Skip to comments.3rd Concern with the 9-9-9 Plan
Posted on 10/29/2011 6:54:07 PM PDT by NaturalBornConservative
Conservatives vs. 999ers -
By: Larry Walker, Jr. -
Under the 9-9-9 Plan, 95 percent of people making $1 million or more would get a tax cut that averaged $487,300. ~Tax Policy Center -
At a Michigan website entitled, North Star Writers Group, Herman Cain attempted to address some of the criticism to his 9-9-9 Plan. The article, dated October 16, 2011, is entitled, "9 responses to 9 false attacks on the 9-9-9 plan". But somehow Mr. Cain has confused what is merely constructive criticism with attacks. I mean its as if when one asks Mr. Cain a valid question these days, he either gets it wrong the first time, or he simply pulls the assault card. Yet, after I criticized Mr. Cains plan (not him personally), when I wrote an article entitled, "Herman Cains 9-9-9 Sham", I was personally labeled as a Marxist, Communist, as naïve, an idiot, and a left-wing shill. And all of that came from fellow, so called, conservatives. So has Mr. Cain's plan really been attacked, or are perhaps the 9 concerns, which he deems to be false attacks, simply valid points?
Personally, I think that when conservatives start calling fellow conservatives naïve, Communist, Marxist, idiots, and left-wing shills somebodys got a problem. To contrast, the article I wrote immediately prior to my critique of Mr. Cains tax plan was entitled, "Obamacares Deadweight Loss", and with that I was practically branded as a conservative champion, by way of private commentary. But apparently, sometime between October 12th and October 23rd, I either lost my mind, or I unwittingly signed on with the Communist Party USA. Ill let you decide. Okay, so today Im not going to list all 9 of the concerns that many have with the 9-9-9 Plan, but just the 3rd, and Mr. Cains response.
Claim 3: The plan redistributes wealth from the poor to the rich.
Response: It does no such thing. It is fair and neutral, taxing everything once and nothing twice. Whats more, we are getting ready to propose empowerment zones for economically struggling areas in which the rates will be even lower. That will allow the poor to benefit even more from the plan than they already would.
Mr. Cains main argument against the fact that his plan redistributes wealth from the poor to the rich is that, it does no such thing. But what does that mean? Simply stating it does no such thing doesnt satisfy the anxiety. The real concern is that since the top 1% of income earners pay 38% of all income taxes, and because the 9-9-9 Plan reduces their tax rate by 74%, while at the same time exempting empowerment zone residents, that either a greater burden of taxes will be borne by the middle class and working poor, or the United States will go down in flames in a matter of weeks instead of years.
Also, according to Mr. Cain, it is fair and neutral, taxing everything once and not twice. But this is simply not true. As proof, since the 9-9-9 Plan doesnt allow businesses to deduct wages in determining taxable income, it in effect imposes a 9% tax on wages at the corporate level, and then taxes wages again at the individual level. So how is this not taxing something twice? And further, when the same wages are spent into the economy, they are hit again by a 9% national sales tax. So wages are not only taxed once or twice under Mr. Cains plan, but at least three times. Following are two hypothetical examples of what the 9-9-9 Plan will accomplish when it moves from Cain's chalkboard to the real economy.
For example, in the table below, a couple has wages of $1,000,000 and only claims the standard deduction and personal exemption(s). Under the current tax code they would pay federal taxes of $334,043, and only $90,000 under the 9-9-9 Plan. Thus, under Mr. Cains plan, this couple would receive a tax cut of $244,035. And in order to make up for the shortfall in revenue, by way of his national sales tax, the couple would need to spend $2,711,500 (244,035 / .09) on items subject to the 9% sales tax, or almost three times the amount of their earned income.
Since under the current tax code, the taxpayers in the first example are already in a 35% marginal tax bracket, if they earned an additional $1,000,000, they would pay federal taxes of $698,543 under the current tax code, versus $180,000 under the 9-9-9 Plan. So under Mr. Cains plan, this couple would receive a tax cut of $518,543 (see table below). And in order to make up for the shortfall in revenue, by way of the national sales tax, the couple would need to spend $5,761,588 (518,543 / .09) on items subject to the 9% sales tax, or almost three times the amount of their earned income.
