to do with state sales taxes, one way or another). But the charge resonates with the public, because they're all calculating what their new total sales tax will be. In a state with no sales tax, it will be 9 percent. In a state with a 5 percent sales tax, it will be 14 percent. In a state with 8 percent sales tax, everyone will be paying 17 percent. Most of the public hasn't yet figured out that this number will be increased by the "hidden" value-added tax by another 9 percent, but they will eventually.
To put it another way, the calculation will go something like this: right now, I can buy a snazzy new iProduct for $100, plus sales tax in my state of 8 percent -- total cost to me, $108. If Cain's 9-9-9 plan were in existence, the price of the product would be $109 (with the hidden value-added tax added in). I would then have to pay an additional $8.72 in state sales tax and $9.81 in federal sales tax, making the total cost to me $127.53. That is, roughly, an 18 percent tax hike. On every new product I buy.
Which is why 9-9-9 sounds good... right up until you start doing the math. After a few back-of-the-envelope calculations, most Americans are going to conclude that this isn't such a good deal after all. Which is Cain's main problem. Add on to that the report which Santorum referenced which shows that 84 percent of taxpayers will be paying more -- a lot more in some cases -- and Cain's plan really starts to look like a bad deal to 84 percent of the people. It's not exactly the "99 Percent" of the protests, but it's pretty darn close.
At the heart of any debate on a new tax policy lies the cold mathematical fact that some will pay more and some will pay less than they are now under the current system. Given the constraints of being "revenue-neutral" it is an inescapable truth. Cain's insistence that this is not really true is much like the line about Lake Wobegon, "where all the children are above average" -- it makes no sense, mathematically.
Cain is fighting hard to counter this fact, but in the end, he will fail. "I'm going to raise taxes on 84 percent of America!" is not the best way to get elected in this country, and it is definitely not the way to win a Republican primary.
It's hard not to feel a little sorry for Herman Cain. After all, he did come up with a plan -- something not all of his fellow candidates have bothered to do (most of them just offer up straight Republican tax dogma, in one form or another). He probably never expected that his plan would receive the level of scrutiny which it is now getting, both in the media and on the campaign trail. Cain's plan is unquestionably bold -- this is one thing that cannot be argued. It would be a radical change to the way the federal government collects taxes. But its very boldness is also its biggest weakness. Because it is so simplistic, it makes it very easy for most Americans to quickly figure out that they will be paying more in taxes. And while most of the attention from the Tax Policy Center's report has so far rested on the 84 percent figure, just wait until people read a bit deeper into the charts and figure out that the top 0.1 percent of earners will be getting an average tax break of over a million dollars per year.
Of course, I don't expect the Republican candidates to start pointing this out -- but then I didn't expect them to attack Herman Cain over the regressive nature of his 9-9-9 plan, either. As I said, stranger things have happened, so we'll just have to wait and see.
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http://www.washingtonpost.com/blogs/ezra-klein/post/the-9-9-9-plan-in-one-very-long-graph/2011/08/25/gIQAgq8WxL_blog.html
Read it and weep, Cain supporters.
6) This would lower the cost of living.
7) This would help keep jobs here instead of shipping them overseas where tax rates would be higher instead of now since we now have the highest corporate tax rate in the world.
8) It would attract foreign investment due to the lower rate, creating more jobs. More jobs creates more tax revenue.
Initially I was disappointed when HC came out with this plan. Then when I researched it I found it was just the first phase and the end goal was the Fair Tax. You may disagree, and considering the forum, I expect it. But, I think we should tax consumption not production.
If we really want to change the country, tax reform that doesn't favor lobbied corporate interests and favors the people. Capitalism has been hijacked by the mega corporations. It's fundamentals has been compromised government favoritism by our elected officials on both sides of the aisle.
At least he has broached the subject and has got people talking.
1) "everybody who makes money paycheck-to-paycheck is going to be taxed at a rate of 27 percent"
This implies that employees are also paying the business tax. Of course the 9% tax is included into the cost of the product or service, but it's better than the 35% that's currently embedded in the cost of the product and that's not including the employee tax and employer matching for Social Security, Medicare and Medicaid that's currently built into the cost of the product. 15.3% + 35% = 50.3% built into the cost of the product vs. 9% built in. 41.3% less tax.
Also, no corporate loopholes to avoid paying taxes. GE? No more lobbying for special favors.
