Posted on 10/24/2011 4:24:25 PM PDT by NaturalBornConservative
You seem to scoff at the idea that eliminating the corporate income tax and replacing it with the lower flat tax rates will reduce the cost of new goods purchased by businesses and consumers, but that will clearly be the case for producers of goods at least where labor costs are not the overwhelming factor in costs and expenses.
With respect to social security and medicare, these are NOW being financed out of general revenue. The trust fund is nothing more than an accounting entry.
And even though the employer's share of these payroll taxes are deductible under the current system, nevertheless it is still the case that eliminating corporate income taxes of up to 35% down to 9% will lower the taxes on most businesses.
Yes, if you are hyper-labor intensive you may not be better off. But shifting incentives in our economy toward the production of more higher-value added capital equipment and towards manufactured goods mean a higher standard of living ultimately for our workforce.
Your main gripe to my mind seems to be not everyone is in a better situation under 9-9-9. Well, there is no such thing as a free lunch.
But on a macro level, if we assume the tax is revenue-neutral, (1) by moving part of it to a sales tax places part of the burden onto foreign goods, making domestic production of goods more competitive, and (2) eliminating taxes on investment and taxing consumption changes the incentives toward savings, the lack of which has been one of our greatest problems as a nation over the last 25 years (until the recent recession spike).
Yes, there is no free lunch - some will pay more instead of less. But for our nation as a whole, 9-9-9 benefits our economy better than the current system.
You are right on. I looked at the first 50 posts and not a single comment on the actual substance of the article, which is actually a pretty decent job. It doesn’t matter. 9-9-9 is DOA regardless.
From the Fair Tax website:
The FairTax is not a VAT. A VAT works very differently. It taxes every stage of production. It is much more complex and is typically hidden from the retail consumer. Second, in industrialized countries that have a VAT, it coexists with high-rate income tax, payroll, and many other taxes that, in some instances, have led to marginal tax rates as high as 70 percent. Third, all other industrialized countries, except Australia and Japan, have a much larger tax burden than the U.S., which requires higher rates and makes tax administration much more difficult. Lastly, a VAT is a lobbyist’s dream, allowing them to install their loopholes unbeknownst to the purchaser. A retail sales tax, in contrast, is a lobbyist’s nightmare, applied as it is under the bright lights of the retail counter.
http://www.fairtax.org/site/PageServer?pagename=about_faq_answers#45
And remember, according to his own web site, Herman Cain's plan for Economic Growth, THAT was how he was going to pass the 9-9-9 plan:
I call on the Super Committee to pass the Phase 1 Enhanced Plan along with their spending cut package
[... that the only reason someone buys a house in your world is for the interest to be deductible...]
I guess if I could have afforded to pay cash for my home, or could have gotten an interest-free loan, it wouldn’t matter so much. Yet, according to the 999-Plan, since the only personal deduction is for charitable contributions, doesn’t that imply that people will only donate because it’s tax deductible?
[Who DOES the writer support for President? Perry? Romney? Bachmann? Please don’t tell me Huntsman.]
I haven’t decided yet. But by process of elimination, I have removed Cain, Paul, and Santorum from consideration.
[An impressive analysis! - But watch out! Based on what I’ve been seeing today on other FR threads, anybody who voices the slightest criticism of Herman will probably be labeled a RINO mole, somebody who well may be taking orders from Karl Røve, Mark Steyn, Allahpundit and similar neo-con agents.]
Thank you! - I call myself an Independent Conservative, so they may say whatever they want. Truth sometimes hurts!
[Why didn’t Cain throw his support behind the Fairtax, which already has research and supporters? Serious question.]
I think he was just looking for an attention grabbing gimmick to garner support. And the only reason it has worked so far is because it caught the others offguard. I’ve been listening to Cain’s radio show for years, and he has promoted the “Fair Tax”, but never once have I heard him discuss anything like this 999-Plan. It’s nothing more than a campaign diversion, designed to win a primary or two, but it will never fly in the generals.
This statement is beyond laughable. When I stop by my accountant's office I can see the many volumes (at least 15) of IRS code and other IRS regulations all printed in small type.
My accountant says that without computer programs, it would be impossible to do tax filings. The entire IRS code is insanity on display.
