Posted on 10/13/2011 6:16:07 PM PDT by mdittmar
The “9-9-9” plan that has helped propel businessman Herman Cain to the front of the GOP presidential field would stick many poor and middle-class people with a hefty tax increase while cutting taxes for those at the top, tax analysts say.
The plan would do away with much of the current tax code and impose a 9 percent personal income tax, a 9 percent business tax and a 9 percent national sales tax, which tax experts say would mean that low- and middle-income Americans would pay more.
“Right now, we have a strongly progressive income tax. High-income people are paying a higher share of income in taxes than lower-income people,” said Alan Viard, a former Federal Reserve Bank economist and a resident scholar at the right-leaning American Enterprise Institute. “That is a pattern that would be disrupted by adoption of the Cain plan.”
The 9-9-9 plan has helped define Cain’s candidacy. Coupled with his buoyant, plain-spoken style, it has helped transform the former long shot into a front-runner. Cain has touted the proposal’s apparent simplicity and fairness, but he rarely delves into details in person. His campaign website shows that the plan is only a step toward achieving his ultimate goal: to eliminate the Internal Revenue Service after replacing all federal taxes with a national sales tax.
Meanwhile, analysts said the 9-9-9 part of Cain’s vision would place a further burden on those hit hardest by the nation’s economic problems.
Roberton Williams, a senior fellow at the nonpartisan Tax Policy Center, is working on an analysis of Cain’s signature policy proposal. Although the plan’s details remain sketchy, Williams said that it would increase taxes for the poor and middle class, despite Cain’s statements to the contrary.
For starters, about 30 million of the poorest households pay neither income taxes nor Social Security or Medicare levies. “So for them, doing away with the payroll tax doesn’t save anything. And you are adding both a 9 percent sales tax and 9 percent income tax. So we know they will be worse off,” Williams said.
At the top end of the income scale, meanwhile, the opposite would occur, he said. The top 1 percent of earners would get a tax cut under Cain’s plan, Williams said.
The nation’s top income earners have reaped the vast majority of the nation’s income growth over the past quarter century, pushing income inequality in the country to levels not seen since the Depression. The tax plan would exacerbate that gap, Williams said.
“People at the top end pay 20 or 21 percent in income and payroll taxes now,” he said. “This plan zeroes out their payroll tax and suddenly their tax is down to 9 percent. Then, like everyone else, they pay 9 percent on what they spend. But the rich don’t spend everything they earn.”
Many conservatives are leery of creating a national sales tax that could be increased in the future.
“I am extremely uncomfortable with the idea of letting the crowd in Washington have an extra source of revenue,” wrote Dan Mitchell, a senior fellow at the Cato Institute, a libertarian think tank.
Rich Lowrie, an Ohio money manager who is an economic adviser to Cain, said analysts who call the 9-9-9 plan regressive are not privy to details of its provisions to soften the impact of the tax plan on the poor. The critics are “ignoring the empowerment zone piece that we are rolling out next,” Lowrie said in an email. Lowrie did not explain how the empowerment zones would work, but h e said details would be forthcoming.
Cain, a one-time director of the Federal Reserve Bank of Kansas City and former chief executive of Godfather’s Pizza, has said his plan has the twin virtues of fairness and simplicity while creating incentives to boost economic growth and personal wealth.
“It basically empowers the poor rather than being regressive on the poor,” Cain told reporters earlier this week. “I don’t care about rich people. They’re already rich. I want to make it possible for people who are not rich to get rich.”
Cain said his plan would promote increased saving, investment and growth. When the increased growth is factored in, Cain says, the plan would be able to bring in as much money to the federal coffers as the current tax system. Tax analysts have mostly agreed with that assertion, although they cautioned that projections about the plan’s revenue potential are imprecise.
“I cannot promise that the plan is wholly revenue neutral compared to current law,” wrote Edward Kleinbard, a University of Southern California tax expert. “But in fact it should raise a great deal of revenue.”
The tax plan, which Cain has gleefully touted in GOP debates and his public appearances, has helped catapult the former executive to the front of the Republican presidential field, according to a new NBC News/Wall Street Journal poll, as well as a separate survey by the firm Public Policy Polling.
Experts say that adoption of 9-9-9 would mark the most radical federal tax change since the expansion of the income tax in the 1940s. It would upset the vast array of social policy that has been built into the tax code for years by, for example, removing tax breaks that subsidize home purchases and college tuition.
For that reason, many say that its adoption would be highly unlikely, even if Cain were elected president.
Although Cain talks about 9-9-9 as a concise, easy-to-understand plan to reform the sprawling federal tax code, it actually is envisioned as the middle step in moving the nation to a “fair tax” or national sales tax.
