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Cain's Plan May Not Need a Sales Tax (Part of 9-9-9 causing the most discontent not necessary)
American Thinker ^ | 11/05/2011 | Robert Genetski

Posted on 11/05/2011 12:21:06 PM PDT by SeekAndFind

Republican presidential candidate Herman Cain has done the nation a great service by proposing major changes in the byzantine way the U.S. government collects its revenue. Cain maintains that his so-called "9-9-9" plan restructures the nation's tax system in a way that significantly boosts real growth. He also claims that his program is revenue-neutral. This means that it is designed to replace the revenues generated by the current tax system.

Restructuring the U.S. tax system along the lines Cain proposes might promote explosive economic growth. However, there are serious problems with tax proposals that claim to be revenue-neutral. One potential flaw is a tendency to assume that individuals will behave the same way regardless of the tax system. If this were true, there would be no reason to change current system.

The main reason to change the tax structure is to remove impediments to economic growth. If the new structure succeeds in doing so, it can improve economic activity and raise both incomes and revenues.

The failure to account for the dynamic impact of a positive structural change in taxes can inadvertently lead reformers to propose changes that increase the overall tax burden. This is the case with the proposed "Fair Tax," which would replace all federal taxes with a national sales tax.

Insisting on revenue-neutrality places the government's need for revenue above the needs of individuals. In an effort to ensure that government receives the same claim to revenue as before, estimates of the necessary national sales tax often amount to 20-30 percent. While the structure of such tax may appear superior to current system, the immediate impact of an abrupt shift to such higher rates risks retarding economic growth rather than promoting it. That will lead to a spiral of less-than-expected revenues, higher tax rates, and so on.

(Excerpt) Read more at americanthinker.com ...


TOPICS: Business/Economy; Culture/Society; News/Current Events; Politics/Elections
KEYWORDS: 999; hermancain; salestax

1 posted on 11/05/2011 12:21:09 PM PDT by SeekAndFind
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To: SeekAndFind

Ok but isn’t part of the reason it’s there is because he wants to transition to a pure consumption tax?


2 posted on 11/05/2011 12:22:28 PM PDT by exist
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To: exist

It hurts me but it makes drug dealers and bottom feeders pay..


3 posted on 11/05/2011 12:26:04 PM PDT by goseminoles
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To: SeekAndFind
Again desperately clinging to the existing tax code, as this author is, is exactly the problem.

We must boarden the tax base. As long as we divide the country into payers and payees the structural basis in the political system will always lead to more and more taxes and spending. 6 wolves and 4 sheep voting will always vote to eat the sheep.

Only Cain's plan addresses that structural flaw in our tax code.

The author gets it exactly backwards HIS solution will ensure the structural flaws in the current system are maintained thus leading to ever more taxing and spending.

4 posted on 11/05/2011 12:26:12 PM PDT by MNJohnnie (Giving more money to DC to fix the Debt is like giving free drugs to addicts think it will cure them)
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To: SeekAndFind

Will we still get rid of all the excise and punitive taxes, not to mention hidden taxes. All things considered, I’d rather pay a sales tax, providing it isn’t a tax on top of other taxes.


5 posted on 11/05/2011 12:26:54 PM PDT by pallis
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To: SeekAndFind

I like the sales tax because it makes all the DEADBEAT pay something into the federal government.

For those that don’t like it, then simply stock up, buy cars, buy boats, buy toilet paper, etc BEFORE the tax takes hold. It’s probably smart to do that anyway, given the direction this country is going with our debt.


6 posted on 11/05/2011 12:33:40 PM PDT by BobL ( A vote for Newt is a vote for Romney)
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To: exist
Ok but isn’t part of the reason it’s there is because he wants to transition to a pure consumption tax?

Exactly. Cain LOVES the national sales tax, which is why I won't vote for him.

