Skip to comments.9 Responses To 9 False Attacks On The 9-9-9 Plan
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 doesnt 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?
Thats why Im happy to see so much criticism of the 9-9-9 plan Ive 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 countrys economic problems, we are getting somewhere.
This is not to say, of course, Im 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 employers 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 consumers 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 dont want the rates raised, dont 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. Whats 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 Im 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. Whats 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 its not necessary. The consumption tax replaces ones already embedded in prices. Its 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 doesnt 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 wont be paying more than before. Theyll 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 companys income. Second, we treat capital and labor the same, both with the corporate tax and with the income tax. That is fair and neutral. Whats more, the current system taxes both capital investment by business and capital gains by individuals. Thats a double tax, and the 9-9-9 plan eliminates it.
Claim 6: The numbers dont add up. The 9-9-9 tax wouldnt 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: Thats 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 youd have to dodge two taxes, not just one, to save the 18 percent. And by eliminating loopholes weve made that virtually impossible to do anyway. I dont 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 doesnt 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 wont 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?
Cain also annouced a 909 plan...you have heard about it
I like the 9-9-9 plan. It’s actually an 8.75-8.75-8.75 plan but that doesn’t sound as catchy.
presidential candidate Herman Cain clarified his much talked-about “9-9-9” tax plan Friday, saying those who fall at or beneath the poverty level would have a different plan: “9-0-9.”
Cain took heat over his proposal, which replaces the current tax code with a 9% corporate tax, a 9% income tax and a new 9% national sales tax. Opponents have argued the middle part of the plan would increase taxes on the poor, who currently pay little to no taxes.
But Cain fired back Friday, saying in a Detroit speech that those paying no taxes now would continue to pay zero taxes under his plan.
“If you are at or below the poverty level, your plan isn’t 9-9-9 it is 9-0-9,” Cain said. “Say amen y’all. 9-0-9.”
TAX TEA NOW! The Tea Party candidate wants to tax tea—and everything else! And the Tea Party is buying it! It’s hilarious!
I can’t figure out for the life of me why people wouldn’t want to pay an 18% tax. Today the government confiscates 50% of people’s income at the top rate. People should pay LESS in taxes not more.
The opponents of this plan want to keep the high tax status quo. Our corrupt establishment thinks our taxes are too low!
That’s exactly what’s wrong with the thinking in Washington these days.
I prefer Newt’s plan..create jobs. The plan includes:
1.Stop the 2013 tax increases to promote stability in the economy. Job creation improved after Congress extended tax relief for two years in December. We should make the rates permanent.
2.Make the United States the most desirable location for new business investment through a bold series of tax cuts, including: Eliminating the capital gains tax to make American entrepreneurs more competitive against those in other countries; Dramatically reducing the corporate income tax (among highest in the world) to 12.5%; Allowing for 100% expensing of new equipment to spur innovation and American manufacturing; Ending the death tax permanently.
3.Move toward an optional flat tax of 15% that would allow Americans the freedom to choose to file their taxes on a postcard, saving hundreds of billions in unnecessary costs each year. This optional flat tax system will preserve deductions on charitable giving and home ownership, and create a new personal deduction of $12,000 for every American. This deduction is well above the current poverty level, ensuring that this new system does not unfairly target the poor.
4.Strengthen the dollar by returning to the Reagan-era monetary policies that stopped runaway inflation and reforming the Federal Reserve to promote transparency.
5.Remove obstacles to job creation imposed by destructive and ineffective regulations, programs and bureaucracies. Steps include: Repealing the Sarbanes-Oxley Act, which did nothing to prevent the financial crisis and is holding companies back from making new investments in the U.S; Repealing the Community Reinvestment Act, the abuse of which helped cause the financial crisis; Repealing the Dodd-Frank Law which is killing small independent banks, crippling loans to small businesses and crippling home sales; Breaking up Fannie Mae and Freddie Mac, moving their smaller successors off government guarantees and into the free market; Replacing the Environmental Protection Agency with an Environmental Solutions Agency that works collaboratively with local government and industry to achieve better results; and Modernizing the Food and Drug Administration to get lifesaving medicines and technologies to patients faster.
6.Implement an American energy policy that removes obstacles to responsible energy development and creates jobs in the United States.
7.Balance the budget by growing the economy, controlling spending, implementing money saving reforms, and replacing destructive policies and regulatory agencies with new approaches.
8.Repeal and replace Obamacare with a pro-jobs, pro-responsibility health plan that puts doctors and patients in charge of health decisions instead of bureaucrats.
9.Fundamental reform of entitlement programs with the advice and help of the American people.
We need pro-growth policies. I’m one of those conservatives who loathes austerity policies. I don’t think they’re politically viable - people can only tolerate being put on a diet for so long. Its human nature and honey is more palatable than bitter vinegar. There is nothing with America we can’t fix as long as we have the right policies.
If you have quoted Newt’s plan accurately which I believe you have, I have the following comments:
1. The IRS is still the IRS we know and “love” today
2. The IRS is still the IRS we know and “love” today
3. The IRS is still the IRS we know and “love” today
4. The IRS is still the IRS we know and “love” today
5. The IRS is still the IRS we know and “love” today
6. The IRS is still the IRS we know and “love” today
7. The IRS is still the IRS we know and “love” today
8. The IRS is still the IRS we know and “love” today
9. The IRS is still the IRS we know and “love” today
This country will never be great again until we have replaced the IRS with something less intrusive and oppressive. Just changing the tax rates isn’t going to cut it.
Secret knowledge to the math challenged... (Shuuush)..
9/9/9 is 27%.... true its a little less than whats paid now..
Most americans have no idea of what they actually pay in taxes..
