Posted on 10/07/2011 9:08:24 AM PDT by SeekAndFind
WASHINGTON -- Herman Cain's bid for the Republican presidential nomination is fueled in part by his proposed tax code overhaul that tax policy veterans say doesn't add up.
Cain's proposal is gaining attention after a Washington Post-ABC News poll released Tuesday found his campaign is tied for second place with Texas Gov. Rick Perry among Republicans and Republican-leaning independents.
In campaign stops, Cain touts his 9-9-9 plan as a concept that will lead to a fairer tax system. The proposal would tax sales transactions and gross income for individuals and businesses at 9 percent while eliminating levies on capital gains. It also ends the taxes that fund Social Security, and corporations wouldn't pay a tax on dividends.
Following the broad contours of Cain's plan, the federal government would have collected almost $2 trillion in 2010, according to a Bloomberg News calculation based on data from the Commerce Department's Bureau of Economic Analysis. The government actually collected almost $2.2 trillion that year, according to the White House Office of Management and Budget.
Tax policy experts say Cain's plan is unrealistic because it presumes that no deductions and exemptions will be permitted, no matter now popular.
"Either Herman Cain is the tax messiah or is proposing a system that has no correspondence to real-world tax systems," said Edward Kleinbard, a former chief of staff to the congressional Joint Committee on Taxation. He is now a professor at the University of Southern California Gould School of Law.
Speaking on radio host Don Imus's program Tuesday, Cain said the 9-9-9 proposal would be revenue neutral, meaning it would generate as much revenue as the government collects now.
"We calculated based upon initially no growth, just replicate the amount of revenue we're already bringing in," he said.
Cain's campaign hasn't produced specific revenue estimates for its proposal and didn't respond to requests for comment.
Using 2010 figures, Cain's plan would have collected $922.1 billion in revenue from the national sales tax with no exemptions, $912.7 billion at a 9 percent individual income tax with few deductions or other tax benefits and $127.7 billion from a 9 percent tax on corporate income with no deductions.
The federal government in 2010 actually collected $898.5 billion from individuals, including levies on capital gains; $191.4 billion from the corporate income tax; $864.8 billion from Social Security and retirement taxes; $141 billion in other taxes, such as estate and gift taxes and $66 billion in excise taxes. This doesn't include the taxes levied by states on retail sales and property.
Cain's proposal is worded in a way that suggests nothing -- food, housing or clothing -- would be exempt from the national sales tax. It is unlikely that Congress would endorse such a broad-based consumption tax, and even if it did, consumers might change their buying habits. That could reduce consumption and would then lower revenue from the national sales tax.
If lawmakers were to exempt everyday items such as food and clothing and provide a rebate to low-income individuals to offset the regressive nature of the sales tax, the plan would generate much less revenue, said David Kautter, managing director of the Kogod Tax Center at American University in Washington. With the information available, it's almost impossible to develop a precise revenue estimate, he said.
"The revenue estimate is largely dependent on the rate and what's subject to tax," Kautter said. "When you pull out housing, clothing and food, the amount you raise drops by a lot."
Cain, 65, has signaled resistance to exemptions from the sales tax. In an appearance on "Fox News Sunday" on Oct. 2, he said his goal is to "grow the base and make sure the tax code is fairer for everybody."
"It levels the playing field," he said. "It gets rid of all the loopholes. But the most interesting is, it gets the government out of the business of trying to pick winners and losers and trying to decide what's regressive and what's not regressive."
Cain's proposal is notable for its lack of deductions and benefits compared with the current tax code. Business deductions would be limited to investments, purchases from other companies and dividends paid to shareholders. Individuals could deduct charitable deductions. Businesses and individuals in so-called empowerment zones could qualify for additional deductions.
Cain is pitching himself as a turnaround manager who saved Godfather's Pizza Inc., a restaurant chain, from bankruptcy. An Atlanta native, he was on the board of the Federal Reserve Bank of Kansas City in the 1990s and was its chairman from 1995 to 1996.