2) The 9% income tax excludes people below the poverty level.
3) 9% sales tax. Regardless of whether the state you live in has a sales tax or not, You're still paying a federal tax anyway. This one is just a flat tax on consumption, not production. And, that's assuming you don't save any money. You're taxed only on what you spend.
4) This takes power away from the Congress and Executive Branch. That's why some if not most politicians are against it.
1) show your math with links please.(50% built in tax, really?...LOL)
2) where does he say there is ANY exemptions for anyone except those making capital gains?
3) what federal taxes are you counting, or are you double dipping here...please show your work!.
4) which is exactly why there will NEVER be a flat tax with no/limited deductions...it;'s called POWER and politico's from BOTH party's LOVE IT!....you got this one right!
5) more favoible...really....man I need you to show your work here again...can;t just say something and make it true..this aint FOX news you know.
6) OK you believe a national sales/VAT atx will LOWER the cost of living........not sure where you went to school on that one, but....show us your work again please.
7) people ship jobs overseas, because they can make more profit than keeping the jobs here....almost no one creates a job because of some tax change/law. 20 something employer here...I doubt if you've ever had an employee based on this point alone.
8) I'll need you to show your work on this one, but I'll give you a "maybe" on this one.
one out of eight with another maybe true for you at this point....I'll wait for the work and the links
2)On his website.
3) Federal income tax
4)Agree, but hope not. The people need to demand tax reform. Loudly!
5)Go to the Fair Tax website, use the Fair Tax calculator. Learn about the pre-bate. I was pleasantly surprised.
6)Not a VAT tax where value is added at each level of production. I'm strongly against a VAT tax. The Fair Tax is only on the finished product. Not material used to create the product. There is no income tax under the Fair Tax. And no tax on used products. If you eliminate the taxes the business includes in the cost of the product/service, you lower the cost of that product/service. If an employee receives his whole paycheck without any deductions his purchasing power is increased. Go to the website. Read the book. Read the bill in Congress.
7)So by that logic, less corporations would send jobs overseas if we raised taxes? And yes, I have been an employer. Hope to be one again real soon. Working towards it all year.
cont'd
8)If you were starting/expanding or moving your business and you had a choice of a location that had low taxes and a location where you had high taxes, which would you choose?
From your comments it would appear that you haven't researched the Fair Tax. I strongly suggest you do so, especially as an employer. Do you like the current tax system? Do you like cronycapitalism controlling the tax laws? Do you want to pay more taxes? Would you prefer to be taxed on what you produce vs. what you consume?
And a HUGE tax increase for the poorest of Americans.
Every business could buy enough Cadillacs to pay no tax. Every business could set up a dummy financial subsidiary, into which they'd make enough capital investments to pay no tax.
Maybe Mr. Cain means something other than plain English on his web site. If so, people who have a more advanced understanding of what's in the man's head should come forward and clarify this nonsense because as it stands, "9-9-9" is a sham.
Take a business course.
Businesses currently dont pay Tax on "gross Income" There are All kinds of deductions, exemptions and costs of doing business that reduce Gross Income.
That is why companies like GE (whose CEO is an Obama Economic Adviser) pays No corporate Income Tax on Billions in "gross income".
Their effective US corporate tax rate is ZERO. Same with many large Oil Companies.
But the "buy American" part of the plan will spur the economy and create Jobs. If a company bought Cadillacs every year for their senior employers who cares except the share holders of the company? It provides jobs for the auto makers!!
It's going to be similar to the Tea Party calling for spending cuts, then saying "oh wait, I didn't mean Social Security spending cuts". The fact that many will be paying more tax won't really hit home until it hits home.
there is NO "VAT" tax in the plan, and to imply that business (which I have been an owner/employer for over 20 years now) will pass on the 9% tax on the top is wrong.
You are forgetting that Cain dumps all payroll taxes first off. which is a 7.65% savings on all payroll costs. Which depedning on your business payroll costs can be anywhere from 20-80% of your business expenses.
so the 9% tax would be diluted by that much immediately.
second and most important point, is what exactly does Cains"plan" tax?
gross busness income?...doubt it from a republican.
so we'll have deductions (sounds a lot like the current tax code then).
one other note..does cains "plan" tax ALL personal income or does it exclude capital gains, inheritence, interest, dividends, etc?
we liberals should be all for a flat atx plan, but one that uses a standard deduction for all americans ($10K per adult, $5K per child?).
my personal choice would be a 20% flat income tax on ALL income, 3% flat tax on all bussiness revenue,5% national sales tax.
