Posted on 10/08/2011 5:27:08 PM PDT by TLittlefella
Good I want people who pay nothing to have to pay something.
This artical is misrepresenting the facts. This couple working at Walmart are paying nearing 16% in payroll taxes now regardless of their income. They are also paying income tax on their combined social security plus walmart income. Finally they are already paying a hidden 30% nation sales tax which is the portion of the price of a good that goes to the nation government by way of corporate income taxes.
No they can't, because Mr. Cain's corporate 9% is calculated on gross income minus inventory purchases, investments, and dividends - not all of the corporate expenses, and particularly not payroll. So Wal-Mart actually has to pay 9% of the 22,000 in salary since it isn't a deduction from its gross sales under Mr. Cain's plan.
Mr. Cain says he ends the payroll tax, but that's not really true. He just renames it an income tax on the corporation and changes it from 7.5% to 9%.
You’re numbers are not even close to being right.
As someone point out, on a $22,000 income they are paying 15.3% in payroll taxes. $3,366.
Since their employer has been paying half of that on their behalf (a hidden tax) their take home pay will increase by $1,683. So their base pay for Cain’s plan is 23,683.
If they spend $200 a week, then their taxes under the Cain 9-9-9 plan are:
Base pay: $23683
Income taxes: $2131
Sales taxes: $936
Net: $20616
Effective tax rate: 12.95%
vs
Base Pay: $22000
Net: $20317
Effective tax rate: 15.3% (payroll tax rate)
The couple in your example pockets $299 a year more under the Cain plan, and their tax rate drops from 15.3% to 12.95%.
The Cain 9-9-9 plan is a good deal for your hypothetical couple.
What you are saying is totally irrelevant. The 7.5% raise comes DIRECTLY from the reduction in direct tax to Wal-Mart because they will not be required to pay 7.5% employee payroll tax.
Are you aware that Wal-Mart or any other profitable corporations are in 35% top tax bracket? That drops to 9% and that will leave plenty of cushion for losing deduction you listed.
Not even close. According to the 2011 Wal-Mart annual report the company has a federal income tax liability of around 4.6 Billion dollars. For the same period they had sales of almost 419 Billion dollars. So the federal income taxes are about 1% of sales, not 30%.
The effect of federal corporate income taxes on consumer prices is often misunderstood. If Wal-Mart paid no federal income tax and they applied all of the savings to reduced prices you could buy a Walmart 88 cent special for 87 cents. And that nifty $399 computer would be $395. Not much of a change.
The big issue with federal corporate income taxes is how many jobs and factories companies move overseas to support their overseas customers.
I’m not reading that the same way you do. When he says business gross income he is NOT saying gross receipts.
When he says: “Empowerment Zones will offer additional deductions for payroll employed in the zone” — I think the key word here is ADDITIONAL. He is contemplating some multiplier greater than 1.0 on payroll for qualifying businesses.
I think that must mean he is using “gross income” to mean after ordinary business expenses, including personnel costs and SG&A.
Otherwise, it wouldn’t make sense to use the word “additional”.
And don’t forget he appears to make dividends fully deductible.
In any event, he hasn’t yet given us technical definitions of these terms.
I think we will expect to see in coming weeks information from the advisors he used to work on this as well as technical definitions of the terms he is using, so we won’t have to guess at how he defines these terms.
There’s just one flaw in your logic: You leave out the part where people who don’t pay taxes get to vote anyway.
***
1) Indeed I might pay more, but if less of the GDP and corporate bottom line needs to be spent on taxes and compliance, I’ll make up the difference in more jobs and more pay.
2) The glorious part of 9-9-9 (correct me if I’m wrong) is that illegals, and welfare recipients pay national sales tax going forward, and the 9% national income tax means all kinds of people not paying now would pay, right?
The landscaper already has to pay 15.3% off the top in self-employment taxes (payroll taxes). He then has to pay his regular federal income taxes. Let's say he's in the medium backet: 25%. So that' puts his tax rate at 40.3%.
Let's try you story using current tax rates.
When a landscaper faces a 40.3% income tax on the money paid to him or her to mow a lawn, won't they (and the homeowner) be tempted to just exchange some cash and avoid the 40.3% by having the landscaper charging 20% less to the do job, and thus avoiding another 20.3% in taxes?
Last I checked, 40.3% was a lot more than 19%, and is a lot bigger incentive for people to cheat the system by working cash deals under the table.
