With all the talk of Herman Cain surging into second place in the GOP presidential derby, apparently siphoning off much of Rick Perry’s once-fervent but apparently short-lived support, it’s easy to get caught up in the drama of the race without thinking too much about the substance.
So here’s a quick reality check on substance. So far, the basis of Cain’s campaign is his “9/9/9” plan, which would replace the existing tax system in the U.S. with three elements: a 9% personal income tax, a 9% corporate income tax, and a 9% national sales tax. Extremely limited income deductions (apparently the only one that survives is for charitable donations), and as far as is evident from Cain’s website, no exemption in the sales tax for food or other essentials.
Cain gets credit for a couple of things here. First, there’s little doubt that the tax code is insanely complicated and riddled with loopholes that benefit those with enough resources to hire lobbyists to get them tucked in there, so pushing a radical simplification of the tax code has some value. Reforming and simplifying the tax code would be a good thing, other things being equal. But “other things being equal” is the big stumbling block.
Second, there’s no doubt at all that 9/9/9 has proven to be a catchy campaign slogan. Last night’s GOP debate, for example, was apparently brought to you by the number 9, and 9/9/9 is the talk of the twitters and the blogs. How many pillars of Mitt Romney’s 59-point plan do you think most observers can rattle off? Compare that to the number of people who know (more or less) what 9/9/9 is about, and you’ll see the extent to which Cain is controlling the conversation about the economy right now.
The problem is that 9/9/9 is an awful idea, for two pretty simple reasons. First, it would cripple the government by slashing revenues to a point where even basic services would be unaffordable. Cain has claimed that the plan is revenue neutral, but most observers disagree. Stated otherwise,
This, even conservative experts agree, wouldn’t provide the federal government with enough revenue to maintain the safety net and would lead therefore to either persistent deficits and growing debt, or a drastic reduction in social programs.
Second, the plan represents, at heart, a massive shift of the tax burden from wealthy people toward lower-income people. You thought a 6.25% sales tax was bad? How’s about a 15.25% sales tax, which is what you’ll pay once 9/9/9 goes into effect? And as we know from our unfortunate flat-tax experience here in MA, a flat income tax inevitably hits lower-income people harder. It’s really pretty simple: “The rich will pay less; the poor will pay more.” Or, as Reagan, Bush I, Kemp, and Ron Paul veteran Bruce Bartlett says,
The poor would pay more while the rich would have their taxes cut, with no guarantee that economic growth will increase and good reason to believe that the budget deficit will increase.
Even allowing for the poorly thought through promises routinely made on the campaign trail, Mr. Cain’s tax plan stands out as exceptionally ill conceived.
9/9/9 is appealingly simple. But simple isn’t always good.
seascraper says
.
David says
making it worse would make all kinds of sense, because…
stomv says
My parents have payed income taxes their whole lives. They’ve earned more than they’ve consumed, and they’ve paid taxes both on the earnings which they used to consume, and the earnings which they saved.
If you create a consumption tax now — when they have zero income — they’re paying tax *twice* on all the money they spend in retirement. They were already taxed on that income when they earned it. They saved it to use now, and now they’re being taxed on it again.
I’m not opposed to “double taxation” in general — I don’t have a problem with, say, liquor being taxed in excise, then again in sales.
I do have a problem with dramatically changing the rules on folks who’ve already committed to a plan, developed rationally. If you have a sales tax of 9%, you’re reducing every single pensioner’s effective savings by 9%. Every single retired person gets screwed. For that reason alone you will never see a national sales tax replace a significant portion of the income tax.
There’s no reason why we can’t simplify the tax code without using 9/9/9. The Democrats should have done so when they held the reigns, and they should have done it two ways. Firstly, they should have simplified the tax code for folks earning middle class wages with relatively simple tax requirements. Maybe own a second home, maybe own a boat, maybe have kids in college, medical expenses. Essentially expand who was eligible for the 1040-EZ. The second thing that they should have done was simply eliminate extra tax code which allows wealthy people to pay less taxes. This way you get a trifecta — you increase revenue to pay for programs, you make the tax code more progressive, and you reduce the size of the tax code.
What the Democrats really need is some think tank to work on these. Create individual independent tax code change proposals which accomplish a small bit of either the first item above or the second. Then, when the Dems have opportunity, pound ’em out one at a time.
tblade says
999 is 666 upside down. It turns out that it’s the Republican Black guy who is the antichrist!
Code = cracked. You’re welcome.
David says
from the debate last night! 🙂
tblade says
Is there anything lower in life than giving the appearance of possibly plagiarizing Michele Bachmann?
Humiliating, lol.
SomervilleTom says
Superstition and numerology from an elected representative in a campaign for national office.
I know, she was just joking. Right.
Mr. Lynne says
…much farther than looking at the plan’s origins and Cain’s “Economist”