20% X $20,000 = $4000 income tax
5% X $35,000= $1750 Sales tax.
Total taxes = $5750
total same family pays
income tax = $1690
Payroll tax = $3825 ( 7.65% X $50K)
Total = $5515
the sales tax catches those working "under the table"
the flat income tax is the same for ALL income and everyone knows they are getting a fair shake.
the business tax makes up for the loss of the patroll tax that business' pay today.
I do like your flat tax proposal and you are exactly right that businesses already pass along the taxes they pay in the cost of the products or services.
9-9-9 Plan: Summary
Removes all payroll taxes and unites all tax payers
Provides the least incentive to evade taxes and the fewest opportunities to do so
Lifts a $430 billion dead-weight burden on the economy due to compliance, enforcement, collection, etc…
Is fair, simple, efficient, neutral, and transparent
Ends nearly all deductions and special interest favors
Features zero tax on capital gains and repatriated profits
Exports leave our shores without the Business Tax or the Sales Tax embedded in their cost, making them world class competitive. Imports are subject to the same taxation as domestically produced goods, leveling the playing field.
Lowest marginal rates on production
Kills the Death Tax
Allows immediate expensing of business investments
Eliminates double taxation of dividends
Increases capital formation which aids capital availability for small businesses
Increased capital per worker drives productivity and wage growth
Features a platform to launch properly structured Empowerment Zones to renew our inner cities
The pro-growth, pro-job, pro-export economic policies of the 9-9-9 PLAN equals a strong dollar policy
I am not a 100% supporter of the plan but that is the summary.
Sir, you should save such nonsense for your talking points. I am the 53% that pay Federal Income taxes currently.
My taxes are lower under the Cain plan. I don't entirely support it, but jumping to a hysterical 27% mark is disingenuous if not out right lying.
You get the 9% Income tax. Lower then my current income tax by over $6K There is no payroll tax so I get that saving also.
There is then 9% on all New goods I buy. Since it wouldnt be on things like my existing mortgage, and money saved and used goods dont get taxed, I dont pay anything like 9% of my income under that plan.
But your biggest fraud comes in the passing down of the 9% Business Tax. Of course that will be passed down to consumers.
But CURRENTLY a much HIGHER business tax rate is passed down to consumers. Most businesses have a much higher then 9% tax rate and they pass the costs directly onto the consumer already. Lowering their taxes will not result in higher prices!!
Business taxes are ALREADY a tax on the CONSUMER. The tax on the business is embedded in the cost of the product by the corporation. By lowering the rate for most businesses you LOWER not raise the cost at which the business can sell the good or service at a profit.
Lets see, we take more from the greedy evil ones that earn it, and give it to the people that dont work for it!!
But of course the people like the OWS that want their loans repaid etc that they didnt work for, and other material things they didnt work for could be called greedy also right?
And I dont think the 99.9% of Americans who want more out of life then they currently have want to tax themselves at 90% for being Greedy!!
But Your idea is just swell Asiclilpup!! I only wish there were more Progressives with your level of intelligence!!
Take Obama and his big push toward health care. He ended up basically taking the plan the Republicans suggested a long time ago and saying "good enough, we'll start with this", and in the midst of this what all else happened? The economy went to hell, we met the Tea Party, Wikileaks blew up diplomacy, the Arab Spring, Europe, China all caused a plethora of foreign affairs issues. We got into a third war, Guantanamo is still operating, and we still have wars going on that Obama promised to stop.
My point is that Obama has had precious little time to really concentrate on the specific plan he wanted for national health care, much less these other goals he came into office intending (or claiming to intend) to do. Even if the future worked out to where Cain wins the presidency I would put very very slim odds on us ever seeing that 9-9-9 thing implemented for basically the same reason.
This is so true. And so very very scary. Folks like Cain are running to be PRESIDENT of the United States. Yet they toss ot statements and economic plans and simply do not grasp that political consultants and big corporations will hire hundreds of the brightest PhDs in the country to analyze the smallest details to see how it affects them.
Proving how clueless these candidates are about the real world they live in. Running for President, acting like a first time city commission candidate.
The good news is that independent voters are shown how unsuited for office these candidates are.