“Purely unsubstantiated Dem scare tactic comment. The problem in this country is too many people skate on paying taxes so that they care little how they are spent and who they vote for. Maybe if this old couple payed on their side income, they would be less likely to pull the lever for freebies in the polling booth. “
Yes. That.
Sorry, but you don't get it. Mr. Cain's plan re-defines how corporate income is calculated for tax purposes. Under his plan taxable corporate income is not the same as the taxable net income used to calculate the present corporate tax.
Right now all corporations pay a 35% tax on net profits -- which is computed by taking their gross income and subtracting the payroll they paid to employees, the amounts they paid to suppliers to buy goods, etc.
Under Mr. Cain's proposed tax plan the 9% tax is computed by taking the gross income (total sales) and subtracting only the amounts paid to suppliers for goods, money invested, and money paid to stockholders as dividends. He specifically excludes amounts paid to employees as payroll except for some "Empowerment Zones." See for yourself at his own web site.
Once you include the company's total payroll back into the "income" category, you are taxing a much larger amount of the money the company received, so even though the rate is 9% the actual tax is much larger.
I wish I could remember the story about the bellman and where the missing dollor
went because your math equates to that story.
Next Error: The poster is assuming that entire $22,000 earned from Wal-Mart
will be spent on items subject to the 9% federal sales tax FST).
The poster DOES NOT assume the entire $22,000 will be spent on items subject to
the 9% sales tax – read the post again – the post assumes $200 a week will be spent.
Assuming they eat soup all week and dress in rags they will undoubtedly spend at
least $200 a week ($926 sales tax per year).
Your hypothetical ignores that the 25% rate applies only to the excess over $76,900 (assuming the landscaper is married), the landscaper pays only $9,500 on the first $76,900 (assuming he takes no deductions, even the ones he is entitled to). So the rate for the first %76,900 is more like 12%, again with no deductions. In the real world the rate is more like 5% after the typical deductions.
The combined FICA, Medicare, and income tax for the landscaper today are not much above the 18%, and yet people still have a tendency to avoid the taxes. So there is nothing to suggest that having a sales tax and an income tax will reduce the size of the IRS, or the amount of enforcement they have to do.
Cicero...
You have it right. Dissolve the Dept of Education, the EPA and PBS.
Remember members of Congress (aka Crooks) don’t pay into the SS fund.
“We shall seek the truth and endure the consequences.”
I wouldn't count on it. It would be illogical and pointless to have the government pay itself sales taxes. So even if food stamps and other aid to people on welfare seems like it is taxable, in reality it won't be, because the paying entity is the same entity that collects the tax.
Sales taxes do capture revenue from anyone who is spending, and for consumers they are an easy anonymous tax, which is good. So anyone in the USA spending money provides revenue which is good. Of course making everything 9% more expensive may put a crunch on people who are barely making it now.
For low income working people, the 999 plan replaces their 7.5% FICA with a 9% tax. So they pay a little more. Their employer ends up paying a 9% income tax, which will include their payroll because of the way it is calculated, so the employer ends up paying about 1.5% more than he or she used to for the low income working person.
These grand design things like Obamacare or the Ryan Plan or 9-9-9 are all recipes for poltical disaster at the end of the day. It doesn’t matter whether they are good or bad on paper, they usually don’t happen and are eventually like slow moving barges in the middle of a high-tech naval battle. So easy to ka-boom!
As for 9-9-9 specifically, it proposes to tear up the 70,000 page tax code that has 500 different interests ready to defend every sentence of it. It’s HOW all the sentences got in there in the first place—political payoffs. Does anyone really imagine a Congress will convene that will countermand the biggest sources of their own campaign dollars—??
In short: good, bad or indifferent, 9-9-9 will NEVER happen.
I agree that knowing exactly what he means is important.
Note that he does use the identical phrase "gross income" for personal and corporate income. Clearly in the personal case he means "total income" in the sense of "total receipts" since that is how the current tax code works - deductions are the allowed expenses against your total income. (on a 1040, I'm not talking about the Schedule C expenses)
Lets hope your interpretation is what Mr. Cain means, but I doubt it since he hasn't announced a plan to radically downsize government and his plan won't generate enough money to run the government, or support Social Security and Medicare, if he stays with the current definition of corporate income and changes the rate to 9% while eliminating the payroll taxes.
Do you now, or have you ever, worked for the IRS, H&R Block, any similar company or organization, or engaged in any occupation (e.g. tax accountant, tax attorney) that profits from our present system of income taxation?
OK but even revenue neutral you HAVE to radically downsize government just to eliminate deficit spending
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.