Posted on 11/11/2011 6:26:20 PM PST by goldstategop
Do you know why candidates for office tend to be reluctant to propose detailed plans? Because they know the plans will be flyspecked and picked apart by just about everyone. Inviting criticism doesn’t help you to get votes. But fear of criticism prevents you from conceiving solutions to problems. So even if avoidance of criticism helps in propelling you to an election victory, how are you supposed to effectively govern? How are you supposed to fix the problems you told everyone you were going to fix?
That’s why I’m happy to see so much criticism of the 9-9-9 plan I’ve proposed. It shows that people are thinking seriously about a substantive idea. When people stop obsessing over “gaffes” and campaign strategy, and start honing in on fixing the country’s economic problems, we are getting somewhere.
This is not to say, of course, I’m going to leave poorly founded criticisms of the plan unanswered. Certain objections to the plan are circulating in the usual places, driven by the same kind of thinking that has left us with a stagnant economy, $14 trillion in debt and mounting entitlement obligations. These criticisms deserve responses, and here they are:
Claim 1: The 9 percent sales tax, which is one third of the formula, is regressive and hurts the poor, many of whom pay no federal income taxes now. Response: This claim ignores some important aspects of the plan. One is that we eliminate the 15 percent payroll tax, which allows for no deductions at all – not even for charitable contributions. Some critics have argued that the poor still come out behind because employers pay much of the payroll tax. That demonstrates a basic misunderstanding about how compensation works in the business world. An employer decides to accept a certain cost-of-employment for each employee, and the employer’s share of the payroll tax is part of that cost. It comes out of your compensation whether you realize it or not. Also, a flat tax is not – by definition – a regressive tax. Everyone pays the same rate. And it is not an added tax, but a replacement tax, whose total burden is determined by the consumer’s spending decisions. Finally, the best way to help the poor is by spurring economic growth, which the current tax code will never do, and which the 9-9-9 plan is specifically designed to do.
Claim 2: Creating a new tax is merely setting the stage for higher rates on all taxes, as untrustworthy politicians will surely raise them. Response: First of all, that is not a criticism of the 9-9-9 plan. It is a criticism of politicians. If you don’t want the rates raised, don’t elect politicians who will raise them. Even if we repealed the 16th Amendment and eliminated the income tax, as some demand in return for establishing a consumption tax, politicians could raise that rate too. What’s far more important here is the fact that the very simple, flat-rate structure of the 9-9-9 plan, which allows no deductions, loopholes or exemptions (with the exception of charitable contributions for the income tax), is a far more growth-friendly tax structure than the mangled mess of rates, taxes, exemptions and ill-conceived incentives we have today. It virtually eliminates the massive compliance costs of the current tax code, and it restrains the size of government. By taking away the politicians’ gateway drug of loopholes and deductions, we make it much more difficult for them to mess with the tax code. Having said that, any plan could be criticized for what it would look like if someone messed it up. The plan as I’m proposing it is a huge improvement over the status quo.
Claim 3: The plan redistributes wealth from the poor to the rich. Response: It does no such thing. It is fair and neutral, taxing everything once and nothing twice. What’s more, we are getting ready to propose empowerment zones for economically struggling areas in which the rates will be even lower. That will allow the poor to benefit even more from the plan than they already would.
Claim 4: The plan should have included a pre-bate to offset the sales tax. Response: The last thing we need is to establish another federal entitlement, which the proposed pre-bate would quickly become. And it’s not necessary. The consumption tax replaces ones already embedded in prices. It’s not the prices that would increase, but the visibility of the taxes being paid. Right now, money is deducted from your paycheck and you never see it, so it doesn’t feel like you paid a tax. But you did. With the 9-9-9 plan, you feel it, and I suspect a good many people who clamor for higher taxes will start to feel differently as a result. But they won’t be paying more than before. They’ll just be more aware of it.
Claim 5: The business tax represents a new tax on labor. Response: Paul Krugman of the New York Times makes this claim because we do not allow businesses to deduct the cost of labor from their taxable revenue. But the claim is bogus for several reasons. First, we are reducing the corporate tax rate from 35 percent to 9 percent, so the tradeoff is a much lower rate paid on more of a company’s income. Second, we treat capital and labor the same, both with the corporate tax and with the income tax. That is fair and neutral. What’s more, the current system taxes both capital investment by business and capital gains by individuals. That’s a double tax, and the 9-9-9 plan eliminates it.
Claim 6: The numbers don’t add up. The 9-9-9 tax wouldn’t generate enough revenue. Response: Several groups apparently “ran the numbers” and came to this conclusion, including Bloomberg News and the Center for American Progress. Our report, which they do not appear to have read, demonstrates that it generates the same revenue as the current tax code, and our methodology is visible for anyone to see. Those who are making this claim should release their scoring so their methodology is as visible as ours.
Claim 7: The 9-9-9 plan is a really an 18 percent value-added tax plus a 9 percent income tax. Response: That’s an argument? That some might be able to give it a disagreeable label? What we have done is split the incidence of the tax so it is harder to evade – since you’d have to dodge two taxes, not just one, to save the 18 percent. And by eliminating loopholes we’ve made that virtually impossible to do anyway. I don’t really care what people call it. What matters is how it works.
Claim 8: Some people (like Herman Cain) who may live off capital gains, would pay no income taxes. Is that fair? Response: First, one of the benefits of the 9-9-9 plan is that, even if someone doesn’t pay much or any of one of the taxes, he or she is still likely affected by the other two. More to the point, though, everyone has the same opportunity to work hard, earn capital and put that capital at risk. Whatever I have earned has come from hard work, good decisions (and some bad ones), a willingness to take risks and a constant honing of strategy. Nothing is stopping anyone else from doing the same thing. I realize many are being told there are no opportunities available to them, but that is not true and I wish people – for their own sakes – would stop listening to such doom and gloom and come to understand all the opportunity that truly exists, and learn how to access it.
