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.
BUT, we lose the other 'hidden' taxes; and get a BIG tax drop on investment income; and also end up paying less for what we buy, due to the drop of corporate taxes.
Also, it will be easier to pick up some extra income, without having to do calculations on how much can be "safely" earned regarding both lost benefits, and increased taxes, as well as jumping a bracket.
Spending is easier to control to avoid a known single tax hit, than earning to avoid additional multiple hits.
BTTT
Social Security doesn’t go away. FICA taxes go away and are replaced. 999 raises the same amount of revenue as all the current federal taxes combined. So you don’t need FICA the SS is funded through the 999.
What is good about 999 is that it is transparent, and it widens the tax base to include more people (including tourists and visiting businessmen), all at a lower rate. It is nearly impossible to evade taxes, it is so low most won’t want to try to evade it. And with a 9% corporate tax rate foreign investment will flock to our shores. Even if some smaller countries have lower rates this is America where investors want to be because of our history of political and monetary stability.
“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.”
You aren’t taking into account FICA and medicaid. My daughter (working minimum wage while going to college) loses 13.5% of her paycheck to those things.
So a 9% income tax will save 4.5% off her taxes right off the bat.
Not to mention the fact that there will be less poor. A very low corporate tax rate will mean that companies (especially European companies) will begin to move here to save money. We will be the country that others outsource *too*.
This will create a labor *shortage*. (not enough people to do all of the available jobs) In the event of a labor shortage, wages and benefits go way up. (see the mining boom in Wyoming in the late 70’s and early 80’s)
The poor will benefit.
What I’m *really* hoping for is such a major economic boom that there is a *severe* labor shortage. This will require an increase in *legal* immigration of hard-working aliens who want a piece of the American dream. This will increase our dropping labor pool (due to the retiring Boomers) and switch the dynamics of our aging population. We’ll have more workers supporting each of our Social Security recipients. (Something that we desperately need)
______________________________
And before anyone says that this will create a problem with all of those immigrants retiring and adding to the Social Security burden in a few years - we need to implement another part of Cain’s economic plan. Saving Social Security.
Cain wants to give Americans under a certain age (50?55?) the option of switching to investment accounts. This would change SS from a Ponzi scheme to an investment system.
I’d recommend that immigrants don’t get the option. You come here to work at age 30 - you go straight to the investment option. Period.
That way, when they do retire and if they choose to stay here, they are retiring with their own money - not being supported by US taxpayers.
I make $53,000, after taxes. According to that website, my after tax income will drop to $45,000.
It’d been taxable.
Are you sure about that? Alabama doesn't allow you to reduce your state taxable income by the federal standard or itemized deduction you claim? Because if it does then those deductions are gone and you should see your state income taxes go up as well.
I think there is a point here that people aren't thinking about. It's not necessarily luxury goods here. The three car companies that you brought up are foreign manufacturers. The 999 plan would not affect them, as far as the income tax goes. The additional 9% sales tax would affect their sales though. The same would apply to any other product manufactured by a foreign company, such as Honda, Toyota or Kia. Their tax liability would remain the same so they could not lower their prices.
This all might be a plus as it would encourage more manufacturers to base their operations in the US. Would that happen? I don't know.
The point I'm trying to make here is that not every product will come down in price.
“The people who lose are retired folks because they do not pay FICA. They will have to exclude social security from income tax.”
Cain already said on Huckabee that social security would be exempt from income taxes.
If your daughter rents an apartment, would not the 9% Federal consumption tax then be added to that monthly purchase of housing?
This is just the amount of State Tax withheld from my pay, I am not looking at state filing, deductions, etc. That amount will not change under 9-9-9. There may be some changes to my state taxes at filing time, but as I said this was just a simple up front analysis of the effect on my monthly income from a federal perspective.
A rising tide lifts all boats. Enlarge your thinking
Your results are as expected for a wage earner.
Cain’s 999 ‘plan’ is a wealth distribution nightmare, and would rob visciously from small business owners, causing most of them to lay off workers, or possibly just close the business. That is what happened throughout europe when they applied taxation that had similar effects on small business.
If business people examine his plan, they’re likely to drop him like a hot potato, even though the ‘plan’ has zero chance of making it through congress.
But the real danger I see is that Obama will be able to use facets of the unworkable ‘plan’ to draw SS receipients away from Cain. He should just quietly drop it.
“If your daughter rents an apartment, would not the 9% Federal consumption tax then be added to that monthly purchase of housing?”
I have no idea.
Is that considered a ‘new’ purchase?
Assuming that Cain’s 999 plan is using the FairTax plan as the foundation, then yes, rents would be taxed.
Here’s a good discussion on the topic from the FairTax angle:
http://bobbiesfairtaxblog.blogspot.com/2007/11/does-fairtax-tax-rentals.html
This is where everybody needs to plug in their specific situation. In my daughter’s case, the 4.5% savings on her income tax would be more than enough to cover any increase in rent and utilities.
One could argue (probably accurately) that, over time, the lower income folks would see a net positive benefit as the economy, job pay improves, prices drop, etc. in many ways.
However, regardless of our personal feelings about Herman Cain (he’s my pick right now), or that we feel the lower incomes should pay some taxes (since 47% don’t now), it will be a tough sell even to a lot of GOP-leaning voters unless he makes a few minor changes (making it slightly more progressive) to less disproportionately affect the poor. One of the assumptions he makes Cain makes in his explanation of the effect on the poor is that, without FICA, somehow that employer-paid portion would go to the employee, but in my (somewhat cynical) experience, it most likely will not.
>> “A rising tide lifts all boats.” <<
.
I cannot see any way that inane comment relates to anything
jgge posted.
Kind of like a universal retort?
Had you read comment #1, you wouldn’t need any explanation.
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