Posted on 10/17/2011 11:08:56 AM PDT by RockyMtnMan
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?
PING
In 2010 Congress got a strong message from we the people, I suspect in 2012 it will be stronger..those in Congress who survive 2012 will probably be running for the Cain Train to hop aboard...and not be left behind. Think sea change.
“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...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.”
This is the most substantive of the criticisms levied against 9-9-9 and he pretends it’s not important by saying essentially that “well, any plan could be twisted by bad politicians.” Not if the income tax were entirely repealed first instead of following this incremental step towards doing that. I don’t understand why Cain thinks 9-9-9 is a step we need to take if he really supports the Fair Tax and limited government. Just saying “we’ll make everything 9,” doesn’t stop the next wave of Rats from saying, “Well, let’s just make it 10, shall we?”
And even without that omission, these responses don’t address the most cutting criticism of Cain: he is not in the least a reflexive, principled conservative. He supported the TARP bailout in the strongest language possible, to the point that he wrote articles extolling the virtues of a bailout. He endorsed ROMNEY in 2008. The man is simply not cut out to be a leader for the right.
I’ll add my bump too.
Palin and Perry endorsed TARP also. Which of the candidates currently running opposed it?
Face it folks. Cain's 999 tax plan is more a political ploy then anything else. Its a gimmick to hoodwink conservatives into supporting his plan and voting for Cain in the primaries.
I like certain aspects of Cain's plan. Personally I support a flat federal income tax and the abolishment of corporate taxes and capgains taxes, or at the very least a significant decrease in both. But even that is not doable in todays political climate.
A return to the Reagan tax rates of 1988 would be a step in the right direction. Better yet, Congress needs to address the biggest issue today. Cut spending!
I think what he is saying is there is nothing stopping politicians from implementing a national sales tax right now. He addresses the rate change issue much the same way but also adds the salient point that those who don’t pay much or any now would not be inclined to see the rate rise.
Santorum??
The 9-9-9 plan makes much of end of payroll taxes offsetting the sales tax, but retirees have already paid payroll taxes and now they pay income tax on their pensions and withdrawals from 401ks. So retirees appear to pay 18% with no offset via the end of payroll taxes. Why is this a fair deal for retirees or workers who have already paid payroll taxes for years? (This is not a statement, I’m looking for an answer.)
Bookmarked! Thanks.
Rush just said that Ron Paul has the right idea with his plan to cut $1+ Trillion in government spending.
I agree with Rush, Cain’s National Sales Tax & Spend Scheme is a terrible idea. What is needed is a cut in government spending, not a New Tax like Cain’s National Sales Tax to give the politicians more of our money to waste.
... He endorsed ROMNEY in 2008....
what were his other options?
“It virtually eliminates the massive compliance costs of the current tax code, and it restrains the size of government.”
I’m pretty sure he’s on board with cuts in spending. He obviously subscribes to a “starve the beast” approach so I’m sure he’ll present his views on cuts if he hasn’t already.
The one two punch of supply side economics is to lower taxes and reduce spending at the same time. Expanding the base and reducing spending both have the same effect of lowering the cost of government.
Yes he supports cuts. Its easier for some to suggest he doesn’t.
I think he is releasing his plans, slowly, bit by bit. This does a couple of things. It allows for discussion on each piece as its released and it helps to prevent information overload. I really do think that he wants people to understand his plans.
I’m hoping that he wins in 2012 and shames Congress into passing it. I know it will go against everything Congress stands for since it will strip their power away. Let’s face it, Congress derives power from concocting these tax loopholes.
I’m in the camp of “it won’t get out of Congress.”
I’ve heard this argument before and as a spouse to a retiree, it interests me a lot, too. I’m voting for him though, because I think this is the best deal for my kids and grandchild.
Also posted here:
http://www.freerepublic.com/focus/f-news/2793974/posts
If it can’t be passed, it really doesn’t matter if it works, does it??
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