Thanks Vintage Freeper for posting this:
Posted on 10/18/2011 7:42:10 AM PDT by 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.
I have a question - Where are the FICA and Medicare contributions in your example?
I can't put my finger on it, but I recall that any time the Feds cut you a break, some states stepped in and upped their taxes equal to the Fed cut.
I like your effort, however...
Your treatment of disposable income after sales tax implies prices remain the same and sales tax is asseed on top of that. However, since the embedded taxes in goods and services would drop, their cost would drop. The net of lower cost plus sales tax would generally equal the current price. So the increase in your disposable income would be 31,651.20 - 25,2000 = 6451.20
Why? The state sales tax remains the same whether you change the system or not. It is not a variable that needs consideration. It is only a distraction.
Why? Savings and investment are not taxed. They are taxed at the point of income, which he already accounted for and when they are spent, at which time they are not savings.
www.999calculator.net
Well you also have to assume that the “rich” are going to spend more, too. That is where the fairness comes in to the equation. The income tax maybe regressive, but the sales tax is progressive.
I think that the intent of Cain's plan is that expenses for the poor and middle classes will go up. The idea is to level the playing field and get those that do not pay any income taxes to pay something into the Federal tax system. Going by the numbers that are thrown around, that is 47% who do not pay. That is going to be a hard sell to voters in a presidential election.
I don't think that Cain can sell this in the long run. The media WILL paint him as the candidate that has promised to raise their taxes. True or not, that is how it will be presented by the media.
The media may say that, and the Democrats will try. 47% of the people don’t pay taxes, but what percentage of the VOTERS don’t pay taxes? How many of them will want to see the 47% start to be part of the system. It makes total sense to make everyone have skin in this game. It has to be shown that the poor and middle class will not pay more and ultimately will benefit greatly from it.
I am sure the question is difficult for many to grasp. Some here don’t like it. I do like it and I do believe that 999 would result in lower prices and higher wages, faster growth and lower unemployment. The higher wages can happen almost immediately if, for example, companies can be ‘pressured’ by media/politics to kick the 6.2% FICA matching funds back to their employees. If you got a 6.2% ‘raise’ that will offset most if not all of the 9% sales tax you are being asked to pay AND ensure that everyone including foreign visitors will help fund the national budget. Even black market drug dealers will pay taxes!
If the economy grows and unemployment drops, wages will continue to rise via wage inflation. With a 9% top rate corporations and foreign investors will want to come here not just for the rate but for the stability our country offers. With no tax on capital gains people will be encourage to take more risks. So it really can’t be allowed to dissolve into a question of “you are gonna pay more on day 1” but instead, assuming Cain wins the nomination, he will have to explain that this is a change that will result in little to no difference for the poor or lower middle class in the short term, and greater potential for them in the long run. And it also virtually guarantees the poor and the OWS crowd near direct participation. Because the taxes are direct and 100% visible EVERYONE becomes part of the decision making. This almost (but not exactly) helps democratize the Federal government.
As for the budget itself, 999 is meant to match dollar for dollar everything we do today. If we can cut the budget 999 can drop to 888 or 777 or lower still.
BTT for discussion.
That’s an interesting analysis.
Cain’s 999 is more potent than that though. You left off that which is not directly paid or due to you. Indirect impacts are potent, especially as they aggregate. For one example, among the closest indirect impacts is the value of the 7.65% any [statutory] employer pays for each [statutory] employee in Social Security and Medicare. That’s in ADDITION to the 7.65% that [statutory] employees are compelled have deducted from their pay, that is shown on paystubs.
Many employers will return that pool of money to their employees.
Excellent points, and as you said I did not look at iny effects on businesses or indirect effects on my situation. I did a very simple analysis of my bottom line (IE the numbers on my paycheck and in my bank account) and found I come out ahead with 999.
As you have pointed out, it is much beyond that as many of the hidden costs we never see will be eliminated or effected in some way and could result in lower prices at the marketplace and/or higher paychecks.
The upside - higher paycheck means more income tax revenue to the Fed, and lower prices means more spending which means more revenue for the fed.
Amazing how even 9-9-9 ends up right back to Reagan’s ‘trickle down’ plan where lower tax burdens result in higher revenues.
Thanks commish.
If the lower income folks don’t like paying a little extra in taxes, perhaps a lot of them might actually choose to do things like marry and stay married, so they can claim more income and keep more of what they’ve earned?
Hmmmm?
Right now we’re penalized for staying married and filing jointly.
Thanks Vintage Freeper for posting this:
“Without stratified tax rates, any calls by leftists for tax increases will be calls for increased taxes on the poor, and also on themselves.”
Yes, it would ... if Herman Cain hadn’t caved in and included the idea of “empowerment zones”. So the “official” tax rates can be bumped up while politicians rely on buying votes from one “empowerment zone” after another, playing the “blighted inner cities” off against the “wealthy Wall Street” firms. Dem districts will end up as empowerment zones with low rates while GOP districts will be left with ‘15-15-15’ to make up the difference.
The people hurt by this plan are not the poor. People hurt are the people who no longer work and have savings which they spend.
They may make that up in elimination of cap gains and no interest tax, but not in today’s market and interest rates.
You still pay FICA and Medicare taxes (15.3 paid half by you and half by your employer). Those would go away under 999.
” the 9% tax would be applied to adjusted Revenues, not Income, and the adjustments are mainly raw materials, products, utilities, etc., purchased from suppliers.”
I don’t think you are correct. His site states:
“Gross income less all purchases from other U.S. located businesses, all capital investment, and net exports.”
That covers all purchases of raw material, etc. The beauty of the plan for corporations is that it eliminates repeated taxation of the same items as they pass through the system to a final product.
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