Cain’s 9-9-9 plan is upside down

Posted on October 11, 2011

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Herman Cain’s 9-9-9 tax plan sounds really simple. The problem is, you’d have to be simple to think this plan is sound.  You’d have to be outright retarded to think it’s a good idea.

Despite numerous requests, the Cain campaign refuses to release the nuts-and-bolts details of his plan, but according to his website, it’s a “simple three-step process.”

The 9-9-9 part of the plan is merely an intermediate second step in instituting a Fair Tax, which would replace all federal taxes with a 30 percent national sales tax.

“Whatever one thinks of the Fair Tax, it makes not the slightest bit of sense to have a plan that requires fundamental changes to the federal tax system twice to achieve its objective,” Bruce Bartlett wrote in a Tuesday New York Times op-ed. “One of the prime selling points of the Fair Tax is its simplicity, and the 9-9-9 plan is far from that.” Bartlett was the senior fiscal policy advisor to the Ronald Reagan and George H.W. Bush administrations.

Cain’s plan would do away with the complex system of deductions and loopholes that currently plague the tax code, but it would also redistribute the tax burden from the wealthy to middle and low-income Americans, Bartlett states.

Once you look closer at the details of Cain’s 9-9-9 plan, you’ll see that the poor and middle classes will inarguably pay more, while the rich, who pay most of their taxes though the capital gains tax that Cain would eliminate, will pay nearly nothing.

And here’s how.

In phase one of Cain’s plan, both personal and business income taxes are capped at 25 percent. Given that more than 88 percent of working Americans are currently taxed at LESS THAN 25 PERCENT, Cain’s plan is a sham. The following table from the IRS showing 2011 tax brackets proves it.

Income Level Tax Rate
$0 to $8,500: 10%
$8,500 to $34,500: 15%
$34,500 to $83,600: 25%
$83,600 to $174,400: 28%
$174,400 to $379,150: 33%
$379,150 and above: 35%

For the Middle Class – roughly 180 Million people – Cain’s plan does absolutely nothing. To capitalize on a statistic that the Republican love to cite, because 47 percent of tax filers earn a low enough income that they do not currently pay income tax, Cain’s plan would raise taxes on the poorest Americans by 9 percent.

Cain’s tax break only benefits the wealthiest 4 percent of workers, who currently pay between 28 percent and 35 percent income tax. Only those making more than $83,600 a year will see any reduction whatsoever.

The second phase, or the 9-9-9 phase, would drop personal and businesses income tax rates to 9 percent. The wealthiest people in America are already paying a lower tax rate than anybody else, and Cain wants to LOWER their rate. And Cain’s plan does NOTHING to eliminate the loopholes, shelters, deferments, offshore cash hoarding and deductions that allow the rich to often not only pay nothing in taxes, but are eligible for scores of tax credits and deductions for which the bulk of Americans don’t qualify. You can argue whether Warren Buffet is a “liberal loon” from now until Ronald Reagan is granted sainthood. But the fact is that Warren Buffet – the third richest man in the world – pays a significantly lower tax rate than anybody who works for him, all because he follows the current IRS tax laws.

As for business taxes; the nation’s corporate income tax now stands 35.2 percent. Cain’s plan would be a massive reduction in corporate taxes. But that’s only part of the story. The current tax structure includes credits and deductions that often reduce the rate at which businesses pay income taxes. According to the World Bank, businesses on average pay an effective tax rate of 15.4 percent. And that’s not including subsidies and tax credits in the current system that lets companies like Exxon and General Electric not only pay NOTHING in taxes, but actually get a multi-billion-dollar refund check from the IRS.

Cain also wants to implement a 9 percent national sales tax. Low-income earners would be devastated this tax because they spend a vastly larger percentage of their income on bare necessities like food, water and clothing. The problem with sales taxes is that the more you buy, the more taxes you pay.

Cain’s 9-9-9 plan would eliminate payroll taxes, which currently fund Social Security, Medicare and Medicaid, along with the estate and gift taxes. Taken together these three taxes brought in about $883 Billion in 2010, or about 41 percent of the $2.16 trillion collected by the federal government last year.

Cain says he would implement these three proposals immediately without offsetting the lost revenue. Guess what, Cain-lovers:  “Without offsetting the lost revenue” means INCREASING THE NATIONAL DEBT. Where are Eric Cantor and Mitch McConnell and the rest of the “fiscally conscious” Republicans demanding dollar-for-dollar offsets to Cain’s rampant spending plans?

The last step in Cain’s tax plan is to abolish all federal taxes and institute a 30 percent sales tax on all products, known as the Fair Tax.

The argument that the rich will be just as harmed by the national sales tax is, putting it politely, a fallacy. The poor don’t have the ability to use an expense account, or a trust, or a shell corporation buy their week’s groceries. The poor don’t have a team of accountants available to offset purchases with charitable contributions or “operational expenses.” The poor can’t chalk up their rent or mortgage as a “depreciable business expense.”

So, the damage done to the nation’s poorest by a 9 percent sales tax will be more than tripled. How would you like to pay 75-cents tax on a $2.49 loaf of bread or gallon of milk? How about a $4.50 tax on a store-brand pair of jeans? How about a $4,500 tax on a six-year-old used car? That’s the reality of Herman Cain’s 9-9-9 plan.

When you get past the air-brushed campaign buzz words and rah-rah debate sound bites and look at the details of Cain’s plan, it’s clear that Cain has given the wrong name to his plan. It should be 6-6-6.

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