HERMAN CAIN: HOW DID HE DO (slow-witted Gregory) More like dumb

Powerline ^ | October 16,2011 | JOHN HINDERAKER

[Hojczyk]

Reading the transcript, what strikes me is how slow-witted Gregory was. Repeatedly, Cain makes a simple, clear point, but Gregory doesn’t seem to get it. This became almost painful during an exchange about state sales taxes:

MR. GREGORY: The other defect in the plan comes from fellow conservatives who say, “You’ve got some problems here.” … “The real political defect,” the Journal writes, “of the Cain plan is that it imposes a new national sales tax while maintaining the income tax. … A 9 percent rate when combined with state and local levies would mean a tax on goods of 17 percent or more in many places. The cries for exemptions would be great.”

MR. CAIN: Don’t combine it with state taxes. This doesn’t address state taxes. If you add them together, yes, you’ll get that number. This is a replacement structure. These are replacement taxes. They’re not on top of anything.

MR. GREGORY: Mm-hmm.

MR. CAIN: We replace capital gains tax. We replace the payroll tax. We replace corporate income tax, replace personal income tax, and replace the death tax. It is a replacement tax structure.

MR. GREGORY: But where do state taxes go? You’re saying they’re going to be repealed?

MR. CAIN: If you–with the current structure, you have state taxes, right? So with this new structure, you’re still going to have taxes–state taxes. That is muddying the water.

MR. GREGORY: How so?

MR. CAIN: Because today, under the current tax code, state taxes are there if they have it. If they don’t have a state taxes, they don’t have it. It has nothing to do with this replacement structure for the federal tax code.

[sklar]

Perhaps you'd be so kind as to answer my dim-witted questions in posts #29 and #40.

Thanking you in advance for your kindness.

[TigersEye]

But say a farmer needs an expensive new backhoe. Currently, he buys the backhoe, and gets to write off the bulk of it's cost against profits, as a "cost of doing business deduction". Under 9-9-9 he would get no tax relief for purchasing the backhoe.

Actually he would.

Herman Cain's 999 Plan

9% Business Flat Tax

Gross income less all purchases from other U.S. located businesses, all capital investment, and net exports.

9% National Sales Tax.

Unlike a state sales tax, which is an add-on tax that increases the price of goods and services, this is a replacement tax. It replaces taxes that are already embedded in selling prices. By replacing higher marginal rates in the production process with lower marginal rates, marginal production costs actually decline, which will lead to prices being the same or lower, not higher.

The farmer would be covered under "capital investment" so he would pay no tax on the backhoe to begin with and the price of the backhoe would be less in the first place due to the lower marginal rates on the manufacture of it if it were U.S. made.

[BlackjackPershing]

Maybe he was drunk, like he was on Inmus a few years ago.

[Harmless Teddy Bear]

The law can’t be written to specify the tax is only for certain RETAIL purchases.

Sure it can. It being done now. In Michigan you pay sales tax on non-food items and you don't pay on food items. It is quite simple.

[USFRIENDINVICTORIA]

Good point. The "9-9-9" formulation is overly simplified -- which is probably a necessary evil for an election platform.

Here, in Canada, our GST (a VAT) exempts food, and a lot of other things, that make up most of the expenditures of retired or poor families. There is also a tax credit -- the tax man sends you a cheque -- for low income individuals and families. In effect, most pensioners, and poor families pay no GST (some even come out slightly ahead).

Similarly, a flat income tax (the first "9") can be made "progressive", by simply allowing a deduction of the first "X" dollars of income. Obviously, you have to be careful not to mess with the formula too much -- or you risk making it too complicated. Also, if your objective is to give everyone "some skin in the game", you should ensure that everyone pays at least some tax.

[Fido969]

"Sooo... What happens to the state taxes? All 57 of them?"

[Fido969]

"Sooo... What happens to the state taxes? All 57 of them?"

[Brookhaven]

But don't forget, under 9-9-9, when the flour maker buys wheat from the farmer, he'll be paying a 9% Fed Sales Tax that HE NEVER PAID BEFORE.

When the baker buys flour from the flour maker, he'll be paying a 9% Fed Sales Tax that HE NEVER PAID BEFORE. etc etc etc.

You are describing a VAT, not a retail sales tax.

