Cain's Stimulating 9-9-9- Plan

Wall St. Journal Opinion ^ | 10/19/2011 | Art Laffer

[SueRae]

It used to be that the sole purpose of the tax code was to raise the necessary funds to run government. But in today's world the tax mandate has many more facets. These include income redistribution, encouraging favored industries, and discouraging unfavorable behavior.

To make matters worse there are millions and millions of taxpayers who are highly motivated to reduce their tax liabilities. And, as those taxpayers finagle and connive to find ways around the tax code, government responds by propagating new rules, new interpretations of the code, and new taxes in a never-ending chase. In the process, we create ever-more arcane tax codes that do a poor job of achieving any of their mandates.

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CloseDavid Klein Republican presidential candidate Herman Cain's now famous "9-9-9" plan is his explicit proposal to right the wrongs of our federal tax code. He proposes a 9% flat-rate personal income tax with no deductions except for donations to charity; a 9% flat-rate tax on net business profits; and a new 9% national tax on retail sales.

Mr. Cain's 9-9-9 plan was designed to be what economists call "static revenue neutral," which means that if people didn't change what they do under his plan, total tax revenues would be the same as they are under our current tax code. I believe his plan would indeed be static revenue neutral, and with the boost it would give to economic growth it would bring in even more revenue than expected.

[misterwhite]

"People are not getting that they will save money on goods and services by removing 22% hidden taxes and replacing with 9% sales tax at final point of sale."

You're assuming that when the 22% of hidden taxes is removed, all this money will be added to the employees paycheck?

[Watchdog85]

Can you guarantee that the current rates do not go up?
Also can you gaurantee that Congress doesn’t raise your current hidden taxes or install a new one? Remember the hidden taxes on goods and services you don’t see.

[BfloGuy]

So, again. the Republican proposal is to control peoples behavior, but this time in a positive way, by tinkering with the tax code.

You could say that about any and every tax proposal anyone could ever suggest. By your reasoning, even leaving the current tax laws in place is controlling people's behviour. As such, it's a poor argument.

[Watchdog85]

This has nothing to do with employees paychecks, this is the hidden tax on goods or services when you buy something.

Try this and see
http://999calculator.net/

[marty60]

“Still, a number of my fellow economists don’t like the retail sales component of the 9-9-9 plan. They argue that, once in place, the retail rate could be raised to the moon. They are correct, but what they miss is that any tax could be instituted in the future at a higher rate. If I could figure a way to stop future Congresses from ever raising taxes I’d do it every day of the week and twice on Sunday. Until then, let’s not make the perfect the enemy of the good.”

WOW he can’t figure out a way to stop Congress from raising taxes?

Some economist!

Try a Balanced Budget Amendment AND an amendment REQIRING a 2/3rds vote of BOTH Houses of Congress to raise ANY tax.

Laffer really liked Jerry Brown’s tax policy, while he was advising Clinton.
Hey Art, Stephen Moore now says the Sales tax portion needs to be dropped. Did he sober up?

[Marie]

Wow! You’ll even take Art Laffer out of context??

What he actually said was, “It used to be that the sole purpose of the tax code was to raise the necessary funds to run government. But in today’s world the tax mandate has many more facets. These include income redistribution, encouraging favored industries, and discouraging unfavorable behavior.”

This is a BAD thing.

[USS Alaska]

So, again. the Republican proposal is to control peoples behavior, but this time in a positive way, by tinkering with the tax code.

No, numbnutz, not control behavior, free people to spend their own money.

9-9-9 is not tinkering with the tax code, it replaces 7,700 pages of rules, regulations, favors, breaks, penalties, carrots and sticks with a fairly straight forward approach that frees up capital and will invigorate the economy.

Why do you bother to post at FR, wouldn't you be more at home at KOS or DU?

[SueRae]

Thank you for those, I was actually able to download them! (I’m still stuck with the work computer, whose firewall blocks much of the good stuff on his site.)

New laptop on the way, finally.

THe debate format doesn’t lend itself well to providing details. I’m thankful Laffer stepped up but would like to see more.

[NC28203]

From the article:

"Thus, Mr. Cain's 9-9-9 tax base for his business tax is $9.5 trillion, for his income tax $7.7 trillion, and for his sales tax $8.3 trillion. And there you have it! Three federal taxes at 9% that would raise roughly $2.3 trillion and replace the current income tax, corporate tax, payroll tax (employer and employee), capital gains tax and estate tax."

It would appear that more than a third of the revenue from this plan would be derived from the corporate tax. Looking at the current Monthly Treasury reports, corporate income tax accounts for less than 10% of revenues under the current plan. If corporations are going to bear a much larger share of the tax burden, would we necessarily see savings in the prices of goods and services?

[Marie]

Cain’s people need set up a seriously good website that breaks it all down in the simplest terms.

