I don’t think it’s misleading at all. If anything it’s a comprehensive critique of the entire policy. Under the 999-Plan the employer pays a 9% tax on wages, and the employee pays another 9% tax on wages, so let’s see, that’s 18.0% versus the current 15.3%. Then the employer pays a 9% national sales tax on purchases, and the employee also pays a 9% national sales tax on purchases. Then by excuding deductions for expenses like mortgage interest, state taxes, etc... the proposal effectively places a 9% surcharge on the same, thus raising costs.
You have to separate business payroll taxes on wages from the individuals taxes. That’s because, currently, businesses pay 6.2% on only the first $108,600 of an employee’s wages, and 1.45% on an unlimited amount. Meanwhile, although individuals don’t get a deduction for payroll taxes, they only pay 6.2% of the first $108,600 as well. But under the 999-Plan a business will pay a 9% tax on wages without limit to the amount paid to each individual. Also since payroll taxes are deductible for income tax purposes, businesses really don’t even pay 7.65%. [For example, if a company is in a 35% tax bracket and pays $100,000 in payroll taxes, because payroll taxes are deductible, it really only effectively pays $65,000 (100,000 - 35,000).]
What’s most profound is that under our current system, those FICA taxes that you mention (15.3%)are currently being spent in their entiretly to cover the current burden of social security benefits, and only a fraction of Medicare benefits. Social security has run at a deficit for the last two fiscal years, so that both programs have had to dip into the general fund. So I ask you, where will the money come from to cover the government’s present burden of social security and Medicare benefits? Won’t most of the money collected under the 999-Plan simply be spent on these two programs alone?
If just in my little one-man company example, the businesses taxes went up to a degree that it suffered a loss, then how does that lead to job creation? How does it lead to a decline in prices? My presentation includes all of the factors you mentioned and more, and if you stop and think about it, and study it carefully, you will see that.
And if you made it to the end of this piece which I know is rather long (too long), then what expenses will be allowed for purposes of State income taxes. The 999-Plan will cause the 43 States that have an income tax to completely rewrite their laws. That ought to be a walk in the park, eh? I’m not going to sit on my hands while the entire nation is stuck on figuring out how to make this work. We don’t even need this. If the goal is to get to only having a national sales tax, then why not just do that from “J Street” rather than screw around with this madness?
The 999-Plan simply put, “won’t work”. It’s just not workable no matter how you spin it. You either need to be in business or work with business finances to understand it, but then again, that’s what I do.
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.