Analysis of Herman Cain's 9-9-9 Plan

[rambone]

Ok, forget the candidates for a minute. Lets just have a straight up economic discussion of the plan.

The 9-9-9 Plan has some high points and some low points.

Some good points are the elimination of the death tax and payroll tax... If Republicans don't compromise away the good points of the plan.

On the downside, the IRS goes no where, income tax remains, America gets one step closer to a European-style Value-Added Tax, and the Feds can now tax us while we are coming and going.

And lastly, isn't America having a hard enough time exporting its goods overseas without additional taxes being put on them?

Herman Cain's "999 Plan": The Good, the Bad, and the Ugly

The Bad
Cain doesn't get rid of the income tax. Instead, he reforms it. And then he adds a new levy -- a national retail sales tax -- on top of it. Why? Why doesn't he just get rid of the income tax at the start? The answer, most likely, is that if he proposed to eliminate the income tax in one fell swoop, while trying to raise the same amount of revenue as we do today, he would have to set the rate for the sales tax so high -- well above 9% -- that voters would balk. My guess is a national sales tax would have to be set at something closer to 25%, to raise the same amount we currently raise with the existing income and payroll taxes.***

No wonder Mr. Cain has fallen back to a two-step strategy: 9% is a teaser rate!

The Ugly
The second problem with Cain's plan is more serious than the first. It puts in place the infrastructure for a VAT, a Value Added Tax. That's bad. No, that's very bad.

Cash-register sales taxes have a habit of evolving into VATs. That's what happened in Europe. And that's undoubtedly what will happen here, if we adopt Cain's plan.

And if Cain's 9% personal flat tax failed to remain flat (as happened with Ronald Reagan's promising but ultimately failed 1986 tax reform), we would end up with the worst of both worlds: a confiscatory income tax and a job-crushing VAT.

Paradoxically, then, if you want higher taxes and permanently bigger government, one way to get there would be to support Herman Cain's 999 plan!

And another analyst says that the plan is unrealistic and will have the same effect as a "27 percent uncapped payroll tax."

Cain's 9-9-9 Arithmetic Raises Revenue Generation Questions

“Herman Cain’s bid for the Republican presidential nomination is fueled in part by his proposed U.S. tax code overhaul that tax policy veterans say doesn’t add up.”

“Tax policy experts say Cain’s plan is unrealistic because it presumes that no deductions and exemptions will be permitted, no matter how popular.”

“Either Herman Cain is the tax messiah or is proposing a system that has no correspondence to real-world tax systems,”

“In practice, it will have the same economic effect as a 27 percent uncapped payroll tax.”

 

[teddy12b]

What I like about the 999 plan is that it's an attempt to simplify the current system and get it to the point where common people such as ourselves can understand the law and how it applies to all people without exception.

In my opinion if it takes more than one page to entire tax law that governs our country then it's got too many exceptions and loopholes. Some of the people marching now are the same ones who marched in DC with the TEA party and people have a right to be upset at how the system is currently setup. All the exceptions, loopholes, and general lack of understanding because of the depth of it's complexity are the reasons that people see our current system as unfair and baised towards the rich getting richer and the poorer getting poorer.

What I don't like about the 999 plan is that it's not simple enough. We need to create a tax code that could be printed on one side of one sheet of paper and easily understood by everyone. One set of rules that applies equally would at least resemble something fair.

By contrast Romney's plan with all his points just sound like more of the same.

 

[Magneto]

Cain said that there are no taxes on products until they are sold, therefore no taxes on products going overseas, helping make american products more competitive overseas.

 

[rambone]

Cain said that there are no taxes on products until they are sold, therefore no taxes on products going overseas, helping make american products more competitive overseas.

So foreigners get American products cheaper than Americans can? Interesting.

 

[indykid]

While a national sales tax sounds like a nice idea, it would really impact the elderly who on a fixed income and right now pay no federal income tax would then be hit with a 9% tax on everything they purchase (in the list provided by Cain as what would be taxed versus exempt). It would really be a hit on their ability to live.

Or maybe that is the real for the 999, Soylent Green!!!!!!

And for the tin foil crowd, 999 seems really good until you read it upside down!!!!!!!

 

[rambone]

While a national sales tax sounds like a nice idea, it would really impact the elderly who on a fixed income and right now pay no federal income tax would then be hit with a 9% tax on everything they purchase (in the list provided by Cain as what would be taxed versus exempt). It would really be a hit on their ability to live.