7 posted on 11/05/2011 12:38:30 PM PDT by Huck (TAX TEA NOW==SUPPORT 9-9-9!)
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To: Huck
Huck loves the existing corrupt failed tax code which proves his is a completely ignorant fool
8 posted on 11/05/2011 12:40:38 PM PDT by MNJohnnie (Giving more money to DC to fix the Debt is like giving free drugs to addicts think it will cure them)
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To: MNJohnnie

And you’re still a babbling idiot, as every one of your posts demonstrates.


9 posted on 11/05/2011 12:41:31 PM PDT by Huck (TAX TEA NOW==SUPPORT 9-9-9!)
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To: Huck

“Exactly. Cain LOVES the national sales tax, which is why I won’t vote for him.”

LOL. But for us in Texas, we would LOVE to see ILLEGALS start to pay something towards the federal government, because they practically get a free ride here (i.e., we love having them)...and this is probably the only way to get that out of them.


10 posted on 11/05/2011 12:42:24 PM PDT by BobL ( A vote for Newt is a vote for Romney)
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To: pallis
Will we still get rid of all the excise and punitive taxes, not to mention hidden taxes.

It doesn't appear so.

11 posted on 11/05/2011 12:46:36 PM PDT by SoJoCo
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To: SeekAndFind

The author correctly identifies the problem with the business tax. It will mean a tax increase for many companies, and even those companies that lose money will find themselves with a substantial tax bill.


12 posted on 11/05/2011 12:48:41 PM PDT by SoJoCo
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To: Huck

That is exactly what you are doing Huck. Hysterically clinging to the existing code because you are too arrogant to learn any facts about Cain’s plan


13 posted on 11/05/2011 12:48:48 PM PDT by MNJohnnie (Giving more money to DC to fix the Debt is like giving free drugs to addicts think it will cure them)
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To: SoJoCo
The author correctly identifies the problem with the business tax

Abolishing their share of the payroll taxes, as 9-9-9 does, by itself significantly cuts all business's tax burden

Once again, try actually learning the facts about 9-9-9, don't just post fraudulent disinformation.

14 posted on 11/05/2011 12:53:38 PM PDT by MNJohnnie (Giving more money to DC to fix the Debt is like giving free drugs to addicts think it will cure them)
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To: SoJoCo
Yeah actually it does.

So how about you quit clinging to your emotion based opinions about 9-9-9 and finally learn the facts.

15 posted on 11/05/2011 12:54:40 PM PDT by MNJohnnie (Giving more money to DC to fix the Debt is like giving free drugs to addicts think it will cure them)
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To: SeekAndFind

The biggest problem with the sales tax (beyond double taxation on taxable income already saved) is in those states that don’t have one now.


16 posted on 11/05/2011 12:55:10 PM PDT by Paladin2
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To: Paladin2
and they will still not get a State Sales Tax. We need to find a new horse on this issue because the naysayers have pulverized this dead one to dust.

Since the Polutico scandal was going on, everyone stayed away from it and now that it is apparent that Cain was correct all along, now they go back to the 999 beatings again. Just maybe you might want to investigate it a bit more beyond your emotional knee jerks and pretzel talking points from the other candidates and find that just maybe he is right on this one too.

17 posted on 11/05/2011 1:09:23 PM PDT by mazda77 (and I am a Native Texan)
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To: goseminoles
"It hurts me but it makes drug dealers and bottom feeders pay.."

And the top feeders. The 999 plan defunds the "Crony Capitalists" and makes them pay into the system.

18 posted on 11/05/2011 1:11:12 PM PDT by UnwashedPeasant (Don't nuke me, bro)
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To: mazda77
The double taxation is the same with the "Fair" tax and causes the same "kneejerk" objection to double taxation.

(Go put some ice on it.....)

19 posted on 11/05/2011 1:12:29 PM PDT by Paladin2
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To: exist
"Ok but isn’t part of the reason it’s there is because he wants to transition to a pure consumption tax?"

Phase 2 of the Cain plan is to replace 999 with the FairTax, eliminating corporate and individual income tax, repealing the 16th Amendment, and ending the IRS as we know it.