According to a study on GOP flat tax proposals conducted by the Tax Policy Center, the 9-9-9 Plan would cause '95 percent of people making $1 million or more to receive tax cuts averaging $487,300'. The dilemma is that since Mr. Cain claims his plan to be revenue neutral, that is to say, the amount of total taxes collected today will be the same under his plan, then where will the money come from to make up the shortfall? You guessed it! From the same study conducted by the Tax Policy Center
Only 16 percent of people making between $50,000 and $75,000 a year would get a tax cut, averaging $1,959, and at least 70 percent of people in this middle-income category would see their average federal taxes rise by $4,326.
So I guess Mr. Cain better hope that the middle class, who are busy working everyday and taxed enough already, arent paying too much attention to his claims. But I dont think thats the case. Perhaps Mr. Cain needs to go back to the drawing board.
In a second article written in the same venue entitled, Arthur Laffer brings reality to 9-9-9 discussion, Mr. Cain states that, Contrary to some of what you hear in current conversation, the theory of the Laffer Curve was proven correct when Ronald Reagan cut marginal tax rates across the board in 1981, and federal revenues soared. So did deficits, of course, and thats the part you usually hear about. But thats because federal spending soared even more. Excessive spending, not insufficiently high tax rates, was the problem then and its still the problem today.
Notice how Mr. Cain implies that it was not insufficiently high tax rates that was the problem back then, or today. Thats a double negative, but doesnt Mr. Cains statement refute his own plan? If tax rates are not the problem today, but rather excessive government spending, then why are we even talking about a 9-9-9 Plan? A few months ago, conservatives were in unity behind a platform of not raising the Bush tax rates, and reducing government spending. Yesterday it was, We dont have a revenue problem; we have a spending problem. But now, suddenly, it seems that many conservatives believe that all of our problems can be solved through Mr. Cains proposed wealth displacement. So does Mr. Cains plan balance the federal budget? Will it fix Social Security and Medicares solvency issues? If the answer is no, then what is the point?
Laffers curve - In the 1981 Act, Reagan cut the top tax rate from 70% to 50%, and closed many loopholes. He didnt propose cutting the top rate to 9% and adding a 9% national sales tax. Reagan later raised the bottom rate from 0% to 15%, and cut the top rate down to 28%. But his plan was reasonable, while Cain's proposition is extreme. On its own merits, the 9-9-9 Plan is extreme enough to fall off the other end of Laffers curve. Laffer defined a sweet spot somewhere in the middle - as when tax rates are too high, tax revenues decrease, and when tax rates are too low, tax revenues decrease, but when tax rates are just right, revenues will increase. But I believe that Cain's plan overshoots the sweet spot by a long shot. In other words, if Reagan Era tax rates were the mark, and I believe that they were, then why not just bring them back?
Policies have consequences - The 999-Plan will create a host of unintended social problems which naturally occur on the other end of Laffers curve. Giving average tax cuts of $487,300 to 95% of people making over $1 million per year, and increasing the tax burden on the working poor and middle-class, solves nothing. Yes I am a conservative, and if you dont believe it then read the rest of my blog. Im not too sure how to classify Mr. Cains 9-9-9 Plan, but from my point of view, 9-9-9 is not a conservative plan, and not something that conservatives should even be considering. Had Mr. Cain not risked his entire campaign upon this flimsy reed; he might have had my support. But even if Herman Cain is somehow able to win the Republican Party nomination, Ill be casting my vote for the first viable 3rd party candidate.
Herman Cains 9-9-9 Sham
Try again when you have some HONEST, factual, analysis.
Only problem is 9-9-9 does none of that. So once again your "anlayis" is demonstrated to be ignorant propaganda.
“Only problem is your “article” is based on the propaganda from the Tax Policy Center a far far left wing propaganda outlet paid for by the Urban Institute and the Bookings Institute.”
That’s why as with all things, I proved it for myself. I’m sure that if TPC’s only motiviation was political, that they would want Herman Cain to prevail, because his nomination would destroy the GOP.
So in your opinion was their analysis of Perry’s or Gingrich’s plans on par, or just pulled out of a hat as well?
You article is total crap and that is the nicest thing that can be said about it.
Why is it a problem that ANYBODY gets to keep more of THEIR MONEY???
Regardless of what they do with it, the economy benefits far more than if Government takes it from them.
I’ve been involved in the fundamental tax reform movement for a couple of decades. The sine qua non for real reform has always been the complete elimination of income and corporate taxes. Of course, the Cain plan does not do that. It places a consumption tax on top of an income tax on top of a corporate tax.
A total political non-starter, all across the political spectrum.
Just as the Gingrich-Armey flat income tax proposals were always political non-starters.
