Posted on 09/29/2011 3:59:45 AM PDT by Cincinatus' Wife
Herman Cain’s 9-9-9 proposal — a 9 percent personal-income tax, a 9 percent corporate-income tax, and a 9 percent federal sales tax, to replace all current federal taxes — is attractive in many ways. It is not a flat tax, but it is a flattish tax; it eliminates some (but by no means all) of the divide-and-conquer features of the federal tax code; it simplifies taxes for most households and many businesses; it might reduce compliance costs. All to the good.
A few things should be understood about the 9-9-9 plan. The first is that 9-9-9 is not Herman Cain’s real fiscal plan. He proposes 9-9-9 as an intermediate step en route to his preferred solution, the so-called Fair Tax, about which I have some serious reservations, along the lines of those spelled out by Ramesh Ponnuru here. In fact, Mr. Cain proposes an unwieldy and unnecessarily complex multistep program on the way to the Fair Tax, 9-9-9 being Phase 1, Part 2 (“Phase 1 Enhanced,” in his words). Getting Phase 1, Part 1 would be difficult enough, and the program is marked by Mr. Cain’s most distressing hallmark: wishful thinking that borders on fantasy. How is he going to get to Phase 2, the Fair Tax, a radical restructuring of U.S. public finances that invites not only fiscal questions but constitutional ones as well? “Amidst a backdrop of the economic boom created by the Phase 1 Enhanced Plan,” Mr. Cain writes, “I will begin the process of educating the American people on the benefits of continuing the next step to the Fair Tax.” May I propose a Williamson’s Rule of Politics? Here it is: “Any plan that includes the words ‘educating the American people’ will fail.” Mr. Cain’s proposals are always bolstered by that economic boom he sees just around the corner, but he never is able to answer the question: What if the boom fails to show up on schedule? What then? And that is one important reason Herman Cain should not be the Republican nominee. (Based on my single encounter with Mr. Cain, at a meeting with National Review’s editors, I would have hesitated to hire him to run a pizza company, much less the country.)
But let’s take a look at 9-9-9 on its own merits. Mr. Cain says the proposal would be revenue-neutral. I have my doubts. The federal government took in about $2.2 trillion last year. Based on personal-income and business-income figures from the IRS, and consumer-spending figures from the Gallup survey, my English-major math suggests that a 9 percent tax on all of the above produces about $1.7 trillion in revenue, meaning that 2010’s $1.7 trillion deficit would have been more like a $2.2 trillion deficit — from calamity to catastrophe. If Mr. Cain’s team is building in some growth assumptions into the fiscal forecasts, they must be sunny indeed.
In any event, Mr. Cain has not spelled out in any detail a spending proposal that would allow the federal government to get by on $2.2 trillion, much less on $1.7 trillion. If the Tea Party stands for anything, it stands for smaller government, meaning lower spending. And yet the allure of magical thinking on taxes is so powerful that the tea-party favorite has given a great deal more detail about his tax proposals, with actual figures and everything, than he has about his spending proposals, which remain remarkably vague: Spending must be “reviewed with a keen eye and a red pen,” he says. Well, gee willikers, why didn’t I think of that. (Other than his pie-in-the-sky growth assumptions, my least favorite thing about Herman Cain is that his response to every challenge is to appoint a committee of smart guys to do the right thing. He seems incapable of appreciating the fact that moral failing is not the only reason Washington fails to do the right thing.) As I have argued before, the real danger of tax-cuts-and-growth utopianism is that it draws attention away from spending cuts, which is where the real action is needed. Mr. Cain is nibbling at that bait.
The 9-9-9 proposal also creates some perverse incentives. With business income taxed at 9.0 percent while dividends and capital gains are taxed at 0.0 percent, there is an excellent reason to pay out something approaching 100 percent of business income as dividends, or to hide it by “reinvesting” it in the business. I like dividends and am sympathetic to the case for giving them preferential tax treatment — a company that concentrates on paying a high dividend rather than on raising its share price probably is a better-behaved company, in most cases — but it is always and everywhere true that if government creates a tax shelter it will be exploited to maximum effect.
What about that national sales tax? Though I remain hesitant about imposing a federal sales tax, on both Burkean and prudential grounds, Andrew Stuttaford and others have argued persuasively that income shouldn’t carry the entire tax burden, and that consumption has to carry a piece, too. I can live with that. But Fair Tax enthusiasts ought to be ready to deal with the emergence of a very large black market in untaxed consumer goods — a 30 percent sales tax will ensure that. You may get to abolish the IRS, but the sales-tax enforcers might prove just as expensive and intrusive.