[Here again, you are being misleading - the 9% the employee pays replaces the individual tax under the income tax code, so you need to add that to the 15.3% when you compare it to the 9% employee flat tax added to the 9% employer wage tax]
You lost me there. Employer’s don’t pay 15.3%, they pay 7.65% with limits on the SSA portion.
[You seem to scoff at the idea that eliminating the corporate income tax and replacing it with the lower flat tax rates will reduce the cost of new goods purchased by businesses and consumers, but that will clearly be the case for producers of goods at least where labor costs are not the overwhelming factor in costs and expenses.]
So I ask you then, do we live in a manufacturing, retail or service sector economy? It would be nice if we had something to manufacture, wouldn’t it?
[With respect to social security and medicare, these are NOW being financed out of general revenue. The trust fund is nothing more than an accounting entry.]
That’s incorrect. The 15.3% collected from Social Security and Medicare taxes each year is paid into the “Trust Fund” and goes back out of the Trust Fund in the same year. It’s only when there is a shortfall that the general fund get tapped.
[Yes, if you are hyper-labor intensive you may not be better off. But shifting incentives in our economy toward the production of more higher-value added capital equipment and towards manufactured goods mean a higher standard of living ultimately for our workforce.]
It also means fewer jobs. So when Cain say’s this plan will create Jobs, he is incorrect. You can’t have it both ways. I mean you can’t say that wages are not tax deductible and expect employers to pay more wages. Unfortunately, a service based economy means that labor is the number one cost.
[Your main gripe to my mind seems to be not everyone is in a better situation under 9-9-9. Well, there is no such thing as a free lunch.]
Well, according to The Tax Policy Center, around 84% of Americans will be worse off. So who’s getting a free lunch? If the plan somehow paid off the National Debt, or balanced the federal budget it might have merit, but since it tackles neither, I fail to see the point.
[(1) by moving part of it to a sales tax places part of the burden onto foreign goods, making domestic production of goods more competitive]
So under that theory, all the goods made in China, India, and Mexico will start being produced here instead. But if labor and overhead are still cheaper there, I don’t see how this will help. We could cut taxes to zero and still wouldn’t be able to compete. All we will accomplish with this plan is bankruptcy. (Hmmm, it sounds like the 999-Plan to Bankruptcy).
[But for our nation as a whole, 9-9-9 benefits our economy better than the current system.]
So where’s the proof. Show me where this 999-Plan has been implemented anywhere in the world, and let’s see how well it has worked. But if it has never been tried, then it’s just more Hope & Change. What we need right now is what we know works, not to turn our economy into an ongoing experiment. But that’s my opinion.
You are the scam artist.
It’s obvious you rather have a communist progressive tax system that you and your buddies make money off of.... However, Herman Cain’s plan is good for the country and most Americans.
The Tax plan you are defending is killing our economy. All for what... your back pocket?
Sorry Pal I’m with America and with Herman Cain. I’m not with you communist progressive scam.
Your charts are all wrong Mr. Tax Attorney. Yeah right!
For instance, have you ever heard of embedded taxes? How can you factor the exact same expenses after 999??? Duh!
NaturalBornConservative my a$$....
More like NaturalBornCommunist.. No REAL conservative would defend the current communist progressive tax code over the 999 plan.
10 to 1 you are a Perry supporter.
You need to step back from the accounting and look at the economic reality. What employees care about is the net wages hitting their bank account, what employers care about is the gross payroll costs. That some is collected from the employer and some collected from the employee rather than all from one or the other is just a matter of mechanics and accounting, it doesn't affect the economic substance.
So I ask you then, do we live in a manufacturing, retail or service sector economy? It would be nice if we had something to manufacture, wouldn’t it?
Yes, and the 9-9-9 plan would help turn around part of our current disadvantages in manufacturing compared to foreign competitors.
That’s incorrect. The 15.3% collected from Social Security and Medicare taxes each year is paid into the “Trust Fund” and goes back out of the Trust Fund in the same year. It’s only when there is a shortfall that the general fund get tapped.
Only in an accounting sense. The trust fund is "invested" in an obligation from the US government represented by a book-entry. If the trust fund were actually invested in third-party securities, then we could say it has some independent economic reality to it.
