Personal analysis (simple) of Herman Cain's 9-9-9 on a person making $90,000 a year (Vanity)

Self ^ | 10/18/2011 | Self

[commish]

This is a very simple, but hopefully accurate, analysis of what Herman Cain's 9-9-9 plan would mean to me. I make around $90,000 a year, and have rounded figures to get to exactly that for this analysis.

To do the analysis I took my current monthly pay, my current taxable amount, my annual tax refund, and my monthly 'disposable' cash after bills/savings/etc. I consider FOOD part of disposable as I can decide how much I spend on groceries.

For the purposes of this analysis I consider ALL disposable income as being spent and therefore taxed by sales taxes. I also consider the annual refund part of DISPOSABLE income though in reality it usually goes to pay bills or into savings.

First, here is my current situation:
Income $90,000 -- $7500 a month
Taxable income -- $7000 a month
State taxes -- $280.00 a month
Federal taxes -- $1412.60 a month (approx 20.18 effective rate)
After tax income -- $5307.40 A month
Disposable income after bills/savings/etc -- $2000.00 a month
Annual average tax refund -- $1200.00
Annual DISPOSABLE (IE sales taxable) income -- $25,200.00

Now under 9-9-9
Income $90,000 -- $7500 a month
Taxable income -- $7500 a month (notice for 9-9-9 it is all taxable now)
State taxes -- $280.00 a month (state tax does not change as state taxable amount stays the same)
Federal taxes -- $675.00 a month (9% rate)
After tax income -- $6045.00 A month
Disposable income after bills/savings/etc -- $2737.60 a month
Annual average tax refund -- $0.00 (no refund under 9-9-9)
Annual DISPOSABLE (IE sales taxable) income -- $31,651.20
Annual DISPOSABLE AFTER 9% sales tax -- $28,802.59

NET CHANGE UNDER 9-9-9 -- $28,802.59 - $25,200.00 = +$3,602.59

Bottom line, at the end of the year I have $3600 more buying power under Herman Cain's 9-9-9, and that is assuming prices stay stagnant when all indications are that prices will lower under 9-9-9 due to less tax burden on businesses.

[commish]

Hopefully this is helpful to some that are trying to grasp the reality of what 9-9-9 might mean to them. This was a very simple analysis and I am sure those that wish to get 'technical' can start to nitpick things here and there, but I think it still gives a fairly relative ballpark figure of what 9-9-9 would mean to the average Middle Income earner.

I did this mainly because of all the posts I have seen where people say, but this pundit or that pundit says my taxes will raise, and even those that say just the opposite but are still going by a pundits statement.

This too is just a statement, but it is one backed up by numbers. Hopefully some will find it informative.

[allmendream]

On Free Republic 90,000 may well be “the average Middle Income earner” - but for the rest of the nation it is pretty high.

I just about make that much, in very high cost So Cal. ;)

[ScottinVA]

This puts it all in good perspective. And to take it further... the resultant drop in the corporate tax rate will free up businesses to hire more employees, thereby broadening the tax base. That’s one prime factor the 9-9-9 detractors are missing.. or ignoring.

[Grampa Dave]

Your net % increase would be 4%.

Keep Obozo and Rinos in power, and net decreases will be what we will see.

If you use a CPA to do your taxes, you will save that amount.

Also, you will not have to save a lot of paper for your deductions, spend a lot of time organizing it and have a few more hours not doing the tax B$ routine.

[leprechaun9]

Thanks for your post.

Does your data include FICA, Medicare, Unemployment or Disability in your analysis?

[avacado]

Thanks for working the numbers. After going through them they do seem realistic to me. Good job.

[SubMareener]

So you don’t give anything to charity?

[Mr. K]

And not only this, but you don't have to deal with 85,000 pages of tax regulations- only one page.

Satellite Radio guy Mike Church has been WRONGLY saying it would take a constitutional amendment to pass Cain's plain. It would not- we already have an amendment that allows for income tax- this would just make the RATE 9%

I LOVE THIS PLACE but mostly because it takes POWER AWAY FROM THE GOVERNMENT~!! the 85,000 page tax code is just government controls on favored industries and groups. (favored because of the election year donations, more than anything else) It would save BILLIONS in compliance costs. It would wipe out tax lawyers (~!!! he would have had me right there) snd accountants. Which could go back into production.

[Beagle8U]

Those making over 70k do make out better. Unfortunately the majority of voters don't earn that much.

[dila813]

Ask someone, I thought I saw Cain post that FICA goes away.

I think the idea is that the 9% income tax is replacing all of those taxes.

[RobertClark]

Thanks for the excellent analysis of the plan as it is currently presented. I too ran an analysis of my personal situtation and found that I would increase my buying power by approx. $5800. That is seperate of the benefits that I would gain through my business, which would benefit my employees greatly (I used to pay 80% of the expense of everyone’s healthcare plans and now can only cover 50%. With a reduction in payroll taxes I would likely take that back up to 75% which would add to their pockets as well).

[commish]

Does your data include FICA, Medicare, Unemployment or Disability in your analysis?

Yes, the 20.18 rate is all my payroll deductions.

[Anitius Severinus Boethius]

This isn’t an actual tax return, this is an example.

[justsaynomore]

Yes, FICA goes away

[wilco200]

“Those making over 70k do make out better. Unfortunately the majority of voters don’t earn that much.”

Those making under 50K or so currently don’t pay any Federal income tax. According to Obama, everyone should pay their fair share. That means tax the poor. Those making over 50K are already taxed too much.

[AppyPappy]

Add your state sales tax to the 9% sales tax

[Sergio]

bkmk

[Beagle8U]

Do you have anything in savings? If so, don’t forget to deduct 9% from that.

[dila813]

I thought that is what I read, and it is the key factor that I had in supporting 9,9,9 because for most poor people it isn’t going to have as big an impact moving to a flat tax system.

[asinclair]

This is a very simple, but hopefully accurate, analysis of what Herman Cain's 9-9-9 plan would mean to me. ...

Applause. Instead of just talking points, you took your real-life situation and did the comparison.

Now, if I were Cain's campaign manager, I would find someone to do a Web page that lets people "plug in the numbers" to see how 9-9-9 would specifically affect them. Indeed the pundits could put together a corpus of scenarios and plot the results. In that way, some of the critics could show just how "the poor" and the "the middle class&quote; would be affected.

And once we have some serious numbers against which to talk, we all can all talk about how to make tweaks to deal with adjusting the curve without destroying the basic idea: keep it simple. Indeed, the changes may not be to the tax code, but to other legislation.

Of course, there is a downside to the 9-9-9 plan: some companies, like H&R Block, will need to re-focus their business. Ditto independent tax preparation companies. But the hit to employment shouldn't be as bad as you might think, because CPAs will still be employed by companies to track performance, track expenses, and so forth -- they just won't be spending as much time (and billable hours) on taxes.

The major concern I have about this plan, and the subsequent steps, is how to rein in the future Congresses from raising the tax rate every time they want to "just spend a little more". The history of the income tax shows graphically how much of a concern this is.