The fair tax, which former Arkansas Gov. Mike Huckabee, R, advocated during his 2008 presidential campaign, is viewed by supporters as efficient and transparent and as a way to encourage investment and broaden the tax base while eliminating the need for the IRS.
Opponents say the “fair tax” would discourage consumer spending, the biggest driver of the nation’s economy.
And the 9-9-9 plan that Cain envisions preceding it would be no better, critics said.
“The absence of current law’s package of a standard deduction, personal exemptions, child credit, child care credit and the earned-income tax credit means a huge tax hike for the working poor and a substantial tax increase on the labor income of the middle class,” Kleinbard said.
Staff writers Amy Gardner and Glenn Kessler contributed to this report.
they don't....drug dealers pay no taxes, prostitutes ($1,000 per night or so) pay no taxes, burglars, thieves, con artists (Maydoff), pay no taxes....people working "off the books" pay no taxes...The underground economy in this country has to be extraordinarily large and mostly not taxed. A national sales tax is the only way that these slackers will ever pay their way.
There has to be more effort separating the "unwilling" from the "unable"...right now they are treated as one and the same.
we once revolted against taxation without representation....I think, no I'm certain, that representation without taxation is every bit as bad. You will vote for those who do not tax you and will give to you the monies they taxed other people out of...Pathetic.
Also over 65 or 70 for basically the same reason...we start out in diapers and we all end up in diapers as they say...
Can't say for sure what would eventually happen under Cain's plan at some point far in the future. But I can guarantee you that unless our current system is completely scrapped and replaced with something like Cain's plan, when the 49% who pay no fed taxes goes to 51%, their new majority will hold all the power and will almost certainly begin imposing huge withdrawal fees on our 401(k)s and IRAs (yes, even on the ROTHs).
That of course is the best outcome. Less likely, but far more frightening, is an idea they've already floated: nationalization of our private retirement accounts.
If you insist on clinging current tax code out of fear, then embrace this scenario as your future, because that 49% who pay no fed taxes will soon be the 51%. G-A-M-E O-V-E-R.
Brilliant....and when that overtaxed corporation decided to pull up stakes and move to China to avoid the new higher taxes that required it to raise prices and become non-competetive, you would be screaming that greedy corporations were taking jobs from Americans....re-read your solution...it has been happening in this country for years and it certainly hasn't worked. We have among the highest corporate tax rates in the world and our economy is suffering because of it. CORPORATIONS DON'T PAY TAXES, but they have to artificially raise the price of their products and thereby become noncompetitive. People stop buying their products (see Wal-Mart)and they lay off American workers (see the 12% national unemployment rate)
Who would be out of a job under Cain's plan: nothing to analyze about 9-9-9.
It's so simple they wouldn't be the smartest people in the room during a tax discussion any more.
“Herman Cain’s position on TARP:
On October 20, 2008, Herman Cain wrote, in an article in North Star Writers Group’s Herman Cain column #133, that “Wake up people! Owning a part of the major banks in America is not a bad thing. We could make a profit while solving a problem.””
http://hermancaintarp.com/about-herman-cain/herman-cain-supports-tarp/
The guys a RINO snake oil salesman.
“A sales tax in grossly unfair to the elderly, and the disabled”
Are the “elderly and disabled” exempt from State and local sales taxes now?
Arrggh. The poor, the poor, the poor!! I’m so SICK to death of hearing about how it will be bad for the poor.
We’ve donated some 10 billion to the “poor” over the past 30 years ...where does it get us???
We also are NOW donating billions upon billions to the “elderly” while our younger people look at an extremely bleak future.
We need to do something for this country — for the MAJORITY of the working people who are the strength and future of this country. I’m sorry — every life is worth something, but there will be NO country, NO help for the “poor” OR those on social security if we don’t do something. There will be NO social security, nothing for anyone if we continue on this path.
Liberals can suck it. And the “poor” — and I mean the ones who can walk, talk, and get up on the morning — THEY can get their ass*%s to WORK!!
That is not an additional tax as the federal sales tax would be.
You want to jack up taxes on the elderly to pay for a cut for you?
I'm paying 28% fed, 10% state(CA)/8% state(ID) plus social security/medicare and CA state sales taxes of 9.25%. Cain's 999 might put 10% back in my pocket. It won't have any impact on my property taxes in ID...other than possibly removing them from consideration in the calculation of federal income tax AGI
The US is about the only country in the world that collects taxes on products that US company’s manufactured overseas and sell overseas (never enters the US markets). So, US companies pay local taxes in whatever country they sell their products plus US taxes. Go figure. Makes it hard to compete with local products in other countries.