It also means fewer jobs. So when Cain say’s this plan will create Jobs, he is incorrect. You can’t have it both ways. I mean you can’t say that wages are not tax deductible and expect employers to pay more wages. Unfortunately, a service based economy means that labor is the number one cost.
By disadvantaging foreign manufacturers, it DOES spur job creation here.
The creation of the service economy is not something that happened apart from government incentives. By imposing oppressive environmental regulation, labor regulation, keeping energy prices artifically high and yes, having a tax code that disadvantages domestic production, these influences have combined along with other factors to push us into a service economy. There is nothing written in stone that said the United States should become a service economy.
We import millions of low-skilled labor that work at low-value added services jobs or low-value added agricultural jobs, in fact disincentivizing productivity increases that other countries have achieved.
We maintain high rates of consumption by borrowing against the value of assets created by prior generations or borrowing by government on the credit of future generations.
But we are looking at a precipitous collapse in living standard. What we need to turn it around is to move in the opposite direction in terms of creating an environment for higher productivity jobs and creating an environment for savings, not borrowings.
The standard of living is what the endgame should be for our national strategy. The Cain plan isn't the complete answer, it just takes one aspect of the situation and turns it from the wrong direction into the right direction.
Well, according to The Tax Policy Center, around 84% of Americans will be worse off. So who’s getting a free lunch? If the plan somehow paid off the National Debt, or balanced the federal budget it might have merit, but since it tackles neither, I fail to see the point.
Under the current system, 47% of tax filers get a free ride. It is true that under the Cain plan, more people would have to get out of the wagon, and help push the wagon, at least a little bit. As Michelle Bachmann has said, everyone should pay at least some taxes, even if just $100.
We need for more Americans to have skin in the game when it comes to the size and spending of the government. Conservatives should not be the ones objecting to that principle.
So under that theory, all the goods made in China, India, and Mexico will start being produced here instead. But if labor and overhead are still cheaper there, I don’t see how this will help. We could cut taxes to zero and still wouldn’t be able to compete. All we will accomplish with this plan is bankruptcy. (Hmmm, it sounds like the 999-Plan to Bankruptcy).
No, not "all the goods made overseas" would start to be made in the U.S. What the Cain plan does is take one aspect of the situation, the tax code, which is hurting domestic production as currently structured, and turns it into the other direction.
It is not the complete solution. We need reform in the size of government, less onerous regulation, more freedom in right-to-work, and a number of other changes as well to completely turn the situation around.
So where’s the proof. Show me where this 999-Plan has been implemented anywhere in the world, and let’s see how well it has worked. But if it has never been tried, then it’s just more Hope & Change. What we need right now is what we know works, not to turn our economy into an ongoing experiment. But that’s my opinion.
Fans of Rick Perry and the Texas economy should be among the first to point out the advantages of using a sales tax in lieu of an income tax. That is how Texas finances its government, and we hear so much about how wonderful the economy is in Texas.
I read your entire post. I had also read as much as I could find about this plan.
My husband and I own a small business, he is the only full time employee. I had calculated (in my head...so NO it’s really not all that complicated) that we would be facing about $10,000 more in taxes.
Your examples validated my thoughts precisely. Thanks for taking the time to present such a detailed analysis...after all, as a member of the targeted useful middle class, I’m working 80/hrs per week already, so I don’t have the time...LOL!
[as a member of the targeted useful middle class, I’m working 80/hrs per week already, so I don’t have the time...LOL!]
Thanks, I hear you! I’m about in the same boat. This one’s for my four-day old granddaughters. They give new meaning to the term, “children and grandchildren”.
He actually worked for the IRS for a while, but how many people ever worked for the IRS anyway?
I not ashamed to say that I have liked Newt since day one.
So according to your theory, mortgage interest, real estate taxes, medical expenses, health insurance, etc... will all miraculously cost less under the 999-Plan? I think you need to really think about what you’re saying. BTW - That was the whole point of this post - to get people to think!
“I don’t see prices going down under this plan because taxes really don’t ever decrease, so there are no savings.”
No matter what tax system we are subject to, there will always be special interest group that will lobby congress. It is our job to hold the politicians feet to the fire not to cave in. In order to relieve the politicians of this power over us with string attached, we would need a well written amendment to the constitution. Example: All federal revenue shall be derived from a national tax of no more than or less than 15% of value of goods and services paid by the end user of goods and services.
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