He won Florida's Republican presidential straw poll on Sept. 24 with 37.1 percent of the votes. Perry was second with 15.4 percent.
There are plenty of questions remaining about the details of Cain's proposals. Chris Edwards, the director of tax policy studies at the Cato Institute, a Washington organization that advocates for limited government, said some of the business provisions were "odd."
The shift to taxing gross income instead of net income would mean that some business expenses, such as wages, could no longer be deducted, Edwards said. He questioned the benefit of such a move when Cain's plan would also protect businesses from paying taxes on dividends.
"The business base would be much broader because businesses don't get a wage deduction, but then it would be narrower because they get to deduct dividends paid to shareholders," Edwards said. "That's a significantly different base."
Kleinbard said the bottom-line effect of Cain's proposal would be a greater shift of the tax burden to individuals from corporations and investors. He said eliminating the deductibility of wages would raise the cost of labor, which businesses would pass on to workers in the form of lower pay.
That, combined with no mention of the standard deduction, personal exemption or earned-income tax credit "means a huge tax hike for the working poor," he said.
There's a long way to go before any of that happens, said Joseph Thorndike, an editor at Tax Analysts, a non-partisan publisher in Fall Church, Va.
"I do not believe they made a serious effort to estimate the revenue from these plans but most other candidates' plans aren't any different," he said. "They spout out all kinds of stuff."
Which of course they would. The 9-9-9 plan is sheer idiocy.
My question is: IS IT LEGAL TO MAKE CONTRIBUTIONS FROM YOUR CORPORATION TO YOUR FEDERAL CAMPAIGN. lISTING AS DONATION.
THEN TURN AROUND AND PAY MONEY TO THAT SAME CORPORATION AS AND EXPEDITURE?
I mean it falsely makes it look like a candidate is doing better than they are, but HUMMMM.
Also, Is it legal for Candidates to make LOANS to their committee with the due dates for repayment 12-31-2012?
Sorry making sure we are giving the Feds enough money is WAY down the list of priorities for voters.
They don't seem to get it. We want Fed spending CUT way way way down.
One way to do that is serious reform to the tax code.Remove from Congress the power to shake down business for billions of lobbying dollars in echange for 10s of billions of Fed gimmies by removing Congress's ability to tinker with the tax code
If this person is a Keynesian newsie he must now be burned at the stake for heresy. Everyone knows that consumers don't change their habits when the tax situation changes. Why would they? Millionaires and billionaires won't.
I like Herman Cain, but he needs to drop the 999 plan. First of all.. conservatives want less tax, not a new kind of taxing.
So let me get this straight. Cain’s proposal won’t work because they won’t implement Cain’s proposal?
And what would be the problem with a smaller amount ending up in Washington in the first place?
Let’s see...this article appears to miss the fact that there would be no more SS and medicare tax as well...saving individuals and business a lot of money.
Also it’s not a zero sum game. With the 9,9,9 plan people will be willing to work extra and be more productive as they get to keep more of what they earn.
The elites hate it because it means they can’t control business and people with the tax code any longer. This will dry up their lobbyist money pay to play politics/business.
No what is sure idiocy is this mindless clinging to the current corrupt failed tax code by supposed "Conservative" Freepers EVERYTHING you bitch about in 9-9-9 is even MORE available in the current system There is NOTHING to stop Congress from simply raising income tax rates now. So rather then mindlessly emote based on your blind adoration of Paul, try thinking for a change.
I am a Perry supporter but will back Cain if Perry drops out. I think he needs to be vetted because the Dems and the media will.
Cain proposes a 9 percent increase on the poorest Americans and a 24% tax cut for the richest Americans. This will be the Dem angle on this.
Cain proposes to more than double the sales tax people already pay. In Texas we have a 8.25 sales tax we will add 9% to that. So a family of 4 who lives under the poverty level will have a 9% increase to their sales tax and a 9 % increase to their income tax. While a millionaire will have a 24% decrease to their income tax.
