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Herman Cain's Hidden Nine(Peter Schiff on 9-9-9, full article post)
Safe haven /Europacific Capital ^ | Oct 18, 2011 | Peter Schiff

Posted on 10/19/2011 9:35:02 PM PDT by sickoflibs

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To: Kellis91789
The confusion arises because 9% applied to the consumption tax base would raise either much less than $500B or much more than $500B depending on what is subject to sales tax.

I think it's very hard for any of these analyses to account accurately for changes in behavior that will affect both prices and consumption rates.

I tend to look at these things somewhat, for lack of a term, algebraically. A bunch of variables are in relationship and there's a principle as to how that relationship works. It may seem simplistic to those who want to crunch numbers, but I think it is a sound additional approach to predicting the result of economic policies.

Here, I accept the principles underlying the Laffer Curve: that broadening the tax base and lowering rates leads to positive economic behaviors that have positive economic results, including increased tax reveneues.

The NRST broadens the tax base (everybody pays it) and lowers rate (the 9% NRST is lower than the around 20% embedded taxes that jack up consumer good prices now and which would be eliminated under 999). Therefore, if one is thinking algebraically, increased tax revenues result:

b (broaden the tax base) + l (lower tax rates) = r (increased tax revenues)

IOW, coming at it just from an application of principle, one can conclude that the NRST, as part of the comprehensive 999 reform, will increase tax revenues from what they are now.

And, of course, there's a sweet spot for that, hence, it's a "curve."

Now you are interested in *how much* tax revenues would increase. I'd say that depends upon how close the 9% is to the sweet spot (I imagine it's close) and the degree to which positive behaviors are engendered.

101 posted on 10/22/2011 8:39:52 AM PDT by fightinJAG (NO REPRESENTATION WITHOUT TAXATION! Everyone should pay taxes, everyone should pay the same rate.)
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To: fightinJAG

Actually, the more basic question to be answered first is whether services are taxed or just “goods”.

Since services account for 70% of the economy, this is a much more important factor than the effect on prices and spending behavior when the tax is visible rather than embedded.


102 posted on 10/22/2011 2:02:17 PM PDT by Kellis91789 (There's a reason the mascot of the Democratic Party is a jackass.)
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To: Kellis91789

I think you’re right.

But there’s also the fact that goods are the basis for services. Every service provider buys at least some goods to use to provide their service.

So if the service industry is boosted, a boost in the purchase of consumer goods that are associated with those services should accompany it.

Let’s take the example of a hairdresser.

I take it you are wondering if the person who purchases a hair coloring service pays a 9% NRST on the purchase of that service.

I am wondering how many more consumers will want and be able to afford to have their hair colored, thus increasing the amount of hair coloring products the hairdresser purchases in order to provide those services.

I agree with you that this doesn’t negate the usefulness of answering your direct question: are services taxed as retail consumer purchases under the NRST?

But it does show that none of this can be strictly compartmentalized — because taxes change behaviors. And behaviors have complex, not linear impacts.


103 posted on 10/22/2011 3:00:17 PM PDT by fightinJAG (NO REPRESENTATION WITHOUT TAXATION! Everyone should pay taxes, everyone should pay the same rate.)
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To: Kellis91789
Actually, the more basic question to be answered first is whether services are taxed or just “goods”.

P.S. I reiterate that, in my view, the application of principles, as I detailed previously, can predict the economic impact of policy changes better than number crunching (at least in the macro sense).

104 posted on 10/22/2011 3:02:45 PM PDT by fightinJAG (NO REPRESENTATION WITHOUT TAXATION! Everyone should pay taxes, everyone should pay the same rate.)
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To: sickoflibs
But unlike our current corporate tax system, the plan eliminates the deductibility of wages and salaries from corporate income. The net effect is the creation of a brand new 9% tax on wages.

Shame on Schiff. Are not wages necessary and ordinary expenses of doing business? Does not the 9 plan tax INCOME rather than REVENUE? If it is income tax, Peter, the tax will apply to what's left of revenues after expenses, including wages are subtracted. Cain isn't talking about a REVENUE tax, he's talking about an INCOME tax. Revenue is not income. Peter Schiff should know this.

105 posted on 10/26/2011 7:57:01 PM PDT by April Lexington (Study the Constitution so you know what they are taking away!)
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To: April Lexington
RE :"Shame on Schiff. Are not wages necessary and ordinary expenses of doing business? Does not the 9 plan tax INCOME rather than REVENUE? If it is income tax, Peter, the tax will apply to what's left of revenues after expenses, including wages are subtracted."

No. It eliminates deductions for wages supposedly to make it simple. Its a flaw in the plan but Cain would argue getting rid of payroll taxes makes up for it. I posted a number of times that this is a bad idea.

106 posted on 10/26/2011 8:04:47 PM PDT by sickoflibs (Cain :"My parents didn't raise me to beg the government for other peoples money")
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To: sickoflibs

How does the plan treat raw materials and the electric bill? If wages aren’t a business expense, what is?


107 posted on 10/26/2011 10:05:10 PM PDT by April Lexington (Study the Constitution so you know what they are taking away!)
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To: April Lexington
RE :”How does the plan treat raw materials and the electric bill? If wages aren’t a business expense, what is?

One of the critique of the plan is it taxes business ‘income’ not ‘profit’ like the existing tax code does. That means that a company that makes no money after expenses can have a tax liability. In fact a critique of GE is they paid no taxes last year.

Cain was trying to make it simple by not having deductions.

108 posted on 10/27/2011 5:18:30 AM PDT by sickoflibs (Cain :"My parents didn't raise me to beg the government for other peoples money")
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To: sickoflibs
Cain was trying to make it simple by not having deductions.

Then the Cain "corporate 9" is a REVENUE tax or a tax on gross sales rather than business income. In accounting, income is what is left after expenses are deducted. If we shift to a revenue tax, the tax becomes nothing more than an operating expense and it lowers net income just like the electric bill. The problem with a revenue tax is that Herman Cain won't be POTUS forever. The next career politician in office will sign legislation from our worthless Congress raising the revenue tax to 15% and beyond. It will be an unstoppable and relentless push to tax more and more revenue. Simpler tax forms, no doubt. but more and more revenue disappears into the government black hole. Revenue sharing with the FedGov. Dhimmitude. Extortion. Plunder. Protection Money.

109 posted on 11/02/2011 9:15:55 AM PDT by April Lexington (Study the Constitution so you know what they are taking away!)
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To: April Lexington

Interesting thought. What if we just pass the 9% through to customers like another sales tax? Then, they pay state sales tax, Cain’s 9 sales tax and the corporate 9 tax. It all comes from the serf (consumer) class anyway...


110 posted on 11/02/2011 9:18:03 AM PDT by April Lexington (Study the Constitution so you know what they are taking away!)
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To: sickoflibs

Interesting thought. What if we just pass the 9% through to customers like another sales tax? Then, they pay state sales tax, Cain’s 9 sales tax and the corporate 9 tax. It all comes from the serf (consumer) class anyway...


111 posted on 11/02/2011 9:18:54 AM PDT by April Lexington (Study the Constitution so you know what they are taking away!)
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