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The Tentacle


November 28, 2011

Pluses and Minuses of Cainís 9-9-9 Plan

Michael Kurtianyk

Whatever happened to Herman Cain’s 9-9-9 Plan? Remember that one from the former CEO of Godfather’s Pizza? It’s the one where there will be a 9% business flat tax; a 9% individual flat tax; and a 9% national sales tax.

 

Mr. Cain’s website touts that the 9-9-9 plan “will expand GDP [Gross Domestic Product] by $2 trillion, create six million new jobs, increase business investment by one third, and increase wages by 10%.”

 

This plan would get rid of the federal income tax code, eliminate social security and other payroll taxes, and drop all federal inheritance, dividends and capital gain taxes. Many tax deductions would be wiped out also. So, should we adopt this or not?

 

On the plus side, it would hopefully spur businesses into putting money back into their operations. Under the plan, capital gains and dividends would no longer be taxed. Companies that couldn’t hire due to a lack of funds would now be able to start expanding, i.e., hire workers. This could also mean that companies would stop outsourcing to other countries and keep their businesses and factories here in America. It could also mean that foreign companies could come to the United States and set up their businesses here.

 

Tax returns would be much easier, too. Herman Cain proposes a one-page form for tax returns. We wouldn’t have to spend so much time writing down gas mileage, organizing receipts, and, in general, preparing forms to pay our taxes. Logically, it would also reduce the bureaucracy that is the Internal Revenue Service.

 

However, this plan will not work.

 

As the so-called “super-committee” proved, Congress can’t be trusted to reach a bi-partisan approval on anything. Herman Cain’s 9-9-9 plan won’t pass Congress. Even if it did, it will be chopped up into tiny bits and pieces of flotsam and jetsam. Not since the Civil War have we had such a divided country. The Republicans blame the Democrats, and the Democrats blame the Republicans. Each side will insist on digging in their heels and not moving. It’s sad, but true. There was once a time when our political leaders served the people.

 

Another reason Mr. Cain’s 9-9-9 plan won’t work is that five states don’t have a sales tax (Alaska, Delaware, Montana, New Hampshire, and Oregon). Mr. Cain isn’t likely to win the primaries in those states. Besides, who’s to say that Congress won’t raise the sales tax sometime in the future, or that Congress will tax items at separate rates than others, like alcohol and tobacco?

 

Yet, it’s the deductions, which would now be eliminated, that proves this plan’s undoing. Tax incentives are one of the ways that our government can influence society for good. Deductions like the retirement savings credit, the mortgage deduction on personal residences, the earned income credit, and others would be eliminated in Mr. Cain's plan. This is not going over well with many Americans.

 

Mr. Cain’s 9-9-9 plan won’t even do what he says it will do. He has stated that the 9-9-9 plan "does not raise taxes on those that are making the least." However, according to the Tax Policy Center, it would raise income taxes on people who now have low tax burdens due to exemptions and deductions. The Tax Policy Center is an independent policy analysis group that includes tax analysts who have worked in both Democratic and Republican administrations.

 

The Tax Policy Center looked at Mr. Cain’s plan and found that this plan would result in tax cuts for the wealthiest taxpayers and tax increases for the poorest taxpayers. The center found that 83.8 percent of tax filers would get a tax increase under Mr. Cain’s plan. However, most of the tax filers who make more than $1 million would get a tax cut under his plan. The average tax cut for millionaires would be $487,300.

 

Mr. Cain’s 9-9-9 plan fails not only on practical terms, but also on fairness terms.

 

Michael.kurtianyk@gmail.com

 



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