Great point. Then we'll be pressured to raise Social Security taxes to keep up with the cost of living increases caused by the National Sales Tax.

 

[ViperJock]

The stuff these guys are predicting are results of the evolution of his plan. What if THIS happened?!?!? Um, yeah. Well, even so it would be better than what we have now. As for tax deductions etc, why would someone who was previously taxed 20% that managed to get down to 18% after deductions prefer to have the current system than start at 9% that would just be stupid.

My guess is that the "analysts" are more interested in sinking Cain than they are in realism. The reality is ANY plan can be perverted and worsened. The best we can hope for is to compare what the plans are at face value to what we currently have. My prediction: no matter whos great tax/deficit reduction plan we vote for via a new president gets completely hosed in 10 years even if it gets implemented properly in the first place.

 

[ViperJock]

By the way, who has a better actual plan? and what is it?

 

[mrjarrell]

By the way, who has a better actual plan? and what is it?

Well, Johnson supports the Fair Tax plan. Not a fan of it myself, but it's certainly a better plan than the one Cain is floating. At least it would get rid of the 16th Amendment and the IRS, (even if it did have another bureaucracy for the entitlement checks that would need to be issued).

 

[ViperJock]

The fair tax thing has the same problem with people on fixed incomes. In fact, I think it would be worse since ALL the taxes would have to be gathered that way. There would be no income tax at all so that revenue would have to be made up in additional sales tax. right, Indykid? Also I don't really understand wha the deal is about non-regressive tax. how does someone pay tax in advance on what they will spend? Granted I haven't read a ton about this but although simpler, I don't think it is ultimately any better. this system can be corrupted as any other. Furthermore they are designing it to be revenue neutral which means the total amount of taxes being generated now will still be generated. The taxes will just be more spread out to the population. While this may be good for those paying ALOT of tax, it will be bad for just about everybody else UNLESS we also decrease the amount we tax overall.

Better? nah, different.

 

[rambone]

By the way, who has a better actual plan? and what is it?

The Ron Paul plan. Shrink government enough so that the IRS can be abolished and replaced with NOTHING. Cain has not impressed me with his reluctance to want to abolish any agencies. Without drastic cuts, who cares how we are taxed? We are broke! A better 9-9-9 plan would include 9 Federal bureaucracies to abolish.

“I want to abolish the income tax, but I don’t want to replace it with anything. About 45 percent of all federal revenue comes from the personal income tax. That means that about 55 percent — over half of all revenue — comes from other sources, like excise taxes, fees, and corporate taxes. We could eliminate the income tax, replace it with nothing, and still fund the same level of big government we had in the late 1990s. We don’t need to “replace” the income tax at all. I see a consumption tax as being a little better than the personal income tax, and I would vote for the Fair-Tax if it came up in the House of Representatives, but it is not my goal. We can do better.”

Ron Paul, 11/20/2008, New York Times / Freakonomics interview
​

 

[ViperJock]

And how would Paul pay for roads and defense? I would love to cut the fat out of the budget and eliminated jobs of 10s of thousands of people that do nothing but paperwork justifying their own job, BUT there are things that have to be paid for. The federal government has to have money somehow. How do they get it if no taxes? tax the states? that'll be fair I'm sure. California is broke, Indiana is not. I wonder who will pay more state tax so that the Feds can tax the state?

 

[Prometheus]

And how would Paul pay for roads and defense? I would love to cut the fat out of the budget and eliminated jobs of 10s of thousands of people that do nothing but paperwork justifying their own job, BUT there are things that have to be paid for. The federal government has to have money somehow. How do they get it if no taxes? tax the states? that'll be fair I'm sure. California is broke, Indiana is not. I wonder who will pay more state tax so that the Feds can tax the state?

You must have missed the part about being able to eliminate the personal federal income tax and roll back spending to 1990's levels.

I'm not sure how old you were but we had a military (the strongest in the world) and roads way back then.

I can't think of anything that would stimulate the economy better than increasing the average Americans take home pay by 20%~ every week.

20% more money would allow people to have more money to buy gasoline and go on road trips and thus increase the taxes from fuel sales that actually DO fund the roads.

I like Paul's plan. I think it should be called the Win-Win-Win plan.

