Posted on 10/11/2011 6:56:32 AM PDT by SeekAndFind
Herman Cain's 9-9-9 plan, which the former Godfathers Pizza CEO and current Republican presidential front runner claims will slash taxes and consequently boost the economy, includes some tax increases that may not go over well with many struggling Americans: specifically, sales taxes on both food and clothing.
During an interview with CNN's Candy Crowley on Sunday, Cain said food and clothing would not be exempt from the 9 percent national sales tax he would attempt to enact if elected in 2012. Crowley, who seemed surprised by a potential tax on those basic necessities, pushed Cain to expand on his reasoning.
"So a poor person is paying the same amount of taxes on groceries as I am? Does that sound fair to you, just in a vacuum?" she asked.
Cain responded that "Yes, it does sound fair," claiming the tax would even out since under his policy, those same low-income individuals would not pay taxes "if they need to buy a car or a home or some hard goods that are used."
Cain argues that because the 9-9-9 plan -- which would implement a 9 percent flat-tax on personal income and corporate income, in addition to the national sales tax -- would lower income taxes for many Americans, they will have more money to spend and will be able to afford higher taxes on food and clothing.
However, Michael Linden, the Center for American Progress' Director of Tax and Budget Policy, told Think Progress that because the bottom quintile of earners currently only pay about 2 percent of their income in federal taxes, under Cain's plan they would be paying considerably more. Specifically, he said with the 9 percent tax on every dollar they make, as well as every dollar spent, the poorest Americans would pay a whopping 18 percent of their income in taxes.
Comparatively, Linden said middle-class earners would see their taxes rise from 14 percent to about 18 percent, while the richest one percent of Americans would see their tax rate fall from about 28 percent to 11 percent under the 9-9-9 plan.
"It would be the biggest tax shift from the wealthy to the middle-class in the history of taxation, ever, anywhere, and it would bankrupt the country," Michael Ettlinger, the vice president for economic policy at the Center for American Progress, told The Wall Street Journal.
While Cain has touted his plan as the solution to the nation's economic struggles, Linden's analysis found that, based on 2007 tax data, it would actually result in the largest budget deficits since World War II. If applied that year, the 9-9-9 plan would have yielded just under $1.3 trillion in total federal tax revenue -- 9.2 percent of the GDP -- compared to 18.5 percent of GDP in tax revenue that was actually collected that year.
Cain's plan to tax food is so surprising that even the Tea Party group FreedomWorks assumed certain vital goods, such as food and medicine, would be exempt from the 9 percent national sales tax.
"If you're one of the minority of people -- the top 10% of the population -- who pay 70% of the income tax revenues, you might see the change as a good deal.But if you're lower down the income scale, and especially if you're one of the 50% of Americans who don't pay any income taxes, then you might not see it as such a good trade," FreedomWorks' Web site states in an Oct 6. blog post titled "Herman Cain's "999 Plan": The Good, the Bad and the Ugly.
Thirty-one states as well as Washington, D.C. exempt most groceries from the state sales tax, according to the Center on Budget and Policy Priorities. In addition, seven states tax groceries at lower rates than other goods and five states tax food, but offer credits or rebates on some of those taxes for low-income earners. Only two states - Alabama and Mississippi -- currently apply their states full sales tax on grocery items.
THere is no way the cain 9-9-9 plan changes the Social Security tax. SS is already going bankrupt, and eliminating the SS tax would just destroy SS altogether.
Why do you think that is part of his 9-9-9 plan? He certainly isn’t proposing to pay SS out of general revnues, is he?
You might want to skip the other posts to focus on Posts 75 and 118 on this thread, because they deal directly with the Tax Wedge issue you brought up.
As a non-competitor in the race, Cain’s 9-9-9 plan was great, because it got us talking about how simplifing the tax code would help the economy.
But there is little chance it could be implemented, and if he is the nominee, and 9-9-9 is his “economic plan”, he won’t win the election. It’s a plan for a non-competitor, not for the nominee.
I never said that, nor did I say that anything on the plan on his web site is bogus. Those are are YOUR words.
I said that brochure on his website does not have all the details of the plan, that doesn’t mean “he is making it up as he goes along”
You are correct. I misread your statement, I thought you were adding the sales tax to the existing gas tax, which is why it made no sense to me.
Or maybe not. The fact is that when dealing with major corporations you will almost certainly not see a reduction in prices. Cost reduction policies that they have followed in recent years haven't resulted in reduced prices, why should savings on taxes be any different? Corporations will cater to their shareholders, as they should, and any cost savings will go toward improving margins and stock prices or higher dividends or the like. Cost savings in food will almost certainly not result because most food prices are established by factors far removed from the farmers and ranchers themselves. Price for corn or wheat or beef or whatever is set by commodities markets and is independent on the cost of actually producing the commodity itself. For the prices for services to fall in your scenario that would require that all consumers have open access to the prices of all the plumbers or electricians in the market, something people don't have. So while I suppose it's possible that there may be some adjustment in prices, it is impossible to say with any certainty that prices of everything will decrease enough to offset the increase in taxes.
“Corporations will cater to their shareholders, as they should, and any cost savings will go toward improving margins and stock prices or higher dividends or the like.”