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

20 posted on 11/05/2011 1:18:07 PM PDT by UnwashedPeasant (Don't nuke me, bro)
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21 posted on 11/05/2011 1:18:24 PM PDT by TheOldLady (FReepmail me to get ON or OFF the ZOT LIGHTNING ping list)
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To: Paladin2
The double taxation all ready exists under the existing system since your "saved" income is subject to Capital Gains taxes

So put some ice on it.

22 posted on 11/05/2011 1:23:16 PM PDT by MNJohnnie (Giving more money to DC to fix the Debt is like giving free drugs to addicts think it will cure them)
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To: MNJohnnie
We must boarden the tax base.

You mean we should kill it with a hatchet?

Actually, word play aside, I'm with you. Having an ever growing segment of the population exempt from taxes is a recipe for disaster.

23 posted on 11/05/2011 1:24:41 PM PDT by Rinnwald
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To: SeekAndFind

I like the 9-9-9 plan as it is because a similar such plan turned Ireland from a backwater into the Celtic Tiger. It WOULD force people like illegals not in the system to pay a share and vastly reduce the inconvenience of the present tax code for those who are in the system. If we scrap the 16th Amendment, all the better. As for those who say that 9-9-9 will be 10-10-10 or 11-11-11, well, what’s stopping them for raising the rates now?


24 posted on 11/05/2011 1:30:52 PM PDT by tanuki (O-voters: wanted Uberman, got Underdog....)
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To: Rinnwald

Oh yeah, Kill it with a hatchet is my first choice too. :-)


25 posted on 11/05/2011 1:35:25 PM PDT by MNJohnnie (Giving more money to DC to fix the Debt is like giving free drugs to addicts think it will cure them)
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To: MNJohnnie
So how about you quit clinging to your emotion based opinions about 9-9-9 and finally learn the facts.

So much easier to cling to your fantasies about Cain and his scheme. So where does it say anywhere that Cain's plan does away with excise taxes? Or is this one of those "Well, he hasn't said it does away with them but that's probably what he means" kind of things?

26 posted on 11/05/2011 1:47:28 PM PDT by SoJoCo
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To: MNJohnnie
Abolishing their share of the payroll taxes, as 9-9-9 does, by itself significantly cuts all business's tax burden

Nonsense. Payroll taxes are a business expense and as such are used to reduce taxable income. In your Cain world a dollar of income is, with few exceptions, a dollar taxed. Currently if I have a company with $1 billion in revenue and a 10% profit margin then I'm taxed on $100 million, maybe a maximum of $35 million in taxes. Under your Cain world then potentially I have $1 billion in taxable revenue, unless I operate in a 'empowerment zone' and less any goods I buy from U.S. manufacturers. For a company in a service industry like a bank or insurance company or consulting company then if I make a billion I'm taxed on a billion. My taxes more than double.

Unless, of course, this is also one of those "Cain really doesn't mean what he says" moments?

27 posted on 11/05/2011 1:54:11 PM PDT by SoJoCo
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To: exist

This is MY HOPE TOO!

Install the Sales Tax and DITCH the IRS & the Income Tax!!

That’s the FORMULA!!!!
let’s VOTE on it. OK?


28 posted on 11/05/2011 1:56:26 PM PDT by noah (noah)
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To: MNJohnnie
I'm well aware that inflation is taxed. LT Cap gains are not indexed to inflation, so the longer one holds something, the more problematic it becomes.

Bite your tongue.

It's enough to make one go Galt.