 

[spearheadersarge]

Personal income tax is a fairly new phenomenon. It only started in 1913. The govt survived before that. 999 wont work for the average middle class earner any better than taxing the rich. Say for easy numbers sake a family of for earns 80K. after personal exemptions, mortgage, education, home office etc. their yearly tax burden is about 4K. Why would you vote for 999 when you would have an increase on your personal taxes of nearly 50%? On top of that you would also be paying an added Nat Sales Tax on everything you purchase from here on out. What happens when they run out of money? They bump up the percentage a quarter point and 30 years later it's not 999 but 141414! the government has only proved one thing, they can never get their hands on enough money! We need to roll back every dept, evry subsidy, every entitlement program till we can meet the obligations we have and stop borrowing money!

 

[Prometheus]

Personal income tax is a fairly new phenomenon. It only started in 1913. The govt survived before that. 999 wont work for the average middle class earner any better than taxing the rich. Say for easy numbers sake a family of for earns 80K. after personal exemptions, mortgage, education, home office etc. their yearly tax burden is about 4K. Why would you vote for 999 when you would have an increase on your personal taxes of nearly 50%? On top of that you would also be paying an added Nat Sales Tax on everything you purchase from here on out. What happens when they run out of money? They bump up the percentage a quarter point and 30 years later it's not 999 but 141414! the government has only proved one thing, they can never get their hands on enough money! We need to roll back every dept, evry subsidy, every entitlement program till we can meet the obligations we have and stop borrowing money!

Truth. All of it.

Cain sounds like General Burkhalter yelling at Col Klink with that nonsense NINE! NINE! NINE!

 

[ViperJock]

You must have missed the part about being able to eliminate the personal federal income tax and roll back spending to 1990's levels.

I'm not sure how old you were but we had a military (the strongest in the world) and roads way back then.

I can't think of anything that would stimulate the economy better than increasing the average Americans take home pay by 20%~ every week.

20% more money would allow people to have more money to buy gasoline and go on road trips and thus increase the taxes from fuel sales that actually DO fund the roads.

I like Paul's plan. I think it should be called the Win-Win-Win plan.

You must of missed the part about him leaving the other 55% of the current tax structure in place. You don't think those taxes would just go up? My point is that every plan is pretty much suseptible to the problem, change from its intended purpose. then he said it was just a START and he wanted to get rid of the IRS. Then where would he get the revenue without that additional 55%? He may have said, I don't know.

I am old enough to remember all the way back to the 90s and a few decades beyond. Thanks for the insult though. I prefer to argue with facts, what can I say, I'm a purist. I prefer data to emotional outbursts, implications, and innuendos so sue me.

 

[mrjarrell]

The Ron Paul plan. Shrink government enough so that the IRS can be abolished and replaced with NOTHING. Cain has not impressed me with his reluctance to want to abolish any agencies. Without drastic cuts, who cares how we are taxed? We are broke! A better 9-9-9 plan would include 9 Federal bureaucracies to abolish.

“I want to abolish the income tax, but I don’t want to replace it with anything. About 45 percent of all federal revenue comes from the personal income tax. That means that about 55 percent — over half of all revenue — comes from other sources, like excise taxes, fees, and corporate taxes. We could eliminate the income tax, replace it with nothing, and still fund the same level of big government we had in the late 1990s. We don’t need to “replace” the income tax at all. I see a consumption tax as being a little better than the personal income tax, and I would vote for the Fair-Tax if it came up in the House of Representatives, but it is not my goal. We can do better.”

Ron Paul, 11/20/2008, New York Times / Freakonomics interview
​

I've always liked that plan.

 

[2A_Tom]

9% income tax
9%VAT which the consumer ultimatly pays
9% nat sales tax
Excise tax on tires
Fed tax on gas
7 to 21%workmans comp
Unemployment
3.5% in income tax
7% in sales tax or 10% I'll
13+%fica
Hoe much does that come to?

How many hidden taxes are there that we don't know or think about.

The unexplained charges on your cell phone pay for free phones and minutes for "poor folk" (anyone who gets any type of assistance can get a free phone fron the gubmint)

 

[Kagnew]

By the way, who has a better actual plan?

Well, Prometheus and Rambone, of course. The dream ticket. Change we can really believe in!

 

[KLB]

Here is an interesting look at his plan
Herman Cain’s 9-9-9 Plan Is Great in Theory, but… « International Liberty