And, I believe that to be intentional. We’re dealing with people who are looking for nothing more than campaign fodder, not real fixes to what is destroying our country, based in principle.
You lost me at Example 1.
There is no way on God’s Green Earth that a married couple earning $1,000,000 in wages has ONLY standard deduction and personal exemptions. So you have started with a false (high) premise about how much they currently pay in taxes so that you can argue that they will pay less taxes under Cain.
And you say it like it’s a bad thing for people to be able to keep more of what they earn.
I don’t know you personally, or your posting history, so I’m not going to criticize you personally. However, I will say that the argument that it’s a bad thing for someone to retain more of their wages is also the opinion of OWS.
I have no concerns about the 70,000 page current tax monstrosity. We shouldn’t even consider something else.
Maybe it will be something other than 999 but whatever it will be way better than hope and change.
If I made a million bucks and had to pay that much tax I would fire my accountant.
All your incorrect facts aside, when you call a plan a “sham” it’s an attack. You are basically calling the proponents of the plan liars. Don’t whine when you get called names back.
(Oct 18, 2011) - T11-0374 - Herman Cain’s “9-9-9” Tax Reform Plan; Baseline: Current Policy; Fully Phased in Distribution of Federal Tax Change by Cash Income Level
I prove things in my own way, and some people just talk. You can plug in as much in deductions as you want. So give the couple in example 1 itemized deductions of 697,265 on 1,000,000 of wages and you might be on par, but then there’s a little thing called the Alternative Minimum Tax. But if you look at the actual tax statistics there is still a wide disparity no matter how you look at it. What if they made 10,000,000 or 100,000,000 instead of a million? When you’re in a 35% bracket, all the revenue lost above deductions is not recovered by a 9% sales tax.
***Ive been involved in the fundamental tax reform movement for a couple of decades. The sine qua non for real reform has always been the complete elimination of income and corporate taxes. Of course, the Cain plan does not do that. [It places a consumption tax on top of an income tax on top of a corporate tax.
A total political non-starter, all across the political spectrum.
Just as the Gingrich-Armey flat income tax proposals were always political non-starters.
And, I believe that to be intentional. Were dealing with people who are looking for nothing more than campaign fodder, not real fixes to what is destroying our country, based in principle.]***
I know that’s right EV! So where’s my next president?
[All your incorrect facts aside, when you call a plan a sham its an attack. You are basically calling the proponents of the plan liars. Dont whine when you get called names back.]
The only problem is that I debated the facts and no one has refuted them. Simply stating that my facts are incorrect without providing a basis as to why, or providing more correct facts, is not an argument. Call me what you want. A sham is something that purports to be something that it’s not. And telling people they are getting a tax cut, when they are in fact getting a tax hike, is a sham.
I didn’t call anyone a liar. I simply said, ‘here is your plan, this is what you say it will do, and this is what it will do under conservative assumptions’. I also will not stoop to your level of personal attacks. If you want to tear the GOP apart, then have at it. We’ll see where it leads.
Johnnie, no need to argue with this charlatan. His business is tax accounting and he has said he has no problem understanding the current tax code and believes it should stay just as it is.
Just another bean counter who based his business model on the elites and their so sacred progressive tax code of 70,000 pages and almost 1 million words.
We are going to subject this leech to the same dilemma faced by the buggy whip tanners and the wooden wagon wheel blacksmiths at the turn of the last century.
But you're arguing that it's better, right, and important that we tax the wealthy more so that we can sustain this Ponzi scheme of a Government that is top-heavy. You're arguing that we need to ensure that we have the revenue coming into the Government. For what? What do you want that money to be spent on?
Why should a couple who makes $1 million have to send 35% of that to the Government? Do they really use $350,000 worth of services from the Government?
I would rather cut spending in massive ways, and cut taxes so that they are fair to everyone. Webster's definition of fair, not Washington's definition, or OWS’s definition.
Why are you wanting to the Government to get more revenue at all? They have PLENTY of revenue. They waste it on ridiculous programs. $500,000 to study the viscosity of ketchup? Really?? They need to cut spending, massively, and cut taxes too.
Attention, this is a Perrywinkle Perrybot infected thread, ther is nothing logical about their rantings.
Nothing to see here except more insane rantings against anything not Mr. “hairdo”
“...they would want Herman Cain to prevail, because his nomination would destroy the GOP.”
I want to see you back THAT specious claim.
I tend to think of a Cain nomination as a first step in *reforming* the GOP.
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