I don’t know why you get so excited about taxing all corporations the same amount of tax. Most oil companies and certainly GE (O’bummer’s pet company) pay no taxes, for years on end now, due to tax loop holes decided on by Congress. Most other corporation pay taxes now, if their rate stays the same but more corporation start paying in, where is the harm in that. Get it? Leaves room for private companies to compete on price since they don’t send money overseas to pay kids the equivalent of $2 an hour to manufacture products, like corporations do. Do you see that?
Then very soon the medical industry (esp. medical devices) is going to be taxed extra to pay for O’bummer health care. How is that a fair and even taxation?
Where is the savings for the millions of people just like me?
Not to mention, that if you're in a state that has high sales taxes AND Income taxes you get nailed even worse. Cain's plan is just shifting deck seats on the Titanic. It gives the appearance of being a smaller tax when it probably wouldn't be for most Americans.
Under the current system, most middle class Americans pay about 25% income taxes if they make between $35,500-84,000 per year. (And because of tax deductions Americans often pay less than that rate). Most Americans pay the current rate of 25% plus their state income taxes which averages about 6% across the US. They also pay about 6% in state sales taxes on average. If we assume that an American spends all of their income in a given year that means they would be Sales-taxed and Income-taxed about 37% of their income if they don't claim any deductions or tax credits. If they claim deductions, this percentage of income paid out in taxes can be substantially reduced from 37%.
For example, if a person makes $35,500 per year and receives a $2485 tax refund, they are only paying about 30% of their income in taxes while a person making 84,000 who receives a tax refund of $5880 would also only be paying 30% in taxes rather than the 37% rate. So if your tax refund for a year is 7% or more of your annual income you'd only be paying about 30%.
If Cain's 9-9-9 tax proposal was adopted at 9% on the Federal Level, and you lived in a state with a 6% Income tax rate You'd end up having to pay 15% of your income in state and federal income Taxes plus 15% in state and federal sales taxes. So if you are just an average middle class person who makes $35,000-84,000 per year, you would end up paying about 30% of your income in taxes if you spent all of your income in a given year. Also, from what I understand, Cain's proposed system will not give you any federal deductions and tax credits. Thus if you save more than 7% of your annual income through deductions and tax credits, you would be better off under in the current system than under Cain's 9-9-9 plan.
So I don't see how the average person is better off under Cain's plan than under the current system. Most people would likely be paying about the same percentage of their total income in sales and income taxes under both systems, it's just that Cain's plan plays number games by dividing one big tax into two smaller tax rates which makes it look like the governments are taking less of your money when their not.
Instead of hitting you with one big 18% income tax, it just hits you with two 9% taxes which are both being placed on the same income. One of those tax rates taxes your income when you make it, and the other taxes you for using that same income. (Thus it's arguably a form of double taxation.) Those on fixed incomes like Social Security will suffer the most because a sales taxes tend to be regressive if they don't grant tax exemptions for food, rent, medicine, etc.)
It is also foolish to add a national sales tax while we still haven't repealed the 16th Amendment and the income tax. Having both a sales and income tax is like having two income taxes simultaneously for the reasons mentioned above. Also, the sales tax won't be kept low long. A new tax generally starts out low and then increases rapidly until the tax rate is crushing. When the income tax was first adopted in 1913, it was sold to Americans as a tax of only 1% that would only fall on the richest Americans. That sure changed quickly. The rate was jacked up in the Great Depression. In fact, in World War II those who made more than $200,000 were taxed at 96% and the rate stayed around that number until President Kennedy lowered that rate in 1962! In any case, that 1% tax of 1913 has grown to 25% on the middle class today. What's to stop the Government from raising a 9-9-9 tax to a 20-20-20 tax?
The poverty level is so arbitrary, though. Better to index if you cannot change the tax code. Then get on a gold standard and watch the dollar stabilize and our economy soar.
“You want to jack up taxes on the elderly to pay for a cut for you?”
Yes. Next question.
I don’t see this plan as being perfect, but until we institute a “FAIR” tax plan that will take away the ability of politicians to buy votes based on giving special privileges to “the elderly”, minorities, poor people etc. we will continue to slide down the path to ruin.
Will it be “FAIR” to make “the elderly” pay a sales tax? No.
but it will be a lot less fair than allowing the government to continue robbing over half of working peoples earnings to buy votes with.
Naturally, libs get the idea of taxes wrong. Taxes aren’t designed to even the score for the “poor” or punish the rich. Taxes are designed to pay for basic government services. That’s it. But libs can’t see the whole picture being ideologically bound to a philosophy that penalizes rich AND poor.
Yeah, the masses just love 999!
Let’s face it: we didn’t get over our desire for a king with Washington (George).
of course we all owe da king! At leas our “fair share”
B@lls !!!!!
Semper Watching!
*****
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