Which is to say: There is no easy way out of this mess. Cain’s 9-9-9 program and the Fair Tax might very well constitute improvements on the status quo, but neither is a substitute for comprehensive entitlement reform and deep cuts in discretionary spending, the sine qua non of serious fiscal-reform efforts.
tomatoe potatoe - with apologies to Dan Quayle. Tax on folks where there was no tax before. If you support that, we have no argument.
Many costs passed to us come in the form of EPA regulations and lawsuit costs that businesses must comply with and continually fight (including going on bended knee and hat in hand — with a campaign donation — to Capital Hill). To me, these are hidden taxes.
Government must be CUT DOWN and their influence that has worked it’s way into every aspect of our lives, needs to be stopped, blocked and rolled back.
A major shift in our current paradigm must occur and it will take a long time for this to occur.
Turn out in the 2012 election will be paramount. Democratic Party elected officials, at all levels, must be defeated and replaced with conservatives for this process to begin.
For capitalism to survive, the GOP must bring in every voter who agrees that our country is broken, that it has been beaten down and that we need to return to the basics (get rid of these mulit-thousand page bills and codes and rules with untold numbers of ways lawyers and accountants can interpret them).
As we all know, numbers don’t lie, but liars can figure.
But worse, bringing the idea of a national sales tax into the conversation is dangerous and should be stopped. In short, Cain needs to shut the hell up about it. But of course he won't. Here's hoping his 15 minutes are up quickly.
Yo, Kevin, your libtard education doesn't recognize that lower taxes result in higher revenue. It's probably because libtards are trying to make the public think the words "taxes" and "revenue" mean the same thng.
I would vote for Cain, but I wish he’d get off this 999 trick. It may have good properties, but there are too many unknowns, leaving Cain exposed to the Dems attack. They’ll will have a field day scaring the electorate. We need to focus the electorate on Obama’s record.
You got it! Rush has been making that point ever since he’s been on the air.
I'd rather see your revenue figures now rather than wait and see a few years from now. If Cain's 9-9-9 plan will not even come close to covering current federal spending, how will the 3-3-3 plan do so?
That was a chief component of the Fair Tax - it had a constitutional amendment repealing the 16th amendment, in effect, making income taxes unconstitutional,
whose ratification was a pre-requisite for implementing the NRST.
If the NRST was a VAT, then you’d be making sense.
And we also have a privileged class of tax cheats who find ways to avoid paying. Fairness in taxation needs to return to this Country
That's just a little pessimistic, don't you think?
One of the most important points of this article is the following (which IS true):
“There is no easy way out of this mess.”
I think wise adults understand this. We have decades of unchecked, often ineffective, bureaucratic growth which has insufficient oversight...that needs to be undone. We also have a large segment of the citizenry that is improperly educated with regard to the basic principles of this free nation, does not understand basic economic systems....and has turned its back on God.
We are going to need several good LEADERS in Washington DC who seek God’s help in turning the country around. We need to put a good president in the White House and we need to concentrate on the House and Senate...as well as our local leadership positions.
I still like Perry. I also like Cain. I like the moral principles of Santorum and the knowledge of Gingrich. The contributions of all are going to be necessary.
He also misses the fact that the profits of overseas companies that we import from are not taxed, we would capture some of that with a sales tax.
Husband and I think the FLAT TAX would be best. (Legal barriers can be amended to allow this.)
Actually, cutting the IRS, killing the EPA, killing the DOE, and other cuts are part of his proposal.
His is a solid Tea Partier in that regard.
That is a *very* good point.
This is the reason he doesn't believe we can go straight to the Fair Tax. That is going to involve a Constitutional Amendment (to repeal the 16th amendment) and we don't have the public support to go there yet.
I believe that we're also going to need another election cycle (2014) to give us a super-majority in the house and the senate to push through the final, drastic changes and end income tax once and for all
Cain has said, repeatedly, that we have to educate the public on the necessity of this move and estimates that it'll take 2 years, after the implementation of the 999 Plan, to gain the required support. "Once the American people understand it, they'll demand it!"
And it’s not just the pimps, prostitutes, drug dealers. Many criminal attorneys , service people(plumbers,carpenters,mechanics,yard maintenance,etc) buy and sell for cash hustlers, hair stylist, barbers, waiters and waitresses, illegal gambling houses, never pay income tax. They do have one thing in common. They all use the money they make to live on. Like I said there is a huge underground economy that pays no income tax.
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