Posted on 10/15/2011 10:09:54 AM PDT by rob777
There has been a lot of talk regarding where Cain got his 9% number for the income tax, sales tax and corporate tax. Apparently a full analysis was done by economist and former assistant to the director of the Office of Tax Analysis for the U.S. Treasury Gary Robbins. Robbins thinks that the plan would work economically, but would not sell politically:
“You’re trying to go to a system that taxes income once and only once and quits double-taxing savings,” Gary Robbins told POLITICO on Wednesday. “That’s something that can really juice the economy, it’s probably worth 15 percent in growth. … The problem with the big-bang changes like that, the flat tax or the fair tax, is that they are so alien to the current system that it would be a great big shock.”
Though Robbins says the plan would work fiscally and economically, he believes people would never accept such drastic changes. http://caucuses.desmoinesregister.com/2011/10/12/herman-cains-9-9-9-analyst-its-a-theory-not-a-solution/
The actual number that would allow the plan to be revenue neutral is 9.1% (See table 10c on page 8: http://www.politico.com/static/PPM191_111012_999scoringtables.html
Ryan did NOT endorse the 9 9 9 plan as earlier claimed.
And, with equal participation, that means EVERY taxpaying voters' wrath. Or praise. Human nature hasn't changed, has it?
Ultimately, the final version has to land on the President's desk to be signed into law or vetoed.
Another misconception is that the tax would be added at the cash register at the time of purchase.
Do you have a source for that statement?
Savings already taxed by income taxes will be taxed again by the new sales tax. Seniors worst hurt, poor and minorities least hurt.
Your post made me think - even though transitions are tough - what opportunities exist?
Seems like this could open up a great way to reduce dependence on social security and bring that system back into a sustainable mode.
Phase social security benefits (reducing) over time. Those, like you that have paid the taxes up front already keep high level social security benefits (such as retirement age for qualifying, etc.). Those benefits, or access to those benefits (based primarily on retirement age adjustments) decrease over time. In effect - you get an "offset" by actually getting your money out of SS, but probably remain relatively funds neutral due to the increased sales tax.
Those like me - still a ways from retirement, (~40 years old) probably get screwed the most, but personally fixing the tax system and the entitlement system is something I am will help with (within reason) so that my kids can have an economic environment that lets them succeed on their merits without having to work through a forty plus year spending bing hangover.
I think you are correct - nothing happens in isolation, but I think that there are opportunities to couple dramatic reforms in the tax code with dramatic reforms in entitlement programs so that the reality of the implementation is phased and doable, instead of being a step function with real pain for all.
Doing nothing ensures pain for all.
I see the double taxation of dividends, because it is taxed once as business income, and then taxed again as dividend to you (the same money as a lump sum to the business and then as a distribution to the individual owners).
-PJ
Ryan did NOT endorse the 9 9 9 plan as earlier claimed.
If these points are of interest to you, then invest in the two FairTax books as they do a much better job of explaining all of the other different areas that you would find even greater savings as you drill into it more and more.
And for those who are under the poverty line, there is a prebate system to assist and even pay for the taxes they paid. But it is not automatic, they have to be a part of the reporting system and will have to work to get it back. Everyone will have some skin in the game and will be very aware of how much tax they are paying.
You assumed the price of the pizza would stay the same.
I said “or maybe” which means I can use any number I want.
I thought about $6.99 but that would be misleading:)
Indeed, but is this what we want? We live in a capitalistic economy after all. We need people spending money on things. Probably the idea is that there will be more jobs and people will have more money in their pockets and they will spend it on something or save it which will put more money in the economy for investment. The real beauty of Cain's plan is simplicity. I like the KISS principal. It actually makes us all "smarter". We know what we are doing with more certainty.
Ryan did NOT endorse the 9 9 9 plan as earlier claimed.
I'm not an expert so maybe someone can correct my thinking here...
My thought is that interest paid (say on a savings account in a bank) is in reality no different than a dividend. The only real difference is that in a bank they tell you what the dividend will be up front when you invest in the savings account. Typically that dividend (interest) changes based on the financials and market.
To me it seems like one tells you what your dividend will be before you invest and then change that with the markets (banks) whereas another will tell you what your dividend is after the investment based on the markets.
Maybe I am off base here, but think it is a matter of semantics.
Would you say that it is only a tax on current savings if you use current savings to purchase something?
If you purchase something from future income that has not yet been taxed, then it isn't a double tax anymore.
Now, this may be an issue to retirees who are living off of savings, but today's workers will likely be purchasing from their paychecks or future savings, not past savings.
-PJ
No the trick is to put real tax reform on the agenda and do away with the power of congress to buy votes with your money, and stop the freaking social engineering. All of which reduces spending and reverses the growth of government.
Much ado about nothing...ain’t gonna happen.
Well there's nothing that can be done about existing savings taxed by income taxes at the old rates. Going forward, any new savings would be taxed at the new 9% income tax rate.
That fact that many will be initially screwed is not sufficient reason not to scrap the old system and replace it with a new system that will be better going forward.
It's like if we suddenly invented a way to prevent cancer but we didn't want to make it available to others because it would be "unfair" to those who already developed cancer.
I would be one of the ones getting initially screwed by the 9-9-9 plan as I have significant savings from income that were taxed at 25-33% over the years. However, I'm willing to suck it up and go with this 9-9-9 plan as it will work out better for me in the long run and will super-charge the U.S. economy while at the same time, forcing our government to get smaller.
We have the same danger of tax increases now.
What Cain proposes is that all Americans have some skin in the game - not just the producers.
Because I consider it so :)
I understand it doesn’t meet the technical definition. But I’ve always had an issue with the Unearned Income Tax, as if I would even have any money generating interest for me had I not *earned* it all, and paid taxes on it, in the first place.
Dividends are the owners' share of the profits of a business.
Interest earned is the amount of money a bank pays you for the use of your money.
As an owner, you may not receive a dividend if the value of the stock goes down too much.
As a depositer, you do not lose your deposits. You are not investing your cash assets (converting them from cash to ownership interest in another asset).
As an owner receiving dividends, the business profit being distributed to you is new income. The business profit was already taxed as business income.
As a depositer, the interest earned on your cash is new income to you. Your cash deposits were taxed as income when you earned it. The deposits are not taxed again. Only the interest earned is taxed.
-PJ
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