[ 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? ]
Let’s do the Math on a 20,0000 car.
100% - 35% = 65% (How much the car is worth before taxes from feds.)
$20,000 X 65% = $13,000 (Actual price of car)
$13,000 X 9% (1.09) = $14,170 (Cost of car to Car Maker from 999)
$14,170 X 9% (1.09) = $15,445 (Price the car buyer pays)
How much did the consumer pay even after paying 9% tax?
$20,000 - $15,445 = $4,555 (Savings to the Customer)
So the customer saves $4,555 dollars on a new car which means the business could increase their profit by $2,000 and hire more workers if they wanted to and the customer would STILL save money.
For example, Ford reported totals revenue of $120 billion in 2010. A 9% sales tax would be about $10.8 billion in tax.
The actual tax Ford paid in 2010: One source says $69 MILLION. I did a comparison of pre-tax and after-tax profit, and got $722 million. It was definitely under $1 billion.
So, in 2010, the 9-9-9 plan, even if you did 0% corporate tax, would have increased the tax burden on ford car sales by more than 1000%, from 70-700 million up to 10.8 billion.
Cain says his plan is revenue-neutral. It clearly lowers the taxes on multi-millionares. So there are NO taxpayers in the lower brackets who should expect that their taxes could go down under the plan -- because total tax taken in won't change, according to Cain.
We'll be lucky to convince a majority of americans NOT to increase taxes on the rich. No way people are going to accept a tax increase that lowers the tax rate for the rich.
Been reading here a long time and I had to register to correct your math.
Companies are not paying 35% on revenue. That is only paid on revenue the company takes as profit.
You failed to factor in production costs of a vehicle, such as payroll, materials, shipping, and storage.
That $20,000 car earns the company around $200 in profit (or loses the company money!). So even cutting corporate tax rate to 0% would only save a buyer, at most, $200.
Basic theory (and the real world) shows that companies in competitive markets operate on a $0 profit margin. The companies make enough to cover payroll, costs and producing more things to sell.
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.