29 posted on 11/05/2011 1:59:41 PM PDT by Paladin2
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To: SoJoCo
You don't look at the whole plan, you selectively pick certain facts and ignore the other ones that disprove your assumptions

Try making a factual, not selective, analysis of the whole plan. You need to stop with your habit of just picking certain fact and ignoring all the other facts in order to get your pre determined answer you want to believe

30 posted on 11/05/2011 2:04:29 PM PDT by MNJohnnie (Giving more money to DC to fix the Debt is like giving free drugs to addicts think it will cure them)
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To: Paladin2

I’m sorry I assumed you were smart enough to have your saving invested not just tucked away in a 1% saving account


31 posted on 11/05/2011 2:05:42 PM PDT by MNJohnnie (Giving more money to DC to fix the Debt is like giving free drugs to addicts think it will cure them)
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To: MNJohnnie
You don't look at the whole plan, you selectively pick certain facts and ignore the other ones that disprove your assumptions

I look at the plan that is on his website. I guess I'm not privy to the super-secret 9-9-9 plan that only true believers have access to and which contains all the clarifications like doing away with excise taxes and which somehow doesn't tax businesses as much as the website plan does.

32 posted on 11/05/2011 2:09:14 PM PDT by SoJoCo
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To: SoJoCo

I keep showing your where you always make the same error and you keep repeating it. Impossible to pry open a welded shut mind.


33 posted on 11/05/2011 2:11:57 PM PDT by MNJohnnie (Giving more money to DC to fix the Debt is like giving free drugs to addicts think it will cure them)
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To: SeekAndFind

I have a much better plan.

1) Eliminate all income taxes - federal, state, local. Period.

2) Do NOT impose any federal taxes on human beings or on corporations. Instead, impose those taxes on the states themselves apportioned by population. Let the individual states determine how to pay those taxes.

Gee! That sounds like something I read in the Federalist Papers! /s


34 posted on 11/05/2011 2:19:16 PM PDT by TruthInThoughtWordAndDeed (Yahuah Yahusha)
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To: BobL
But for us in Texas, we would LOVE to see ILLEGALS start to pay something towards the federal government

Idiotic rationale. Since you'd be paying the same new tax they'd be paying, you as an American taxpayer would gain nothing. You'd be breaking even at best.

35 posted on 11/05/2011 3:45:22 PM PDT by Huck (TAX TEA NOW==SUPPORT 9-9-9!)
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To: Huck

“Idiotic rationale. Since you’d be paying the same new tax they’d be paying, you as an American taxpayer would gain nothing. You’d be breaking even at best. “

Actually, I get a nice cut in my income tax, so I’ll roughly break even. It’s the Illegals that are paid under the table and do not pay virtually ANYTHING to run this country that I want to see step up (at least until they’re deported).


36 posted on 11/05/2011 3:54:10 PM PDT by BobL ( A vote for Newt is a vote for Romney)
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To: SoJoCo

You’re a tax accountant, right? Lies come so easy to you guys.


37 posted on 11/05/2011 4:08:48 PM PDT by itsahoot (There was a bloodless coup in 08, and no one seemed to notice. God help us.)
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To: MNJohnnie

“Again desperately clinging to the existing tax code, as this author is, is exactly the problem.”

What ? There is nothing in this article that suggests clinging to the existing tax code. He only points out how much revenue Cain’s plan would generate, and says omitting the 9% sales tax while retaining Cain’s other two ‘9’s exactly as Cain proposes them would raise enough revenue.

The 9% sales tax is unnecessary. The 9% personal income tax and the 9% business tax, together with the explosive economic growth they would generate, would raise as much revenue as today — without opening the door to a national sales tax.


38 posted on 11/05/2011 6:18:52 PM PDT by Kellis91789 (The ultimate result of shielding men from the effects of folly is to fill the world with fools.)
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To: SoJoCo

So only businesses that are well-run and profitable should pay taxes, while poorly run businesses should not pay taxes ?

That’s messed up.

Have you forgotten that poorly run businesses pay taxes today ? 7.65% of their payroll, or 15.3% of payroll if self-employed. Cain’s business tax bumps this to 9%, while also eliminating the employee 7.65%.


39 posted on 11/05/2011 6:27:12 PM PDT by Kellis91789 (The ultimate result of shielding men from the effects of folly is to fill the world with fools.)
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To: Paladin2

“...in those states that don’t have one now.”

Actually, even in those states that already have one, bumping it up by 9% will make a combine 18% sales tax in states like CA and NY. That high a rate makes for a big disincentive to spend or a big incentive to go black market.