Take a look at this link: http://www.nerds4cain.com/forums/discussion/106/does-everyone-understand-the-difference-between-a-vat-and-a-retail-sales-taxs

Does Everyone Understand the Difference Between a VAT and a Retail Sales Tax?

It seems that the 999 plan is receiving a lot of unfair criticism, because many people don't understand the difference between a value added tax (VAT) and a retail sales tax. I'm going to try and describe the difference here, using the milk supply chain as an example.

A retail sales tax (this is what is in the 999 plan)

1. A dairy farmer sells their milk to a processor. No taxes are levied or added to the price of the milk.
2. The processor sells the milk to a wholesaler. No taxes are levied or added to the price of the milk.
3. The wholesaler sells the milk to a grocery. No taxes are levied or added to the price of the milk.
4. The grocery puts the milk on the store shelves. No taxes are levied or added to the price of the milk.
5. A parent buys the milk to put on their cereal at home. At the cash register, a sales tax is levied on the price of the milk. The sales tax shows up as a separate line on the cash register receipt.

The one and only place where a tax is levied on the milk is after it has reached the cash register for it's final purchase before being consumed—a retail purchase.

From a conservative standpoint, the great advantage of a retail sales tax is that it is 100% visible. The tax payer can easily determine how much they are paying in taxes.

A VAT (value added tax)

1. A dairy farmer sells their milk to a processor. A tax is levied on the milk, and it is embedded in the price the farmer charges the processor.
2. The processor sells the milk to a wholesaler. Again, a tax is levied on the milk, and it is embedded in the price the processor charges the wholesaler.
3. The wholesaler sells the milk to a grocery. For a third time, a tax is levied on the milk, and it is embedded in the price the wholesaler charges the grocery.
4. The grocery puts the milk on the store shelves. For the fourth time, a tax is levied on the milk, and it is embedded in the price of the milk displayed on the shelf.
5. A parent buys the milk to put on their cereal at home. At the cash register, no taxes are levied on the milk. The four taxes that have already been levied on the milk do not show up as a separate line on the cash register receipt.

With a VAT, every time a product or raw material changes hands it is taxed, and the tax is embedded in the price of the item. If it changes hands five times before it reaches the consumer, it is taxed five times. If it changes hands 100 times before it reaches the consumer, it is taxed 100 times.

Conservatives are right to abhor a VAT.

A VAT is a hidden tax. The consumer never knows for sure how much in taxes they are paying, because the tax is embedded in the price of the product. That, of course, is why governments love the VAT. Voters are less likely to complain about a tax when it is difficult for them to determine exactly how much they are paying in taxes.

A VAT creates a paperwork nightmare for businesses as they have to keep track of the taxes that have been paid on items and raw materials all along the production process.

It's not surprising that Europe (which has a bias towards high taxes) prefers a VAT, because it is a hidden tax and thus easy to raise. While the USA (which has a bias towards low taxes) prefers to implement retail sales taxes, because it is a highly visible tax and thus difficult to raise.

I hope this makes the difference between a VAT and a retail sales tax clear. They are very different animals.

The Herman Cain 9-9-9 plan implements a retail sales tax. In no way, shape, or form does it implement a VAT.

[william clark]

One question for you. Before you conclude that your parents will be paying more under 9-9-9 due to the national sales tax, have you calculated the percentage by which those goods have gone up, say, under the Obama administration? If not, I would do that before reaching such a conclusion. Chances are Obama’s destruction of the economy has added more than 9% to the price of the necessities that your parents have been buying. Therefore, it’s reasonable to think that if the economy can be restored to health by the stability and predictability offered by Cain’s plan, and costs and prices come down accordingly, then at worst they’ll be paying about what they paid under Bush. I tend to think they’ll do better than that, because costs under Bush were still fluctuating in the uncertain and ever-fluid environment of the ridiculous current tax code.

[sklar]

Thanks, Tiger for your civil response.

I've seen people here saying, "I'm voting for Cain, even though 9-9-9 has no chance of passing." If Cain were to get nominated and then elected based on his FAMOUS SIGNATURE 9-9-9 Tax Replacement Plan, and then he can't get it done, can't get it passed, and 4 years from now, we still have the same old IRS, etc. what do you feel would be the response of Americans who voted for him?

