Herman Cain figured he could throw the Fair Tax into a fancy new package, re-title it the 9-9-9 plan, and sell it, and himself, to the American people. To anyone who's given the subject some thought, 9-9-9 is about as appealing as the notion of Cain as president; which is to say, as appealing as lukewarm, greasy delivery pizza.
Supposedly developed by a crack team of economists. (Economists on crack?) Cain can name only one, Rich Lowrie. This plan is pretty simple on the surface. So simple, in fact, that it is rumored to be
drawn from the pc game SimCity4.
Individual income tax rates would go to a flat 9%. Corporate taxes would drop to a flat 9%. A national sales tax of 9% would be tacked on to every new product you buy. For those in higher tax brackets, this undoubtedly appealing. At least on the surface. However, there are several glaring problems with 9-9-9, beyond its video game origin. Problems so severe that they would make its passage nearly impossible; and wholly regrettable.
First, Cain's plan is incredibly regressive. A consumption tax, by definition, is a regressive tax. It hits those in the lowest income brackets hardest, as they spend a much higher proportion of their income on necessities of life. Tacking 9%, in addition to local and state sales taxes would be crippling for virtually anyone who is on a tight budget. The creators of the Fair Tax tried to remedy this by including a provision that would give every family a "prebate" to cover the tax on the essentials of life. This is an imperfect plan, and has a whole host of other problems, but at least there is an attempt to ameliorate the regressive nature of the tax. The 9-9-9 plan has no such measure.
Instead, the Cain plan adds insult to injury for lower to middle income Americans, by hitting them with a flat 9% income tax. This might seem like quite the tax cut; but it would remove all deductions, save charitable giving, from the equation. Dependents, mortgage insurance...all gone. These deductions allow the vast majority of workers to lower their real tax rate significantly from their normal bracket. The capital gains tax would be abolished as well; but only about 7% of Americans pay capital gains taxes annually. Most of them among those who would benefit from 9-9-9.
Under the Cain plan, a
family of four making $50,000 would pay about $2275 more per year in total taxes.
Every time a politicians proposes an across the board tax cut, Democrats tend to scream that it an attempt to give the rich tax cuts at the expense of the poor. Usually, that's just grandstanding and pandering. In this case that's exactly what the 9-9-9 plan is; it's simply a tax cut for the wealthy, kept "revenue neutral" on the backs of the poor. According to
an independent analysis raises taxes on 84% of workers. And Herman Cain
all but admits this, though he does his best to obscure it by emphasizing that the sales tax only applies to new goods. Like food and medicine. Try buying those things used...
I am no advocate of progressive income taxes; but it is bad policy, morally and economically, to propose a plan that is as intentionally regressive as the nonsense Cain is promoting. Cut taxes on everyone. Make the government suck in its ever expanding gut and cinch up that belt a few notches. End a few wars, cut some domestic programs; but don't overhaul the tax code specifically to cut taxes on the wealthiest by raising them on the middle class and the poor.
There is a second, practical consideration regarding Cain's plan. It is intended to be a temporary, transitional stage toward the Fair Tax, a 23% national sales tax.
The Fair Tax has its own host of problems. Notably, it's just too high and it doesn't actually abolish the IRS or the Income Tax (as you'd need a Constitutional amendment to do so). However, assuming 9-9-9 were to go into effect, and the Fair Tax proved untenable. What then? You'd granted the US Congress a sales tax to go with their income tax. And a flat rate can be raised as easily as a variable rate. If you don't believe that, track the growth of sales taxes in Charleston. In the five years I've lived here, we've seen two "penny" sales tax increases. It is foolish to think that Congress, given an entirely new tax to play with, wouldn't eventually succumb to the temptation to raise it.
Perhaps Cain is believes it; I hope the majority of us are don't.