I think the article is exactly correct. Of course, I’m biased. I’ve been making the same point for weeks. The 9% sales tax is unnecessary and would actually raise more tax revenue than the current tax code. Cain’s plan is a good one without the sales tax component.


40 posted on 11/05/2011 6:33:38 PM PDT by Kellis91789 (The ultimate result of shielding men from the effects of folly is to fill the world with fools.)
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To: SoJoCo

Aren’t you forgetting the 7.65% payroll tax your company would pay on the $900M in payroll ? Remember, the 9% Business Tax replaces the payroll tax as well as the corporate profits tax.

So you pay $35M in profits tax, but $69M in payroll tax, for a total of $104M in Federal taxes.

So your $1B company would still get a $14M tax break — from $104M currently to $90M under Cain’s plan.


41 posted on 11/05/2011 6:42:56 PM PDT by Kellis91789 (The ultimate result of shielding men from the effects of folly is to fill the world with fools.)
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To: Kellis91789
Aren’t you forgetting the 7.65% payroll tax your company would pay on the $900M in payroll ? Remember, the 9% Business Tax replaces the payroll tax as well as the corporate profits tax.

No, because when explaining his 9-9-9 plan Cain always counts the entire payroll tax as an expense borne by the employee which is how he justifies his flat tax and sales tax. I guess he's assuming that when FICA is done away with the companies, out of the goodness of their hearts, will pass that entire savings on to the employees in the form of higher wages. Regardless, you cannot have the same expense be a cost to both individuals and companies. So since Cain doesn't count it as a savings to the corporation then neither did I.

42 posted on 11/06/2011 5:51:22 AM PST by SoJoCo
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To: MNJohnnie
I keep showing your where you always make the same error and you keep repeating it. Impossible to pry open a welded shut mind.

Oh try once more, for old time sake. If you can.

43 posted on 11/06/2011 5:52:13 AM PST by SoJoCo
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To: itsahoot
You’re a tax accountant, right? Lies come so easy to you guys.

Nope, but I'm also not a Cainiac.

44 posted on 11/06/2011 5:53:03 AM PST by SoJoCo
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To: SoJoCo

I have never heard Cain count the half of the payroll tax paid by the employer as belonging to the worker. Nor do I care.

You’re argument was that a company would pay more under Cain’s 9% Business Tax. The only real-life comparison that can be made is to what that company ACTUALLY pays today. You could argue that all business taxes are paid by the customers and not the business. You can play whatever philosophical games you want but you are fooling yourself. The business is the one LEGALLY required to pay their half of the Payroll Tax. Comparing tax plans without regard for who is legally liable to write the check under each plan is a nonsense circular argument.

Then there is the actual point of this article, which is that omitting the 9% Sales Tax from Cain’s plan would still collect enough revenue. So the worker would be paying a 9% Income Tax instead of both a 7.65% Payroll Tax plus a progressive Income Tax with rates as high as 35%. No Sales Tax.


45 posted on 11/06/2011 2:32:53 PM PST by Kellis91789 (The ultimate result of shielding men from the effects of folly is to fill the world with fools.)
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To: Kellis91789
I have never heard Cain count the half of the payroll tax paid by the employer as belonging to the worker. Nor do I care.

Then you haven't paid attention to what the man has been saying.

Then there is the actual point of this article, which is that omitting the 9% Sales Tax from Cain’s plan would still collect enough revenue.

That is true only if A: you are happy with annual deficits in the $2 trillion range, or B: you have a plan to cut federal spending in half. I'm not prepared to sign on with the first and I haven't heard any details on the spending cuts necessary to accomplish the second.

46 posted on 11/06/2011 3:35:58 PM PST by SoJoCo
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To: SoJoCo

Or C: as this article points out, explosive economic growth making those two 9% taxes raise more revenue, and an immediate cut in spending of 30%.

