Skip to comments.Where Cain's 9% Came From
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:
Youre trying to go to a system that taxes income once and only once and quits double-taxing savings, Gary Robbins told POLITICO on Wednesday. Thats something that can really juice the economy, its 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
Thank you! I didn't know that and it will make a HUGE difference. Herman Cain needs to make sure this is clear in the next debate. It changes everything.
The federal tax on your earning goes down to 9% from whatever it is now, most likely around 25%.
Read Cain's entire plan, not just the consumption tax part.
I am not slinging mud.
I am asking serious questions.
Consumption may be negatively impacted, but an economy that relies on 70% of GDP as consumption is unsustainable.
The 9-9-9 plan with allowed corporate deductions only for materials purchased here in the US will stimulate production again rather than relying on unsustainable credit-based consumption.
Every manufacturer publishes their products as Manufacturer’s Suggested Retail Price (MSRP). Just call a manufacturer and ask to purchase an item directly from them and they will have you contact a dealer first. Unless you have the volume to be considered an Original Equipment Manufacturer (OEM) customer, they will not sell to you.
That is determined by the distributor and dealer networks the manufacturer wished to operate under including each level of distribution to the retail market.
All have their preferred markups included. Interestingly, under the current system, each level also has its federal, state and local fees, taxes and regulatory costs added to the equation as well.
“but would not sell politically”
I’m guessing this means it would not sell to our “professional” politicians who have been used to asking for and getting blank checks at the taxpayers peril. I do think that “we the people” are ready to buy into this plan and tell the “professional” politicians where to stick it.
If you were a little more concerned about yourlife as well as those you hold idea, how about educating yourself and reading the two FairTax books and how it works in detail instead of drinking talking points Kool-Aid.
For the record, I oppose a national sales tax. However, I haven't lost my objectivity. Cain's numbers do add up. It sickens me to see opponents lie about them.
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).
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.
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.
I like the openness of the plan. Instead of “out of sight, out of mind” like we have now, any tax increases are actually seen by the taxpayers.
The question is, what else would you be doing with that money had you not deposited it in the bank?
How much would it be worth to you to forego what you wanted to do with it, and instead let the bank loan it to someone else for a period of time? The interest that the bank pays to you is the price you are willing to charge the bank for their use of your money. It should be at least equal to, if not more than, what you would otherwise have earned with that money.
Just remember this about the 999. Herman recognizes jumping from what we have now to the full blown FairTax will be a nightmare and also would create a lag in basic operating funds for the government (little things like paychecks for our military) while the IRS and other agencies are re-tasked to run efficiently (imagine that).
The 99 would provide that basic funding while the last 9 would begin the process of the re-tasking by giving those businesses able to switch rails immediately (mostly the smaller ones) and provide for finding any details that would have to be tweaked to make the system run smoothly for the full blown FairTax. Once there, the first two 9’s would be eliminated.
Herman knows this because he has been a student of the FairTax for a long time because of his close association with both Rep. Linder who originally authored the bill and Neal Boortz who headlined as author of the books.
Not to be overly snide and snarky, but are you related to Rep. Conyers and refuse to read?
READ THE BOOKS!
The danger is not what it can turn into, the danger is what they do already.
There is absolutely no restraint on congress to raise taxes currently, in fact the speaker of the house said on the Greta show, that there is an average of 5,000 changes to the tax code every year.
Spending is the disease, they think the taxpayer will accept half a loaf, so far they seem to be right. Roosevelt was elected three times by playing the class warfare card. We shall soon see, what we have become.
“Or maybe the 9.99 pizza will be $7.00 because of all the hidden taxes already built in?”
Some folks just don’t get it. All the taxes paid by corporations are built into the final cost of consumer goods sold by retailers.
The elimination of the payroll tax + the reduction of the corporate tax to 9% + the creation of a 9% sales tax = tax reduction. This should be very obvious.
“even if in the long run it lowers taxes”
No. It lowers taxes at the moment it’s implemented. With the implementation of 999 the federal government will collect $800 billion less than it does today.
Aren't we talking about the consumption portion of the plan? We're talking about the 9% national sales tax that the already-taxed savings would be used for.
