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.
>>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.<<
Actually, they don’t. Those posts address the problem of comparing the sales tax to a profits tax, a problem I also addressed just above this post because I’d failed to read all the previous posts.
The tax wedge is huge, and it’s spread across the price of any particular product in a multitude of ways. The reason it’s a wedge, is because it, like a doorstop, stops movement. An economy faced with a huge tax wedge stalls out, with one person not hiring another to do something they’re trained to do, preferring to do it oneself, simply because the government takes such a huge chunk (wedge) of the transaction if it’s reported.
If I hire my plumber neighbor and pay him $500, and he reports that to the government at his marginal tax rate (because it was his last income earned, as a personal favor to me, working after hours, say) The government at all levels will take over 40% of that $500 and perhaps more, maybe much more in places like NYC, when you consider that he must pay a doubled SS/Medicare tax of 15.3% and a personal tax rate of, say 25% or higher, plus a state tax rate of, say, 6% or higher. His remaining share of our $500 transaction could be as little as $200, which is why there are so many of us do-it-yourselfers. He has to charge that much to make $200-$250 for the work.
Under 9/9/9, 18% plus the state taxes would cover the tax bill, and he’d keep closer to $350-$400 for his work. But more likely, he’d do the work for only $300, the government would get its 25% or so, or $75, and he’d get his original $225 or so.
However, with plumbers rates falling dramatically, everyone would decide to have their work professionally done, and the demand for plumbers would skyrocket (obviously, I’m exaggerating here, but not as much as one might think) and all those unemployed people would soon find very good paying jobs, after they got some real training, not government jobs training. Taxes collected would also begin to rise, incidentally, enabling not the increasing, but rather the decreasing of the 9/9/9 rate. (I know, wildly optimistic, but not impossible, since the rates would be extremely transparent.)
And our homes would not suffer from lousy do-it-yourself jobs, our wives would be happy, and we’d all be getting more .... okay, that IS an exaggeration...
Okay, but in a given paycheck, conservatively speaking, I pay 20% effective income tax (after deductions) and now I’m going to pay 9%. If I earn $10,000/month I’m going to pay $900.00 in tax instead of $2000.00, giving me $1,100 back every single month. This doesn’t even take into account the additional $765.00 I save by not paying FICA and Medicaid.
Save up for a month and I pay for the additional tax on the car. Save up for a year and I buy the house.
I say “yes”. No, I say “heck, yes!!”
Don't forget the additional 9% sales tax on everything you buy. So if you spend $9,000 per month on food and clothing and gas and car and doctor's visits and what have you then that's an additional $900. So that's $1800 in taxes, a bit of a break but not so big as to swing that house you're talking about.
I don’t spend 90% of my income on consumer goods. LOL!
And 9% of $9,000.00 is $810.
No wonder you don’t like 9-9-9. Your math skills are rusty.
OK, so what is 9% of 9000?
A lot of people do. A lot of average families making an average income are going to see their taxes go way up. They may not be as thrilled as you are.
Doesn’t anyone EVER want to acknowledge that perhaps under 999, prices WILL go down due to competitition, and MORE people will come off the unemployment roles?
More people w/ jobs over time means MORE people have developed a work ethic, have worked and gained experience in the job market. Perhaps a dual income earning couple could save enough to buy a home, live a better life, have pride in what they’ve worked for.
I’d rather pay 9% and have a job than nothing and have no job and pay nothing into the system.
Having all these people on permanent unemployment begging for handouts ..what’s that doing to the psyche of this country? It’s a hideous thought.
I’m also pretty preturbed that 50% pay nothing — so, they’re enjoying roads, handouts, and the protection of our military for FREE — every day. That’s not FAIR to working people like myself, who hoof it and get up early everyday to pay almost 40% of MY income in taxes. I can’t afford the big cars, the bling, the flat screen TV’s that some of these so-called “poor” seem to be able to obtain.
Can someone explain to me how 9-9-9 does NOT become 10-10-10 in the next congress, or then 18-18-18 under the next D admin?
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I think Cain’s new Tax plan would help prevent taxes from going up all the time.
Under the current tax code we just have an income tax, one reason it is this way is because the Govt can get there money and people feel the impact of it less. If they never have the money in their hands they don’t miss it as much. They don’t feel the impact of the tax rate as much.
With Cain’s new Tax revenue stream of a sales tax people will feel more of the impact of a tax rate hike. More people would then be against higher taxes.
It would be just like this threads question, people are going to have to pay more for food every time the Dem’s want to raise taxes.
The bigger issue is preventing the plan from going to a rate of 15-15-8, of 24-25-9. My bet would be you would always see the sales tax the lowest because people have the money in their hand and they will fight against that tax rate increasing
Perhaps they will come down. Perhaps not. I can't think of anything that will force it to happen, short of government legislation, and a whole lot of reasons why it wouldn't.
More people w/ jobs over time means MORE people have developed a work ethic, have worked and gained experience in the job market. Perhaps a dual income earning couple could save enough to buy a home, live a better life, have pride in what they’ve worked for.
You seem to be assuming that none of the people who currently pay no income tax also work. That's a ridiculous assumption to make.
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