I assume nothing.
And Art Laffer, who should know better and has recently supported this bad idea, will bear me out.
There is a peak amount of tax-to-income ration that people are willing to pay. We have just about hit that max. Tax revenues are falling rapidly because of the down economy, which results in lower income taxes and lower sales taxes.
9-9-9 will create an immediate bounce in the economy as people are allowed to keep more of their earnings and to save more of that money by not spending it if they so choose.
This will increase capital formation, which usually results in greater business investment.
However, it will not fix the overall economic problems that not only the US faces but the entire industrialized world.
People will cling to their savings, not invest. They will buy a bit more, but not enough to pay for all that the government is spending on.
What will be the result at that point?
The government will turn up each of those three dials to the “Laffer Curve” maximum. At first they’ll raise it just a couple of points, using incrementalism as they always do. There will be a lot of backlash, but it will pass. After that the increases will be easy. They’ll keep it up until we are at 29-29-29 and we are being taxed to death. Now, I don’t mean literally 29-29-29. I use that number as an easy read to refer back to 9-9-9. Who knows what the eventual numbers will be.
But you know damn thing perfectly well. When the government sees people either 1. Are saving more money or 2. Have more money to spend, they WILL increase taxes.
Now if you want to talk about passing an amendment to the United States Constitution that is so written that we will never see an increase in the 9-9-9 tax plan AND can successfully prevent congress from creating any type of workaround (hidden taxes, taxes through inflation, taxes through regulatory fees, etc.), then we can talk. But that will never happen. Because in the mind of congress, they have one unified goal: take as much from the workers as you possibly can and still keep them going to work.
The incremental increases will eventually surpass the Laffer Curve and undo all of the gains that 9-9-9 creates.
And the left will be able to blame it on a “conservative” economic plan.
What will be the result at that point?
You give your answer below, but let me interject my comment here. You are correct, below, that one response is frantic attempts to raise revenues. Another would be print money. A third would be: DECREASE SPENDING.
Yes, we all get a good laugh out of that one, but the time has come to quit saying "that's not gonna happen" and instead say "we have no choice but to MAKE that happen."
The ONLY way to limit government, in the end, is to feed it less money. So, as far as I'm concerned, your analysis leads to a beautiful conclusion -- the government would not have enough revenue to cover spending AT THE PRESENT RATE. Good. Stop spending on stupid stuff. Budget accordingly. Prioritize.
[Also, Cain is for a Balanced Budget Amendment. His 999 plan is not in a vacuum.] You say the government will respond by:
The government will turn up each of those three dials to the “Laffer Curve” maximum. At first they’ll raise it just a couple of points, using incrementalism as they always do. There will be a lot of backlash, but it will pass. After that the increases will be easy. They’ll keep it up until we are at 29-29-29 and we are being taxed to death. Now, I don’t mean literally 29-29-29. I use that number as an easy read to refer back to 9-9-9. Who knows what the eventual numbers will be.
If you've read through the thread, you've seen the response to this argument several times, so I'll be brief here.
There will be no political will to keep raising the rate recklessly because any rate increase would affect 100% of 100% of Congress members' constituents.
Can you envision Maxine Waters voting to raise the national sales tax rate to some ungodly amount when it would affect 100% of "her people" (her words) in her distict?
No. Now would she try to get an exemption for "her people." Of course! That's situation normal! That's the crap we deal with now!
But in a situation where there is NO TAX CODE full of exemptions, this would be much harder.
Plus, once this is established, We The People need to make the principle that ALL people pay taxes and at the SAME RATE the new third rail of politics. We need to make it point of national pride and principle and shout down anyone who tries to breach this new national standard of fairness and civic-mindedness.
In fact, I'm changing my tagline right now to this:
NO REPRESENTATION WITHOUT TAXATION! [and since we don't want to disenfranchise anyone, everyone needs to pay taxes!]