[Buckeye McFrog]

It may require some tweaks to get done, but all sane economists seem to agree Herman is on the right track with this.

[LibsRJerks]

That calculator is pretty good. It shows the hidden costs. End result would just put more money in your pockets, especially if you DECIDED to save more and give more to charity. I suppose one could argue that the BASE prices could be raised, but I do feel competition and free markets would hold those costs right down.

I LOVE this plan — but, alas, so many Americans have the brains of gnats and are so ideologically driven they can’t open their minds to understand anything new — some of our presidental candidates included.

Wish Cain’s team would produce a very fun, slick, attention getting and simple YOUTUBE video on this tax that even the smallest gnat-brained American could understand. It would go viral beyond the universe if it was properly put together. A lot of people ARE very visual when it comes to numbers.

[9YearLurker]

What’s insidious about a sales tax, as seen by the states’ experience, is how easily it can be demagogued into itsy bitsy, quarter of a penny at a time increases.

“What, you wouldn’t agree to a 1/4 or 1% sales tax increase to support all these teachers, firefighters, old people and the disabled?”

[NoDRodee]

The dynamic analysis says GDP would grow 15% above the 2008 baseline or by $2 trillion.

It would create 6 million new jobs and 10% higher wages too

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Yes this is the key to his plan. People keep looking at the plan under the current economy and their current tax situation.

Perry talked about people in NH pay no sales tax and they won't go for adding one. But they do pay Fed Tax on the tings they buy, on average 22%

Cain need to get a couple of big companies and small business owners do the analyst. Say someone like Ford, let them show they can sales their cars for 10% less, pay their employees 10% more, hire 5% more people and still make more money. He would then have people really thinking.

They would be:
1. I can make 10% more money in my paycheck
2. Then I will have less money taken out of that paycheck
3. Then things they buy will be 10% cheaper
4. Then I'll have to pay 9% more when I buy something

Add it up and they are in better shape.

Also more of their friend will have jobs.

All because of this 1 little TAX plan.
This plan can be sold to the American people

[Marie]

Do you mind saying that over at DU? lol!

I think that it would be great to get MILLIONS of people off the public dole. To encourage businesses to set up shop in the inner cities. To give young black men a way to earn money that doesn’t involve dealing drugs on the street corner. To give single mothers a way to earn GOOD money so they don’t need to be on welfare.

There are many *disadvantages* to businesses setting up shop in these areas. Giving them a tax break is the only way they’ll go there.

Again, Cain sees a problem and is intent on FIXING it. He’s not talking about giving them fish. he’s talking about rerouting the river to them and teaching them how to do it for themselves.

Encouraging work, independence and pride in a *broken* community is a GOOD thing.

[celmak]

"“What, you wouldn’t agree to a 1/4 or 1% sales tax increase to support all these teachers, firefighters, old people and the disabled?” "

And they don't ude this tactic now?

[NC28203]

>>>The 16th amendment must first be repealed before a sales tax is created.

I also think a constitutional amendment has to be passed to allow for the federal government to tax a purchase that does not involve interstate commerce.

I understand that the courts have been pretty liberal in their definition of interstate commerce, and they may eventually come down on the side of allowing the fed gov to do so without an amendment.

But it would likely take a couple of years for the cases to be resolved and during that time companies may opt not to impose and submit the tax to the government.

[Marie]

“I really do like Cain, but I have concerns about his 9-9-9 plan. My biggest concern is that it introduces yet another form of tax on the federal level that Congress can keep pushing up and up and up.

“The national sales tax may be 9% when implemented, but how is Cain going to guarantee that it will stay there? He can’t, of course, and that’s my concern.”
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Yes, it introduces ONE new (very VISIBLE) tax, but it kills a dozen other (hidden) taxes.

Forcing Americans to actually see what the government is doing to them is a conservative dream!

It’ll be MUCH harder to raise a tax that *everybody* sees and *everybody* pays than it is to raise buried taxes that everybody pays, but aren’t aware of.

[celmak]

"I hate to say it, but Cain is proposing reparations on a larger scale than Obama has dared to attempt. "

Letting people keep more of what they earn is reparations?

[myself6]

While we are rebuilding the tax code we can also eliminate large chunks of what the fedgov “pays” for, eliminating the perceived “need” to meet some arbitrary income level from some arbitrary year.

Repeal the 16th. To hard to try? If we are going to be able to restructure the tax code then we will be able to cut this wart off our asses as well. Its part of the deal.

Here is the deal, If Cain is the GOP nominee I will vote for him and support him. If Romney or Newt are the nominee i will stay home and not vote. If perry or any of the others are the nominee I consider voting for them.

However... Even though I support Cain I will NOT support the idea of a federal sales tax without repealing the federal and state income tax and the amendment that enslaves us to the government.

Non negotiable. forget it. No F’ing way.