If you haven’t heard of GOP candidate Herman Cain’s “9-9-9 Plan”, you haven’t been watching the news. Not only has it been all the rage in the headlines, it was also the topic of the Bloomberg economic debate on October 11, 2011.
In Cain’s ‘9-9-9’ tax plan, he sums it up as a 9% Federal Income Tax, 9% Federal Corporate Tax, and 9% Federal (National) Sales Tax. The operative word in the ‘9-9-9’ plan is “federal”. In this, Cain is not considering the topic of state taxes, for state taxes are left to the states, not the federal government.
National/Federal Sales Tax
It has already been written [Today’s 22% Hidden Sales Tax vs. Cain’s 9% Visible Sales Tax] that all goods purchased currently have embedded, “sneak attaxes”, within the products bought by consumers, no matter their income level. According to FairTax.org, who does quite a bit of in-depth analysis of government taxes, says that all Americans, both the wealthy and the poor, are currently paying 22% embedded federal taxes in the products they buy, including consumables (groceries). With Herman Cain’s 9% Federal (National) Sales Tax, the 9% is not only visible, but lower than the current hidden taxes paid.
With this, states who have people paying no sales tax, currently have their people paying 22% federal sales taxes they are unaware of because it is not visible, but hidden within the price of the products. Under Cain’s plan, they will be paying 14% less in federal sales taxes for these same products. The difference, besides the lower federal sales tax, is the 9% is visible, and thereby known by the consumer.
And finally, the 9% federal sales tax is only on new goods, which includes consumable products, not used goods; there will be no federal sales tax on used goods, no matter whether you are wealthy, middle class, or poor.
‘999’ Sales Tax Calculator
Federal Corporate Tax
With the current federal tax code, corporations receive both loop-holed and open deductions that amounts to corporations paying fewer taxes, albeit at a higher rate, than what 9% will give them. Corporations who purchase their parts, supplies, etc. from ‘American-made’ entities, will be able to deduct their 9% federal corporate tax. Companies and corporations that decide to purchase their parts and other goods from overseas will not be able to deduct their 9% federal corporate tax.
The 9% federal corporate tax guarantees one of two things, or perhaps both.
Companies will begin to lower their prices because their tax structure is lower.
This will open up more Main Street businesses in order to produce parts and supplies for larger companies and corporations.
Lower costs + more new businesses = more jobs.
Purchases from overseas:
Companies will not receive the 9% federal tax deduction.
Companies will continue to pay 9% on anything they do overseas on top of the overseas taxes.
Federal Income Tax
True, there are some people who pay no federal income tax based upon their current income amount and numerous deductions. However, based upon the current tax brackets, a single individual making $50,000, a median-income number Mr. Cain chooses often, will pay a total of $8,625 in federal taxes; that’s 17.25%, a 25% tax bracket for 2011.
Included in the current tax system, the single $50,000 income-earner not only pays 17.25% federal income tax, but also pays capital gains tax if they put money into Wall Street investments. That is a larger sum than 9% federal income tax with no taxes on capital gains.
Currently both Social Security income for the retirees, and Medicare is being taxed at 15%, but under Cain’s ‘9-9-9’ plan, neither will be taxed. It is a system that will continue to provide for the elderly already receiving SS benefits, but will offer a personalized savings ‘option’ for future retirees. (Some debate about the Chilean model, but it boils down to the Chilean model working until the bureaucrats decided to meddle at a later day in the same way the U.S. currently meddles in its SS system.) Either way, the tax on SS and Medicare will drop from 15% to zero.
Mr. Cain has also stated that the lower income earners will still be allowed deductions, which means more earned money back to the people.
[Update – 2]
Those below the poverty line will pay zero income tax. Their tax plan will become 9-0-9.
15.1% were below the poverty level in 2010, that’s approximately 46 million people who would have paid zero income tax. (NYTimes and Reuters)
“Renewing Cities Brochure”
Cain’s ‘9-9-9’ plan:
throws out the current tax code
eliminates federal death tax
eliminates federal capital gains tax
replaces federal payroll tax
replaces federal income tax
All state taxes will remain the same, unless the individual state alters it’s tax code. No amount of trying to include the current state tax with a future ‘9-9-9’ plan will create proper assumptions, for those trying to do so tend to ignore the current state tax figures coupled with the current hidden federal taxes.
The biggest downside of the ‘9-9-9’ plan is getting it past the elites, both Democrat and Republican, in Congress for it makes the federal tax code transparent to all people and therefore eliminates the federal government’s infringement upon the people’s money by raising hidden taxes.
However, Mr. Cain is going to need to come out with all of his advisers, on this bold plan and show, in writing, their assumptions with regard to how and why they derived at the number ‘9’ (unless they wish to cater to the news of SimsCity 4), and how they reached the conclusion of revenue neutrality and future deficit reductions.
This is a simple plan, yes. As for it being inadequate as Romney has suggested, or will tax the poor more and rich less, as the media is purporting, is up to the people to decide.