[rolling_stone]

http://www.hermancain.com/999plan

Phase One

Our current economic crisis calls for bold action to truly stimulate the economy and Renew America back to its greatness. The 9-9-9 Plan gets Washington D.C. out of the business of picking winners and losers, using the tax code to dole out favors, and dividing the country with class warfare. It is fair, simple, transparent and efficient. It taxes everything once and nothing twice. It taxes the broadest possible base at the lowest possible rates. It is neutral with respect to savings and consumption,capital and labor, imports and exports and whether companies pay dividends or retain earnings.

•9% Business Flat Tax

◦Gross income less all purchases from other U.S. located businesses, all capital investment, and net exports.

Empowerment Zones will offer deductions for the payroll of those employed in the zone

•9% Individual Flat Tax.

◦Gross income less charitable deductions.

◦Empowerment Zones will offer additional deductions for those living and/or working in the zone.

•9% National Sales Tax. ◦Unlike a state sales tax, which is an add-on tax that increases the price of goods and services, this is a replacement tax. It replaces taxes that are already embedded in selling prices. By replacing higher marginal rates in the production process with lower marginal rates, marginal production costs actually decline, which will lead to prices being the same or lower, not higher.

•Economic Impact

◦According to former Reagan Treasury official Gary Robbins, of Fiscal Associates, the 9-9-9 Plan will expand GDP by $2 trillion, create 6 million new jobs, increase business investment by one third, and increase wages by 10%.

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

Phase 2 – The Fair Tax

Amidst a backdrop of the economic renewal created by the 9-9-9 Plan, I will begin the process of educating the American people on the benefits of continuing the next step to the Fair Tax.

•Ultimately replaces individual and corporate income taxes

•Ends the IRS as we know it and repeals the 16th Amendment

[C. Edmund Wright]

>>> Perhaps you’d be so kind as to answer my dim-witted questions in posts #29 and #40. >>>

You cannot be answered within the confines of a short post because you insist on looking at pieces of the plan as you apply them in your mind to a situation as it exists under our existing system. So no, you are so far from comprehending what a stake through the heart of the IRS and the tax code would do on the macro - that it is useless to waste time on your little examples in the micro.

But quickly, you fail to realize that every good and service we have is already taxed in hidden ways to the 22-23% range on average. All of that would go away and be replaced by a 9% UNHIDDEN tax. But if you can’t wrap your mind around that, and I don’t think you can, then no, I am not kind enough to be able to explain it to you.

As for the pensions, depending on how it’s structured, I am not sure that it would remain as ordinary income for tax purposes.

[TigersEye]

We have a food and clothing exemption on our town’s 7% sales tax so it can be done. The reason for it is a large number of retirees here.

[ilgipper]

Interesting to see who on FR resorts to out and out leftist lies and begins posting MSM propaganda as fact when it becomes convenient to them. This is clearly NOT a VAT tax but some freepers are using this lie to damage Cain.

There are pros and cons to Cain and Perry and I look forward to sorting it out over the next few months. This leftist propaganda on FR is not helping any of our candidates, nor good for our side in the general election.

[youngidiot]

I seem to remember him giggling like a mental patient, stoned are drunk some years ago. He was reporting from a foreign country, I think, I can’t remember the exact details. He’s a class-a douche.

[sklar]

What I am “far from comprehending” is why your ego feels the need to be such a prick to a fellow conservative? I just read you bio page, and MY! we certainly believe we are quite the celebrity, don’t we?

[Solson]

That’s not true. Cain is not calling for a VAT which you describe but a retail sales tax...thus only applied on the final consumer product.

[Solson]

That’s not true. Cain is not calling for a VAT which you describe but a retail sales tax...thus only applied on the final consumer product.

[TigersEye]

That's trying to read the future too much for me. Any Pubbie's plan will be fought against and every campaign promise not fulfilled will generate some ire from the people who supported him or her. I like that Cain sounds like he will really fight for his ideas not just talk them up during the campaign.

The president has a bully pulpit and not much more when it comes to legislation so I would like to have one that uses it. It's up to the rest of us to give our next president the best Congress money can buy (just kidding) that we can.

[Red6]

OMG-

Cain was having a conversation with a rock. He would have been more successful debating a tree stump, or the fungi growing on the side of a rock. This guy Cain was talking to was a code ID10T.