Claim 9: It won’t pass. Response: Politicians propose things that can pass. Problem-solvers propose things that can work. One of the worst instincts of Washington types is to judge an idea not on its substantive merits, but on their perception of its political viability. I do not underestimate the challenge of getting any good idea through Congress, but I have said all along that if you propose a good idea, and the people understand the idea, they will pressure Congress to pass it. So there. I welcome the robust discussion and the many questions that are being raised about the 9-9-9 plan. Asked and answered. What else do you want to know?
Sounds like Newt is piggy backing on issues Herman Cain has already addressed. He uses different words to make them sound like his own ideas. Never did trust Newt, and never will.
For some Newt videos go to thedougurbanskishow.com today.
Cutting taxes to 9% for business, 9% for income and a 9% sales tax would be significant reduction in Americans’ tax burden. Even people who pay nothing today would have to pay some taxes. This would open Americans’ eyes to the reality government takes and that visible price tag is reflected every time a cash register is rung. There is nothing government provides for free. We all pay for it and I don’t think any one can seriously argue we’re getting good value for the amount of taxes we pay today. And high taxes keep us from being competitive in the global market. The Cain plan isn’t perfect but its still a lot better than the status quo that has given us a stagnant economy, public unrest and a $14 trillion dollar debt. That’s why I support it because we need economic growth very badly to address all three of the problems I mentioned that we face today.
Discussion is fine, but it helps if politicians tell the truth. Mr. Cain states that "we eliminate the 15% payroll tax" but fails to point out that he replaces it with an 18% payroll tax, since individuals end up paying 9% on their total income, and businesses end up paying 9% on all of the salaries they paid to employees, since salaries are no longer deductible under his plan when corporate income is computed.
So from the point of view of small businesses, and people that currently don't pay much in income taxes, like families just starting out, or people with new businesses, even before the 9% sales tax Cain's plan increases their taxes.
Also the idea that adding a national sales tax makes for less paperwork and a smaller IRS is nonsensical. With a national sales tax every transaction will end up being subject to IRS scrutiny.
You caught that too...LOL! can you just visualize the dems in congress not going after a hike in the 9% sales tax? heck, O is already going after Christmas Trees. Anyway, Cain would need a 2/3 rds majority in the senate to get the 999 or and the 909 passed and that is not going to happen
IN case anyone has missed this - here is an excellent interview with Rich Lowrie where he takes caller questions about 999 (Lowrie is one of the co-creators of the plan)
http://www.c-spanvideo.org/program/CainsTa
One thing you are forgetting...the 9% national sales tax on everything you buy could get a hit a high per cent monthly depending on your needs, groceries and etc.
[ With a national sales tax every transaction will end up being subject to IRS scrutiny. ]
True.. 9/9/9 is ruse.. a shell game..
Watch one hand while the other pulls a quarter from behind your ear..
The last thing the federal government needs is MORE money..
The problem is taxes its spending..
Forget TAXES... ITS THE SPENDING THAT must stop..
STOP THE SPENDING first BEFORE ANY TAXING CHANGES..
(term limits might be beneficial as well)..
Not really. The 9% corporate tax on essentially all of the corporation's revenue (less direct purchases of goods and some investments), and whatever amount of sales tax is paid by corporations and other businesses are more buried than the current taxes.
Mr. Cain is curiously silent about how and what the sales tax will be applied to. Presumably it will be applied to end user sales like a typical state sales tax. That means there has to be a complex enforcement system to identify end use purchases vs. purchases for resale. The IRS will be hiring tens of thousands of new employees.
Business corporate taxes are reduced from 18% to 9%. The effective 35% individual income tax rate is reduced to 9% and there is a 9% national sales tax. Its a tax applied once to those who pay it and no one pays taxes twice. That means people get to keep more of the income to invest, save or spend as they choose. I trust their decisions more than the government. I don’t see the income tax being abolished over night. But we can flatten it so every one pays the same rate. Make no mistake, abolishing the progressive aspect of taxing income is the first step on the road to eliminating it altogether. That is the direction I would like to see conservative domestic policy take in the future.
Amen to that!
States that have only a sales tax do better than states that have both an income and a sales tax. People pay taxes in the former once. Double taxation is both unfair and it reduces overall tax revenue due to tax evasion. I know the federal tax policy I would prefer - returning to the excise tax system we had before the 16th Amendment was adopted in 1913. But I am not that naive to think we can accomplish that worthy goal overnight.
Non politician-check.
Degree in mathematics,masters in computer science-check.
Successful CEO where only results matter.-check.
Knows the Lord.-check.
Yup...he’s got my vote.
Nein Nein Nein
Pity that Cain seems to have forgotten that part.
Even if that were true, our current tax code is leaving us with trillion dollar deficits and Cain had offered no solutions on how he will deal with them.
So if a business had a billion dollars in what Cain classifies as taxable revenue and $100 million in profits then it's tax bill is $90 million dollars. If the business has a billion in those revenues and $100 million in loses then its tax bill is still $90 million dollars. How is that good for business?
Empowerment zones and 9-0-9 will break the Democrat grip on inner cities and the minority vote. Once people see that low taxes and regulation lead to prosperity how are you going to keep them on the plantation?
[ Pity that Cain seems to have forgotten that part. ]
Its hard to say “Everything’ in a 10,20 second sound byte..
America’s attention SPAN is extremely Short..
Like talking to toddlers..
Far better to say nothing. Especially when you haven't a clue as to how you would do it.
Like talking to toddlers..
Hence the popularity of 9-9-9. Few people are looking at it and saying, "Hey! Wait a minute..."
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