RE: The Calculator from the site you gave in your post....
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Someone in another thread posted this to me using the calculator... and I’d like to read your comments on that.
Let’s talk about a family earning $40,000/year.
Here are some concerns with the calculations from the website you gave:
1) In the first place adding the Employer FICA to the equation incorrectly skews the results. That is a cost to the employer, not the employee, and if it is done away with then that’s a cost reduction to the employer and not an addition to the employees paycheck.
2) In the second place, since the tool does not mention marital status or family size then it’s impossible to see what it is comparing it to.
So for calculations doing it both ways.
CALCULATIONS FOR A FAMILY...WITH AN INCOME OF $40,000
A) TRADITIONAL CALCULATION BASED ON CURRENT TAX CODE
First let’s look at the median family in this country: husband, wife, and two kids. Use your income of $40,000 per year. Individual deductions are $3650 for each person, standard deduction is $11,400 for a total of $26,000 in deductions and a taxable income of $14,000. That gives them an income tax of about $1400. The current child tax credit brings that down to $600 refund. The Make Work Pay credit brings the refund to $1400. You can argue the logic behind that but it is what it is. So our family also pays the Social Security and Medicaid taxes of 5.65% less the federal refund, for a total tax bill of about $1450. Now lets look at them under the Cain plan.
b) CALCULATION BASED ON 9-9-9 PLAN
No individual deduction. No standard deduction. No credits. Just a flat tax of 9% for a tax bill of $4500.
That’s an increase of $3050 in income tax.
Add to that the 9% sales tax and their taxes go up another $2000 to $3000 or more. Their taxes easily exceed $8000, a considerable percentage of their income. Far more that they had under the old plan
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CALCULATIONS FOR AN UNMARRIED INDIVIDUAL EARNING $40,000
Now look at it for an individual. One individual deduction and one standard deduction brings his taxable down to $30650. Income tax is $4179, about $500 less than under Cain. His FICA is $2260. So with the 9% sales tax a single person doesn’t get hit quite as hard as a married couple does, but taxes do go up.
But in addition to that, what else have you just done? Under Cain’s plan the whole concept of ‘marriage penalty’ is back with a vengeance. If you’re single then it’s close to a wash. If you’re married with a family you are seeing your taxes skyrocket. Where is the benefit of that?
And another thing that doesn’t seem to be factored in in all these Cain examples is what he does to state income taxes.
In many states, state taxes are reduced by standard or itemized deductions. Without those, taxable income goes up there and the taxes for the people in your example go up another $550 to $750. So under the 9-9-9 plan the hits just keep on coming for people, married or single.
Do you have any response to this calculation?
By what math is $4500 equal to 9% of $40,000? Looks like 11.25% to me.
Their taxes easily exceed $8000, a considerable percentage of their income. Far more that they had under the old plan
Did you really just claim that a 9% income tax + a 9% sales tax would equal >20% of total income ($8000 / $40,000 = 20%)?
And by the way, the standard deduction for a couple filing jointly is $11,600 in 2011. That, plus an exemption of $2700 per child, equates to a taxable income of $21,000 - not your stated $14,000.
Fact is the speaker of the house revealed that on any given year 5,000 changes are put into the tax code, my guess none of those help the working middle class. The 999 plan stops any of that.
I would like to live in a country where the constitution comes first, you know like every servicemen has taken an oath to defend and protect the constitution from all enemies Foriegn and domestic. Maybe your oath calls for something less.