The solution to the poorest paying the 9% sales tax will be "prebate" checks that are issued monthly to the poor to cover what they will spend in the coming month.
The 999 plan has zero chanceof ever happening
RE: there would be no more SS and medicare tax as well...saving individuals and business a lot of money.
_______________
OK, could you kindly explain to us, how that will not exacerbate the problem for these entitlements?
SS is practically a pay as you go system where current workers pay for the SS of current retirees.
How’s having no SS tax ( deducted from your salary ) going to help pay for current retirees?
Social Security’s Payout has already exceeded revenues.
SEE HERE:
http://www.nytimes.com/2010/03/25/business/economy/25social.html
Won’t Cain’s plan excacerbate the problem?
Sorry that is nonsense.
9-9-9 reduces the tax rates and broadens the tax base. It eliminates all the current corrupt handouts and loopholes in the current system. It is a key component of fundamental structural reform to our failed corrupt political system.
The tax code, along with regulation, is the primary tool Congress uses to reward friends and punish foes. The US tax code is a corrupt failed system that desperately needs replacing
9-9-9 is the best of the lot for reform purposals.
This fear about "a new tax" is misplaced. There is nothing in the current system that prevents Congress from raising tax rates 30-50-80% but the will of the people. It is actually easier to raise taxes now since so few people directly pay them. Most US taxation is hidden from the payers. 9-9-9 makes it all right there in front of everyone. under 9-9-9 you cannot demagogue about "making the rich pay their fair share"
I disagree. 999 is why he’s on fire right now. People love it, they understand it and it’s FAIR.
People hate that the companies like GE get corporate welfare and that the lower middle class pay next to 0 income tax and then vote to tax the rich.
999 removes the incentives for the politicians to play winners and losers which results in pay to play. 999 is also better than the fair tax because the tax isn’t oppressive in any single area, so it avoids the black market that would surely follow a 15% only sales tax.
I pay 9% of my income to the feds. I pay 9% of what I buy to the feds. That’s fair since EVERYONE pays the same amount. And now business will take off under that model and then we all will be making more money.
“Tax policy experts say Cain’s plan is unrealistic because it presumes that no deductions and exemptions will be permitted, no matter now popular.”
No more tyranny of the majority?!
The horror!!! /s
EVERYBODY PAYS. Sounds good to me.
The "poor" do NOT pay their fare share or any income tax at all for that matter. Screw'em. Kill The Poor! They are parasites on our society.(channeling Roseanne and Mikey Moron)
RE: First of all.. conservatives want less tax, not a new kind of taxing.
How’s dropping Corporate taxes from 35% to 9% not less taxes?
How about broadening the tax base and simplifying the tax code? Isn’t that what Conservatives want as well?
What about the eventual goal of getting the IRS off our backs? Isn’t that an even worthier goal?
Clinging to the current tax code will not "Save" Entitlements since they all ready broke. The current system merely keeps the current Entitlement problem hidden.
Not only that. How is eliminating all forms of double taxation in 9-9-9, such as the elmination of all Capital Gains taxes, “Raising a new tax”?
The 9-9-9 plan offered is an idealization that could not ever be fully applied, but that should not be a reason to call it “sheer idiocy”.
An example of “sheer idiocy” is the principle of progressive income tax rates. It is anti-revenue to the degree it becomes ever more progressive. The flatter the tax rate between the top and the bottom, the greater the flow of revenue, if that is the objective.
But if the goal is to LIMIT the amount of revenue the Congress has to work with, then the lower the revenue, it would seem that simple good sense would be to reduce the expenditures. Apparently this far too great a leap for the bulk of voters or legislators to make, therefore, a balanced budget amendment seems to be a reasonable recourse.
And we almost had one, once. What is it about logical thought that escapes so many people?
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