Perry flat tax vs. Cain 9-9-9: How they’d hit you

Market Watch ^ | October 27, 2011 | Andrea Coombes

[casinva]

TexMom,

Thanks for showing how the two different plans would work for you personally. That info was very helpful and would help a lot of people understand both plans a little more.

You are correct that the 999 plan allows deductions for only charitable contributions.

You are also correct that the Perry flat tax plan provides the tax payer the ability to take ALL the allowable deductions, not just a choice of any one or the other but the right to take ALL of them that apply.

---

So here’s how it looks:

999 / 909 Deduction(s)
All that apply:

1. Contributions to charity
2. A full exemption to low income families living in opportunity zones

---

Perry Flat Tax Plan Deductions:
ALL that apply:

1. Deductions for mortgage interest
2. Deductions for any contributions to charity
3. Deductions for state and local taxes that have been paid
4. A deduction of $12,500 PER PERSON (adult and child alike) in a family household. For instance, a family of four, on just this one deduction alone would not pay taxes on the first $50,000 of income. Then they could add the other deductions on top of this deduction.

The Perry Flat Tax Plan also provides / protects the following:

5. Eliminates tax on social security benefits
6. Eliminates tax on dividends and capital gains
7. Eliminates death tax

And related,

8. The Perry Flat Tax Plan does not include a federal sales tax or value-added tax.

9. If the old tax code provides a family even greater savings, the family may choose to report their taxes using the old tax code instead of using the flat tax return with all the above deductions. HERE is where there is a choice of one OR the other as one doesn’t need to file returns using the new flat tax form and then go back and file a second time using the old code too, obviously! LOL

---

When comparing the two, there could be some other potential-future uncertainties which, we now discover, could come into play as well.

Rich Lowrie, Herman Cain’s 999 Plan architect and representing Mr. Cain in Cleveland, Ohio yesterday said the following when asked questions about possible changes we might see with a 9% national sales tax:

Excerpt:

“This is not going to raise prices,” Lowrie said.

But what if corporations decide to pocket the tax savings? What if future leaders decide to increase the sales tax? And what about lower-paid workers who consume more of their incomes than wealthier Americans do? Variations of these and other questions were on the minds of audience members Thursday. And despite Cain’s prediction, Lowrie was unable to offer clear answers to everyone.

End of excerpt

http://www.cleveland.com/open/index.ssf/2011/10/rich_lowrie_architect_of_herma.html

[irishjuggler]

You: “Well, there’s a very easy way to reduce your tax bill: STOP BUYING A LOT OF CRAP THAT YOU DON’T NEED.”

That will be great on the economy, right?

In the long run, yes, it will be great for the economy. We need to get past the idea that this country can consume its way to prosperity. Societies become rich by producing rather than consuming. If sales tax encourages savings instead of spending, I believe that will be healthy for the economy. More private savings means more funds available for private investment. More savings equals less dependence on government-sponsored "safety net" programs.

[esarlls3]

Thanks all for the corrections to my understanding of Perry's plan. Here is the updated comparison. I added another example based on TexMom's info above.

TexMom: Your example does not account for eliminating the Payroll tax under the Cain 999 plan. It is important to include this amount in the federal taxes paid under the IRS and Perry plans. Also, under the IRS plan you show a taxable income of about $12k and a tax of about $6k. Something's missing there.

---

	IRS.gov	FairTax.org	HermanCain.com	RickPerry.org
Summary of each tax plan:
Employee Payroll Tax Rate	5.7%	none	none	5.7%
Employer Payroll Tax Rate	7.7%	none	9.0%	7.7%
Personal Income Tax Rate	15-35%	none	9.0%	20.0%
Retail Sales Tax Rate	none	29.9% exclusive 23.0% inclusive	9.0% exclusive 8.3% inclusive	none
Business Income Tax Rate	15-35%	none	9.0%	20%
Notes		Tax exempt: contributions, tuition	Personal income tax: exempts contributions No personal income tax: below poverty income Retail sales tax: does not include mortgage interest, or local taxes Business income tax: does not deduct payroll	Standard exemption: $12500/person Itemized deductions: contributions, mortgage interest, and local taxes
Assumptions	Lifestyle remains constant. Increased disposable income is saved. Maintains current employee and employer FICA tax rates.
	IRS.gov	FairTax.org	HermanCain.com	RickPerry.org
Estimated price reduction	reference	10%	8%	5%
Case 1: Family of 5: Income $125k, Contrib $15k, Local taxes $6k, Mtg. int. $6k
Net Rate (% gross income)	14.0%	7.5%	12.7%	10.9%
Marginal Federal Tax Rate	30.7%	23.0%	17.3%	25.7%
Increased Disposable Income	reference	22.3%	10.1%	9.9%
Reduced Federal Taxes	reference	46.6%	9.4%	22.3%
Case 2: Family of 3: Income $85k, Contrib $750, Local taxes $8k, Mtg. int. $15k
Net Rate (% gross income)	13.1%	7.3%	13.5%	11.2%
Marginal Federal Tax Rate	20.7%	23.0%	17.3%	25.7%
Increased Disposable Income	reference	18.5%	6.3%	7.0%
Reduced Federal Taxes	reference	44.1%	-2.6%	14.3%

[TexMom7]

Your right, I think I was blinded by the tax tables.

(see if this one makes more sense)

Gross Wages = $ 85,150.00

Less Itemized
Deductions:
$ 7.750.00 yr........state/local taxes
$ 15,116.00 yr.......mortgage interest deduction
$ 750.00 yr.........charitable contributions
___________

Total Itemized Deductions = $ 23,616

Gross wages $ 85,150.00 less $ 23,616 = $ 61,534.00

$ 61,534.00 adjusted wages

less $ 10,950.00 dependent deductions (3 total)

$ 61,534.00 less 10,950.00 = $ 50,584.00

$ 50,584.00 Taxable Income

Tax Tables (tax due) $ 6,749.00 (married filely jointly + one dependent)

Less credit for
College tuition of $ 1,200.00

$ 6,749.00 taxes due less credit $ 1200.00

Taxes Due $ 5,549.00

[TexMom7]

Based on my post at 36, how much would my taxes be under Cain’s plan?

My new numbers under existing and under Perry’s plan are:

Taxes owed/paid

$ 5,549.00............existing income tax plan

$ 4,810.00............under Perry’s Flat Tax plan

[longtermmemmory]

Your chart is flawed.

There is an new entitlement check which is included in the fairtax scam.

This is a new expense.

It will be only nano-seconds before the K street lobbyists and the leftists are screaming for an increase for their clients. It will the cry of “LIVING PREBATE”

The fairscam should just stay dead and focus on creating some OTHER system. Fairscam is just a scam to sell books and t-shirts.

[esarlls3]

Here is the updated comparison of the net effect of each plan based on your numbers. These include payroll taxes as that's part of your federal tax payments and part of what's replaced by Cain's plan and the FairTax.

---

	IRS.gov	FairTax.org	HermanCain.com	RickPerry.org
Case 2: Family of 3: Income $85k, Contrib $750, Local taxes $8k, Mtg. int. $15k
Net Rate (% gross income)	13.6%	7.2%	13.4%	11.2%
Marginal Federal Tax Rate	20.7%	23.0%	17.3%	25.7%
Increased Disposable Income	reference	19.7%	7.2%	7.9%
Reduced Federal Taxes	reference	47.0%	1.7%	17.6%

[casinva]

Thank you for all your work comparing a pure fair tax plan with Herman Cain’s 999-909 plan and Rick Perry’s flat tax plan. It always helps to have visuals when trying to understand specific things.