Architect of Cain's 9-9-9 plan says he should drop the sales tax

The Hill ^ | 10-18-11 | Jonathan Easley

[Brookhaven]

Economist Stephen Moore, one of the architects of presidential contender Herman Cain’s 9-9-9 tax plan, said Cain needs to rework a critical component of the plan.

Cain’s plan would replace the current tax structure with a 9 percent corporate tax rate, a 9 percent personal income tax rate and a 9 percent federal sales tax. But speaking on Larry Kudlow’s radio show on Saturday, Moore said the sales tax should be replaced with a 9 percent payroll tax.

“I’ve come to the conclusion that the American people and the voters do not want a national sales tax,” he said. “[Cain’s] going to have to replace that national sales tax with a 9 percent payroll tax. And if you do that, it’s a total winner.”

The plan has been under fire from both the left and the right since Cain’s recent surge in the polls. Democrats say the plan would lower the tax burden on the wealthy while increasing the burden on the middle class, and Republicans say the sales tax opens an additional revenue stream for the federal government to abuse.

“I’m surprised how hostile people are to the sales tax,” Moore continued. “When we designed this plan, I thought people would go along with the 9 percent sales tax. But the point is they won’t. And why not just do a payroll tax? It’s the devil we know.”

At the last Republican debate, in New Hampshire, Minnesota Rep. Michele Bachmann said that if you turn the 9-9-9 plan upside down, “the devil is in the details.”

Moore, who developed the plan with economist Arthur Laffer and Wells Fargo wealth manager Rich Lowrie, said he would advise Cain to drop the sales tax, but that the plan was solid otherwise.

“I want to be very, very clear on this,” he said. “I am not bearish on this plan. If you could put in place the 9-9-9 plan, oh my God, it would be like steroids in the economy. … You would have a million jobs a month if we put this in place. … I love the concept of it … but the American people will not go for a national sales tax. They’re just afraid of it.”

[E. Pluribus Unum]

Why are you filling out credit requests?

[Age of Reason]

Turn it upside down, and Herman Cain’s 999 is 666

[Talisker]

As Cain pointed out, that's not a criticism of the 999 plan, that's a critisicm of politicians. Politicians could raise the rate under any plan (even the current one). If you don't want the tax rates raised, work to elect politicians that won't raise the rates.

That's an insulting, contemptuusly farcical argument - from Cain, and from you. If politicians were honest and genuinely looked out for people's welfare, we wouldn't have to worry about ANY laws, now would we? They'd only be used as much as needed for the good of the people, and then dropped. So why worry, right? I mean it's like party politics exist. It's not like Leftists are at war with the country and want to tax it to destruction.

What rank idiocy.

The very ROLE of the people in the poltics of this country is to give these politicians as FEW ways to screw us into the ground. Cain himself admitted this about the sales tax danger less than a year ago.

[redinIllinois]

“And no one should allow the VAT argument to stand anywhere it is posted.

It IS relevant to this thread because the reason people are against the sales tax is:

1) It is being misrepresentated as a VAT
2) People don’t understand the concept of embedded taxes going away.

Also - 999 is a bridge to the Fair Tax which is 23% sales tax. If you take out the 9% because it’s too regressive - how are you going to EVER sell the Fair Tax?”

I agree with everything she said, and have to wonder about Stephen Moore’s motives.

There are some in the ‘establishment’ who didn’t expect Herman to be where he is now...

[Brookhaven]

pay 18% of their income in taxes and without any deductions.

You're not figuring this correctly.

If you are going to allocate all of the 9% payroll tax to the employee, then you have to start at 15.3% payroll tax under the current system.

Then you have to consider that taxes are't taxed. What you paid in as payroll tax is deducted from your base income for tax purposes. So their taxable income is only 91% of their base income. So for someone making $100,000 (just using a round number here, because the percentages will be the same no matter what the income).

Base income: $100,000
Payroll tax: $9,000
Base income for tax purposes: $91,000
Income taxes: $8190
Effective tax rate: 17.19%

That's only a 1.89% increase over the current system.

Bottom line is their take home pay will be pretty close to what it is currently.

[Brookhaven]

I like the sales tax option also, if for no other reason that it creates a bridge to the fair tax. With all the talk of what would happen if 9-9-9 became 20-20-20, people always fail to ask what would happen if 9-9-9 became:

8-8-11
7-7-13
6-6-15
5-5-17
4-4-19
3-3-21
2-2-23
1-1-25
0-0-27

Say goodbye to the IRS.

[Raebie]

I don’t get your math. Aren’t the payroll taxes being eliminated? How do you get to 17.19%?

Wouldn’t the taxes be $9000?

[dead]

The danger with 9-9-9 is that it will become 20-20-20

You can shoot down any attempted tax reform with the phrase "the government will just increase it later."

With that logic, we may as just pay up and shut up.

[Brookhaven]

Turn it upside down, and Herman Cain’s 999 is 666

How many pages are in the current tax code? Do you know what you get when you turn that over?

[redinIllinois]

” on top of everything we already pay in federal taxes.”

Did you miss that part of Cain’s quote on purpose?

