This is a common flaw when people analyze the effect of 9-9-9.
Under the current system, taxes, which are a cost of production, are embedded in the price of a product. Under 9-9-9 part of that cost is moved to the point of sale. The net price out the door will not change. The list price of the product will fall 9% because of less embedded tax cost.
The increased tax on the pension is an issue. Although I agree with the plan overall, there is no logic in taxing Social Security retirement benefits and certain levels of pensions. Not a difficult issue to resolve in implementing the system.
There is also an additional tax on savings, already taxed once through the income tax, due to the sales tax. Seniors get screwed as it stands.
Proponents of 9-9-9 (and the FAIR tax) claim that prices will go down because of the reduction in tax on producers, but I wouldn't count on that. Any business will be happy to use the change to increase its profit margins.
Under the current system, taxes, which are a cost of production, are embedded in the price of a product. Under 9-9-9 part of that cost is moved to the point of sale. The net price out the door will not change. The list price of the product will fall 9% because of less embedded tax cost.
Really? And exactly what are those embedded taxes that will magically disappear with 999? Can you name one other than the tax on profits (go ask GE how that works for them)? Will property taxes disappear? Will the State's unemployment and disability tax go away? Will all of the costs of regulation compliance vanish?
999 is foolishness. Cain's "get rid of the EPA" is actually a plan that would work. Perry's claim to dramatically reduce regulation will go even farther without penalizing my savings and causing riots in the vast Entitlement Community.
your assuming that competition wouldn’t force the full tax burden reduction on producers/service sector providers to roll prices back to the actual pre-sale net cost/tax reduction level. That would only happen if there are barriers to entry.
your assuming that competition wouldn’t force the full tax burden reduction on producers/service sector providers to roll prices back to the actual pre-sale net cost/tax reduction level. That would only happen if there are barriers to entry.
“The increased tax on the pension is an issue.”
The taxation of pensions is not a straightforward process of are pensions taxed, or are pensions not taxed.
It depends.
The portion of a pension, if any, that IS taxable, is any portion that WAS NOT derived from their own personal pre-taxed contributions (employees’ own pension contributions made out of wages that were already taxed).
What is covered by that - is everything derived from what the employer contributed plus everything the derived from what the individual paid in the form of “tax sheltered” contributions. Personal “tax sheltered” contributions to a pension plan are where the employee forgoes a portion of the salary/wages, having it contributed directly to the pension and avoiding income taxes on that earned income, in the year earned. They’ve “sheltered” that income, to the years when they will be likely at a lower tax bracket - when they’ve retired.
Or, to put it the other way around - the portion of a pension, if any, that IS NOT taxable, is any portion that WAS derived from contributions the employee made from their own pre-taxed income (contributions made out of wages that were already taxed). The rest is taxable.
So, the taxable amount varies from plan to plan and individual to individual.
In as much as 9-9-9 ignores all these distinctions, the 9-9-9 tax results will vary just as widely with pensioners. Actually, those in any plan where everything was contributed by their employer alone, would actually get a good tax reduction. Their entire pension is taxable now, probably at least at 10%, but minus things like their rent/mortgage, what they save and invest, the rest - what they consume would only be taxed at 9% at the cash register. On the other side, those whose pensions contain a result from a substantial amount of personal pre-taxed contributions, the 9-9-9 tax result could be substantially different.
However, the big thing is that “difference” is the difference of a change. In the end, in the long run, the tax obligations of everyone would LESS different from each other than they are today.
The system of today is a system of favorites and benefits to the favorites. The 9-9-9 plan should be embraced by Liberals who love the term “universal” applied to anything. If there was anything as far as possible from “universal” about a tax system, that would ours at present. There is always immediate winners and losers in any big change. But, down the road, after the change has had time to settle in, everyone should be able to see that instead of preferences and favorites, under 9-9-9 we will all be paying taxes in a much more “universal” and non-preferential manner than today.
9-9-9 can be sold. Its a matter of how IT CAN be sold. Set the terms - fair, universal, even handed, against the current corrupt system and it - selling it - can be done.