If everything we spent in 2000 had increased only by inflation, we’d be spending $1T less this year than we are. $1.8T in FY2000 = $2.4T FY2011 http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1.8&year1=2000&year2=2011

So all we have to do to fix the deficit is to use the FY2000 Budget and adjust all figures by actual inflation. Then let each Department figure out how to work within their budgeted amount.


47 posted on 11/06/2011 4:24:05 PM PST by Kellis91789 (The ultimate result of shielding men from the effects of folly is to fill the world with fools.)
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To: Kellis91789
Or C: as this article points out, explosive economic growth making those two 9% taxes raise more revenue...

What if it doesn't? If companies are paying higher taxes, or are being taxed regardless of whether they make money or not, then how will that foster explosive growth?

...and an immediate cut in spending of 30%.

An immediate 30% cut would mean $810 billion in reductions. So what goes under the Cain administration?

So all we have to do to fix the deficit is to use the FY2000 Budget and adjust all figures by actual inflation. Then let each Department figure out how to work within their budgeted amount.

Simple as that, huh? So cut Social Security spending by about 60% and Medicare by 2/3rds and defense spending in half and what exactly do you do away with.

48 posted on 11/06/2011 5:16:26 PM PST by SoJoCo
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To: SoJoCo

“If companies are paying higher taxes, or are being taxed regardless of whether they make money or not, then how will that foster explosive growth?”

If a business DOESN’T make money today, they must still pay 7.65% of their payroll in taxes. They must pay 15.3% if they are self-employed. Under the Cain 9% Business Tax applies to payroll and profits, so if there are no profits then it applies only to wages. So if a business doesn’t make money, their taxes increase by 1.35% of payroll.

If a business DOES make money, they must pay 7.65% on their payroll (or 15.3% if SE) PLUS 35% of their profits. Under Cain’s 9% Business Tax, they pay 9% of Payroll PLUS 9% of Profits. So they pay an extra 1.35% of payroll costs but they save 26% of their profits.

Every economist agree that the corporate tax rate of 35% puts America at a disadvantage compared to the rest of the world. Lowering it to 9% is therefor pro-growth.

“An immediate 30% cut would mean $810 billion in reductions. So what goes under the Cain administration?”

Wrong. A 30% cut from the current $3.6T means $1,080B in cuts, making total spending $2.5T, which is essentially FY2000 spending increased by inflation.

“Simple as that, huh?”

Yes.

“So cut Social Security spending by about 60%”

No. Social Security has only increased by CPI, so there are no cuts to SS.

“... and Medicare by 2/3rds ...”

Quite possibly. All medical costs are out of control due to litigiousness, CYA testing, and over consumption. Medicare and Medicaid are even worse because they are pay-for-procedure models. The Medical Industrial Complex of Doctors, pharma, Insurers, and hospitals have attempted to make more money from these programs by increasing the number of tests and procedures. The government responds by trying to cut how much it will pay for each procedure. The doctors, in turn, find additional procedures to bill. The patient doesn’t limit their consumption because they are not the payor, and doctors can always justify extra procedures based on cautious preemption of malpractice lawsuits and being “thorough”. Change Medicare and Medicaid to HMO’s with significant co-pays and extend the Federal government immunity from lawsuits to those doctors and hospitals providing services. This would radically cut the cost due to eliminating all the overhead of billing and the unnecessary procedures done only to CYA. Doctors and hospitals would perform the necessary services to keep from being dropped from the program due to bad results, but no more than that since they don’t get paid per procedure.

“... and defense spending in half and what exactly do you do away with.”

Almost. 40%. Defense spending has increased much faster than inflation. Had it increased only as fast as inflation, it would be $387B rather than $700B. With Iraq over and Afghanistan pointless, getting back under $400B shouldn’t be tough at all. Give it to the DoD and let them figure out how to spend it instead of 535 members of Congress all feathering their own nests.


49 posted on 11/06/2011 9:30:33 PM PST by Kellis91789 (The ultimate result of shielding men from the effects of folly is to fill the world with fools.)
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