That is.... the ones that pay taxes..
Course everybody pays taxes... business pay zero taxes..
It is passed on as the cost of doing business.. in “the price”..
TAXES are a major part of the price of ANYTHING you buy..
Federal, State and local taxes.. fees, penaltys, licenses, permits, citations, and other GRAFT..
People forget what Fascism “IS”...
hosepipe, I was doing the math on the 999 and do NOT like it at all. The national sales tax will vary depending on how much you shop, how far you commute (gas) and also have an impact on those living in countys or cities that have high sales taxes already
Yeah that is terrible. A 9-0-9 plan if you make less then $15,000. Rather then the 35-0-0 plan they pay now
Except you “do the math” by ignoring all the current taxes you will not pay under 9-9-9.
Cain is the only one who understands the real problem. How do you change a system that appaeras to divides the nation into 47% takers and 53% payers. You got to get everyone to realize they have skin in the game. That government does not “give them” anything. It merely takes from them indirectly to give them the illusion they are getting stuff.
Cain’s plan is the only one who makes the hidden taxes transparent.
“If you dont want the rates raised, dont elect politicians who will raise them.”
Oh, okay; problem solved! We'll just make sure the nation never elects anyone who would raise taxes again. Why didn't anyone else ever come up with that idea? Genius! Now we don't ever have to worry that the National Sales Tax will ever become repressive!
That is SERIOUSLY listed as the “solution” to Conservative concerns about giving the Liberal a brand new National Sales Tax. He's not joking.
Good argument by Mr. Cain.
I don’t think empowerment zones or 9-0-9 are good ideas,they are steps towards the complexity and favoritism we have now.
No, he cannot. Did not work for Reagan, will not work for Newt.
As long as you maintain a tax code where some pay and many take, you will not change the fundamental political dynamic. Our system encourages Government spending because the tax code hides the cost of that spending in the illusion that someone else pays for it.
Newt plan does not ever reconize the problem. The problem is he system itself is broken. We don't need to fix the system, we need to reboot it.
People have to stop electing politicians who promise them “free” this and “free” that. No such thing. We all pay for it even when we don’t see it.
Sorry real Conservatives would rather see serious tax reform then blindly cling to the current corrupt failed system based on nothing but blindly ignorant hysteric fear
909 sucks! Do not like his plan and will continue to support Newt.
9/9/9 is a ruse a shell game for the rubes..
It would turn into a VAT quickly..
It might take some time for it become 33/33/33, maybe not!!!..
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)
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.
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..."
[ Hence the popularity of 9-9-9. Few people are looking at it and saying, “Hey! Wait a minute...” ]
9/9/9 is actually 9+9+9 = 27.........
The odds of 9+9+9 becoming 8+8+8 is extremely remote..
12+12+12 is more likely..
Trying to compare the 9% tax corporate tax proposed by Mr. Cain with the existing corporate income taxes is not that simple since two completely different definitions of income are used. For the present corporate income tax, almost all of the corporation's expenses are deductible, but under Mr. Cain's plan very few expenses are deductible. For example, salaries are deductible expenses to a corporation now, but they are not under Mr. Cain's plan.
If, as I believe you are saying, the sales tax is truly a "first end user" tax, meaning it does not apply to goods bought for resale or goods that are sold used, then there will have to be a tremendously complex reporting and enforcement methodology. For example, if you buy materials to build a garage next to your house, are the materials taxed or not? If you intend to use the garage, then presumably they are. If you intend to sell it, then they should not be. But if you built the garage from parts, then when you sell it a sales tax should be due, right? Note that this is exactly what happens in a business that builds things. So if everything is taxed once, and the 9% sales tax is not a VAT in disguise, then you should be able to buy goods for resale without paying the tax. Including the parts you need to build that new garage, right?
Alternatively, the tax would be paid on the parts, but not on the finished good. Which would mean GM would pay the sales tax on all the car parts it bought, but not you at the dealership.
This is why states that have retail sales taxes have elaborate exemptions for businesses that resell goods. And then even more elaborate audit and enforcement schemes to make sure goods bought without paying the tax are really meant for resale.
You have identified one of the many issues with the 9-9-9 plan. Since presumably the 7.65% FICA and 1.45% Medicare payroll taxes are repealed under Mr. Cain's plan (if not its a giant tax increase) the employer sees a .1% reduction in payroll taxes for most employees earning less that $105,000. This is because the corporation cannot deduct payroll as an expense, so it pays 9% on its total payroll under Mr. Cain's plan but it currently pays 9.1% on the first $105,000, and then 1.45% above that.
So if the company in question has a high payroll, then its tax burden is about the same. Note however that it can deduct all purchases from other corporations. So if, instead of having a large payroll it buys all of its goods from a Chinese corporation, then it saves $90 million in taxes. So while the 9-9-9 tax plan may not change much for the corporation, it will lead to a faster migration of jobs out of the country.
A smart company will outsource everything to foreign suppliers and invest the tax savings in those companies.
The problem with that is that under 9-9-9 Cain claims that the whole cost of FICA is borne by the employees and not split between them and the corporation. That's the only way he can claim that his flat tax and sales tax are not a tax increase for individuals. You can't have it both ways, so in Cain's world the corporation passes on the FICA savings to the employees as salary increases, and gets taxed on them anyway.
Note however that it can deduct all purchases from other corporations.
Only if those goods were manufactured in the U.S. Which brings us an interesting problem; what do you do with purchases that were assembled in the U.S. from imported parts. Do you deduct, not deduct, or partially deduct?
A smart company will outsource everything to foreign suppliers and invest the tax savings in those companies.
It may well hasten that, yes.