So what if they do? They won’t be able to hide those numbers. Everyone will see they are sticking it to the consumer.
That allows smaller, mom-n-pop businesses get back into the game and compete again because they WILL treat their employees and customers right. There are a lot more of us small businesses than big corps.
I sure hope so.
The “poor” should learn to shop in thrift stores like my wife does.
I sure hope so.
The “poor” should learn to shop in thrift stores like my wife does.
‘Bout time the poor paid their “fair share.”
Sorry, forgot to include this in my first reply to you.
On a $20,000 car to make the 9% tax save the purchaser any money then the car generating $5142 in profit for the car company. We know this is not the case as car companies are barely profitable.
Closer to the real numbers would be a car generating $200 in profits which means $70 in taxes per sale at the 35% rate.
The 9-9-9 plan would reduce the cost of the car to $19,930 which would then be taxed at 9% bringing the cost of the car to $21,723.70.
The 9-9-9 plan costs the consumer more money.
It also messes around with the market since a used car could sell for $21,000 (more than the base price of the new car) and still be cheaper since there is no sales tax.
Why is that 'sticking it to the consumers'? Are you saying that corporations are not entitled to make a profit? Or are you saying that they can only make so much and the excess has to be returned to consumers?
That allows smaller, mom-n-pop businesses get back into the game and compete again because they WILL treat their employees and customers right. There are a lot more of us small businesses than big corps.
No doubt Ford and Apple and GE and Citicorp are shaking in their corporate boots.
We can't. For that reason, if Cain gets the nomination, we'll end up with 4 more years of Obama, unless Cain abandons or significantly modifies 9 9 9.
If the tax burden shifts from the wealthy towards the poor, we'll have those louder than ever.
>>Ford and Honda currently pay a 35% federal tax rate. I their federal tax rate went down to 9%, don’t you think the competiton between car companies would cause them to lower their prices—lower them enough to cover the additional sales tax, so that the end cost to the buyer (even with the 9% sales tax) is LESS than it currently is?<<
You have to be careful with this argument because you’re comparing apples and oranges. The 35% is paid on net PROFITS, whereas the 9% will be paid on SALES. A company might have great sales, but a low profit margin, so the 9% sales tax will overwhelm the savings from the drop on the tax on profits.
Profits in grocery stores, for example, are only about 1-2% of sales, so even if you cut their tax rate to zero, you’re only enabling a less than half percent cut in prices. Of course, there are taxes up and down the line that have to also be considered...taxes paid by their suppliers, their employees, etc. The point is that it will be a messy calculation and it’s easier to look at it in a big picture way.
That is, look at total income and sales taxes collected now, and then apply the 9/9/9 formula to total incomes and sales in the economy to estimate how the government comes out. If taxes collected are nearly the same under both methods, then clearly 9/9/9 will promote more economic growth because of its lower marginal rates, but it’s not so clear that any particular segment of the population will necessarily benefit. That said, a rapidly growing economy helps lower income people improve their lots much faster than an economy like the one we now have.
The real beauty of something like 9/9/9 is that it will become very difficult to change the rates in an upward direction, and quite easy to drop them, especially if, as I believe economist Milton Friedman once predicted, revenues would grow rapidly under a flat tax because the economy would grow so strongly.
But there is little chance it could be implemented, and if he is the nominee, and 9-9-9 is his “economic plan”, he won’t win the election. It’s a plan for a non-competitor, not for the nominee.
Here you are, making intelligent comments again! :-)
So on a new car...let’s be conservative, $30,000...9 percent fed tax adds $2700 to the price ( we pay 7 percent state sales tax, but we’d have to pay that anyway.) I don’t think that’s anything to discount.
On a new house, right now, no sales tax because state sales tax does not apply, but a new house runs around $200,000, add 9 percent sales tax that’s another 18,000 added to closing costs...yikes!
In no time at all, 80 percent of everything sold will be sold "used" to avoid the tax. Don't think it will happen? Just watch.
Initially I was intrigued by Cain's 9-9-9 tax plan. After carefully studying the plan and his answers--most of them confusing--to questions put to him about it, I have to admit that I am completely unimpressed with it. It's a slapdash tinker toy solution to a formidably complex problem.
I don't think he has really thought it through. First of all, he will not be able to unilaterally impose the plan. That's not his constitutional role as president. He can propose it, but Congress has to be sold on it. And anybody who understands the first thing about Congress knows that Congress will never propose and pass legislation that requires people in lower income brackets to pay effectively a national 18 percent tax on food and other necessities. If Cain doesn't understand this, then he really is not ready for prime time. If he does understand it, then he should admit that its just a gimmick and give us his best fall-back solution.
I don't care for Perry, but he has one important advantage over Cain. he has actually governed a state. And governing a state is nothing like running a pizza business. And if the pizza business model is not like running a state, it is even less helpful in understanding how to run a nation of 50 states filled with innumerable noisy contending interest groups and an impossible fractious Congress that would rather spit in your eye and kick you in the shin than cooperate on passing your ideas for overhauling the tax code.
Cain can still make the sale. He can start by showing that he has more than a superficial understanding of the complex challenges of governing in a republic made up of powerful interest groups intent on preserving their prerogatives and tax benefits and screwing you out of yours.
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