Additional, not a replacement like the Fair Tax.

[redinIllinois]

“I like the sales tax option also, if for no other reason that it creates a bridge to the fair tax. With all the talk of what would happen if 9-9-9 became 20-20-20, people always fail to ask what would happen if 9-9-9 became:

8-8-11
7-7-13
6-6-15
5-5-17
4-4-19
3-3-21
2-2-23
1-1-25
0-0-27

Say goodbye to the IRS. “

I nominate for post of the day :)

[Brookhaven]

The proposal in the article is a modification to the current 9-9-9 plan. It is suggesting replacing the 9% sales tax with a 9% payroll tax.

[wayoverontheright]

Excellent point.

Perhaps Herman and Steve Moore should talk about phasing in the 999 plan... As income taxes are brought down say, 20% per year, the sales tax portion could increase 20% per year (example: 20% of 9% is 1.8% the first year, up to 3.6% the second year) such that the plan could be accomplished in gradual fashion over five years.

[jgge]

LOL… the average income in the US is $ 45,000 and you gave an example of someone making $ 100,000.

Repeat under the current tax code almost 50% of the population does not pay any federal tax when they file for all their deduction and the credit for minimum earned tax. In other word if someone makes $ 50,000 he will pay the $ 0 in Federal taxes after all these deductions and as if he did not pay any taxes including the FICA taxes, zero, zilch, nada, it is not very hard to understand this.

Now under Cain current 9-9-9 tax plan he would be paying $ 4,500 in federal taxes on his income with zero deductions. Suppose he spends 50% of his income buying stuff he would pay another $ 2,250 in sales tax so under Cain current 9-9-9 tax plan he would end paying a total of $ 6,750 a year in federal taxes where as under the federal current code he is paying $ 0.

If Cain the TALKER drops the 9% sales tax and replace it by 9% FICA tax without any deduction this man would pay a total 18% on his income (9% income tax + 9% FICA tax) without any deduction and that is $ 9,000 a year in total taxes to the Federal government.

[justsaynomore]

Here is the full context of what Cain said:

__________

“A national retail sales tax on top of all the confusing and unfair taxes we have today is insane! It gives the out-of-control bureaucrats and politicians in denial one more tool to lie, deceive, manipulate and destroy this country.

The third reason the national retail sales tax on top of all the taxes we already pay is a bad idea, is that there is already proposed legislation that replaces all of the federal taxes we pay. It replaces all current revenue. It supercharges our national economic growth, and puts the power of taxation back into the hands of the people who spend their money.”

It’s called the Fair Tax. It’s as easy to understand as ABC!
____________

[SoJoCo]

But speaking on Larry Kudlow’s radio show on Saturday, Moore said the sales tax should be replaced with a 9 percent payroll tax.

That raises the taxes on even more of the population. How is Cain supposed to get elected on a promise to jack up the taxes for most of the people?

[cynwoody]

(1) Replace the current 15.3% payroll tax with a 9% payroll tax

(2) Flat 9% business income tax

(3) Falt 9% personal income tax

Is this a better or worse proposal?

9% beats 15.3%.

It also avoids introducing federal sales taxation on top of federal income taxation, although, as it it currently stands, only Republican votes keep Congress from enacting a federal sales tax or VAT. The Donkees would love to let the Bush rates expire, add in a VAT, and see how many votes they can buy with all that extra revenue!

The real solution is to pass a constitutional ban on income taxation at all levels of government. Then work out how consumption taxation is going to work. The good thing about consumption taxes is that everybody who votes feels the pain (along with others, such as illegals, who don't are not supposed to vote).

It's also important that the amount of the consumption tax be visible. People need to know how much they are paying. Relying on voters with skin the game strikes me as the best way to restrain the growth of government.

[newzjunkey]

In your haste to bash Cain, you've lost the forest for the trees.

CONTEXT. CONTEXT. CONTEXT. Cain's writing there is a discussion of adding a sales (or VAT) to the EXISTING TAX CODE.

It's nothing like 9-9-9 which replaces the existing federal tax code entirely.

[Longbow1969]

You can shoot down any attempted tax reform with the phrase "the government will just increase it later."

The problem is 999 creates the infrastructure for a national sales tax - a brand new mechanism for the federal government to siphon off our money.

I don't want the government dreaming up or implementing new ways to tax the population. We have a spending problem and the focus should be shrinking the size and scope of government, not figuring out new ways to collect revenue.

999 is just not going to happen. Once people understand it most will absolutely oppose the 9% consumption tax. There is no realistic way to sell that to a general election audience - and that's before we even get into how it will effect social security with the elimination of the payroll tax. Cain would be better off just proposing lower tax rates, cutting regulation, cutting spending, etc. 999 is going to blow up in his face.

[SoJoCo]

9% beats 15.3%.

But is almost twice the 5.65% that most people currently pay. Under this proposal, an average family of four earning the median income of $49500 will see their income tax go from zero to about $4500, and watch their FICA go from $2796 to another $4500. From $2800 under the existing tax code to $9000 under Cain. That's a tripling of their tax burden. Would you vote for someone who promised to do that to you?