However, we already have state and local sales taxes in the range from 6%-9% in most places, right? If so, then the conversion of existing sales taxes to the national consumption tax would mostly cancel out, right?
You can define "endorsement" as in part with changes expected, or the concept of a credible plan overall which will change the tax structure of the country--BIG TIME where the time [make use of a good crisis, the Left claims] has come to be a team player and run over your opponents. Now, of course egos of other candidates come into play--but where is their plan, the ones that are so quick to "say it won't work"? They do not have a plan, any credible plan supported by real economic thinkers as Reaganomics Laffer has called "wonderful" who has also had critics of his own--it's politics as usual.
No more win on personalities and coiffed hair-dos, and not substance or experience--plan first, win second-the way it should be.
I once was eager over Gov. Perry, but perhaps he is more at his comfort level in his homestate where he has seen great success. I like Bachman as I can "see her" as presidential material, very intelligent, tax attorney-carries herself with great dignity and poise. I thought Palin seemed always tackling family drama issues, as a mother-bear should and finally decided what was best for her family, first. I admired that. Mitt has great leadership skills and thinks like a business man even using powerpoint presentations at first, in control even under pressure when in meetings where he allows blowhards to do their talk, then takes charge. The rest don't enter my radar screen as not real leaders of the most powerful nation in the world that I would feel comfortable with.
... or do they all become a blur after a certain point?
LOL I think its more of a problem with Cain looking better the Perry.
Id like to see your source for that allegation.
Mr. Cain needs a more educated voter, but sadly he is out of luck on that one. Bill Clinton taxed the dead and then taxed SSN as well, was that too complicated.
How about giving half your estate to the government when you die? A simple move that would eventually destroy the farmers of America, but do nothing to control the Giant endowment funds that finance the movers and shakers of the world.
Capital gains, you know that stuff that creates retirements funds are double taxed already. Spending is the enemy, not taxes.
I have no issue with removing those taxes.
Gee, ya think?
Correct. And no matter what the cost might be, mylife, how about staying home and making your own meal once a week to cover the “increase” you mentioned. The market will adjust the price, and to your benefit if you do not buy it.
Ryan said he loves the 999 Plan, and that it would be a great starting point for reforming the U.S. Tax System in 2013:
So let’s see . . .
We get to pay 9% federal sales tax in addition to a state sales tax.
Add in state sales taxes, and some us would then be paying close to 20% in sales taxes when we buy something.
The result will be consumers will reduce spending.
A further collapse of our consumer economy will follow.
Meanwhile, because consumers reduced purchases, the 9% sales tax won’t generate the expected revenue.
So then the government raises the 9% sales tax to say, 12%.
People reduce spending even more.
Government then raises sales tax from 12% to 15%.
People reduce spending further still.
Meanwhile, states will also find their revenue from state sales taxes falling, so they will have to raise sales taxes or income taxes or whatever to try to make up for the drop in sales tax revenue.
At some point, the federal government realizes raising sales tax is counter productive, to it raises income tax from 9% to 12% or 15%.
But because the economy is in the dumpster because the consumer has reduced spending, incomes are off, so even the increased income tax fails to generate enough revenue.
Then, instead of raising the tax rates, the government might take the view view that putting your money into a bank savings account amounts to “buying a bank account,” snd proceed to charge 9% “sales” tax on the money you put into savings . . .
To make people more likely to spend money to boost sales tax revenue and the economy by making it equally expensive to save as to spend.
And anyway, if a poor mother pays federal and state sales taxes to buy her children shoes . . .
The billionaires should slao be made to pay the same rate when they buy stocks and commodities with the cash they have left over after buying their kids shoes.
But in any case, I’m not worried, because this 999 plan will never happen, and is just a gimmick to generate controversy and votes.
Actually they are taxing twice. Once when earned and once when spent. Makes me not want to spend.
The premise behind your argument is that the National Sales Tax is a simple add-on tax the way state sales taxes are. It is not an ad-on tax, but a replacement for taxes that are already embedded in the selling prices. As such, it does not constitute an automatic increases in retail prices. In fact, there could conceivably be a decline in prices if the 9% tax is indeed less than the embedded taxes it replaces.
Your posting history is readily available to anyone who looks at it. Pretending to be an objective observer when you are in fact a fervent campaign bot is dishonest.