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.
[ Right now the only way out of the crazy system, whether you’re a small business millionaire or a smelly stinky protester is to literally QUIT the economy altogether. ]
Opressive Socialistic Control always leads to Black Markets.
The Market will not be denied.
Businesses in the food industy currently pay a 35% federal income tax rate. Everyone in the food chain (farmers, processors, truckers, warehousers, groceries, etc...) pays a 35% tax, which raises the price of food.
Let's use an apple for an example. Under the current system it costs $1 + 0 in sales tax, so the final cost is $1.
Under the 9-9-9 plan business taxes drop from 35% to 9% (a 26% drop). Let's be conservative and assume the cost of the apple only drops 20% to 80 cents. So under the 9-9-9 plan the consumer pays 80 cents + 9 cents in tax for a total of 89 cents for the apple.
Current system apple cost = $1.
9-9-9 system apple cost = 89 cents.
The consumer saves 11 cents under the 9-9-9 plan, even though they are paying a federal sales tax.
I admit this is a hard sell, because it requires people to actually think things through, but in the end people will be paying less for food under the 9-9-9 plan.
Exactly - someone made the point the other day that fuel and transporation taxes is a huge hidden tax in everything - and those numbers would come down.
Have you been to a decent Goodwill lately? I’ve spent the last three years only buying clothes from goodwill and now have a closet full of Pendleton, Gap, Banana Republic, J. Crew, not to mention Danskos, Doc Martens, Ettiene Aigner, etc. I’ve never owned so many designer goods in my life....
The Brits call them ‘stealth taxes’ which is a perfect encapsulation of their hidden - and evil - nature.
Our CURRENT taxes are more susceptible to going up when you have 50% of people not even paying them.
If 100% of Americans (and even illegals) pay taxes, politicians are far less likely to mess with them. Instead of only pissing 5% or 20% off, they can try to piss everyone off.
“Thoroughly confused by what this statement means.”
It didn’t make sense at first to me either. But I think it’s meant poor people wouldn’t pay the 9% Fed Sale tax on “used” items. Because a Fed tax was already paid when they were new.
RE: 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
Here’s the problem as I see it, no matter how many times you make this same explanation, there will still be people who do not believe that competition will drive down prices. In fact, I know of many people wo insist that the drop in tax rate will cause companies to USE the extra money for other things (e.g. padding their bottom line). Benefits to consumers will be the last thing on their mind.
This mentality of course, flies in the face of actual experience in other countries.
Australia introduced a GST ( Goods and Services Tax in conjunction with a huge lowering of income tax rates under the 10 year term of Prime Minister John Howard starting in 2000 ).
The same worries about the price of food and clothing skyrocketing were written in paper after paper ( I should know, my own family lives there and I visit there quite often, and READ about it on the internet ).
A subsequent study 4 years later by the Queensland University of Technology showed that the total effect on consumer goods by the introduction of the GST was NEUTRAL.
Beyond a small one off lift in price of 2.8% when it was first introduced, the long term effects were statistically insignificant.
See here:
http://eprints.qut.edu.au/423/
I know that this will not convince the unconvinceable, but a real life 10 year experience is there for all to see.
The argument that needs to be emphasized is that prices will go down more than enough to cover any "tax increase." I'm not sure how much of the current price of food is taxes (I'm pretty sure some fair taxer can find this) but I know it's pretty substantial.
Lowering the business tax rate from 35% to 9% will cause the price of food to drop more than enough to cover the additional federal sales tax. At the end of the day, the consumer will walk out of the store having paid less (including sales taxes) than they do today.
The other things that need to be emphasized are:
I admit it's a complicated argument, and we live in a sound bite society.
Me too! Goodwill is fantastic! My favorite store in the world!
IMHO, the class warfare is already there in Cain's plan with the "empowerment zones".
He stated in an NPR interview that blacks would be most affected by the empowerment zones, as in Detroit.
It’s a solid plan but will be a difficult sell. I saw first hand how Mark Critz used ads distorting his GOP opponent’s support of the Fair Tax to absolutely crush him at the ballot box.
Good to know that America's "poor" bring their used designer clothes to Goodwill! ;-)
Oh please. There's hardly a major corporation in the U.S. that pays a 35% rate on their income. Ford expects to pay $63 million in taxes on $3 billion in profits this year. That's 2.3% Yet I don't see them slashing the price of their cars by 33%, do you? Bank of America will earn $4.4 billion plus expects a $2 billion refund. Wells Fargo, on the other hand, will pay about 34% tax on their profits. Yet BofA isn't talking about reducing costs to their customers because they don't pay any taxes. On the contrary, they're talking about slapping a $5 per month surcharge on their ATM transactions. Obviously they aren't fearing the competition. GE made over $10 billion last year and got a billion dollar refund on top of that. What prices did they slash? IBM and Apple pay about 24% in taxes, about 4 percentage points more than HP, but HP isn't lowering its prices. All the companies I mentioned are in competitive industries. Some paid less tax than their competitors, some paid more, none of them slashed their prices because of it.
We live in a capitalist society, where profit is not and should not be a dirty word. If a company sees its costs go down because its taxes are reduced then they are under no obligation to return that windfall to their customers or their employees. They owe their loyalty to their shareholders, and their primary responsibility is to make them happy by raising dividends and increasing shareholder value. And if they reap a multi-billion dollar windfall from lower taxes then that's where that money will go. Not to consumers, no need to. Not to employees, the company paid that FICA not the workers so why should they get paid any more? No, that money will be used to improve the corporation and increase share prices. And anyone who thinks otherwise is just kidding themselves. So no, I don't see prices going down under Cain's plan. Certainly nowhere near enough to offset the increase in taxes most people will pay. And I don't see salaries going up just because FICA is done away with; corporations pay the least that they can get away with paying. And if Cain's insistence that both will happen is pure pipe-dream.
And his website does not. Why the contradiction and which one is to be believed?
Hey...I like the GW Boutique. lol
So if that’s true, that means you would pay sales tax on a new house or new car...that seems like an economy killer.
I probably will to. But most people will not. So why should they vote for the man who will raise their taxes?
But to be honest I'm very, very wary of this 9-9-9 plan. I was a much bigger supporter of Herman Cain when he was just advocating the Fair Tax without this absurd 9-9-9 forerunner. I don't care what he says. Once we give Washington the ability to enforce an income tax and a sales tax they'll NEVER relinquish them. Never...we'll be stuck paying both until we die. Then we'll have to pay sales tax on our coffins and burial plots.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.