The night of Herman Cain’s “9-9-9 Plan

Yahoo News ^ | 101111 | Chris Moody

[Fred]

There was one clear winner from Tuesday's Republican presidential debate, based on the simple metrics of name recognition: businessman Herman Cain's "9-9-9 Plan."

Virtually all the candidates at the debate table had something to say about Cain's plan to replace the tax code with three, flat nine-percent federal taxes on consumption, business and income. Cain, once delegated to the remote wings of the debate stage, has enjoyed a surge in the polls ever since he won the straw poll in Orlando, Fla., last month, and at the first debate since he joined former Massachusetts Gov. Mitt Romney and Texas Gov. Rick Perry in the top tier, Cain and his policy proposals took up more of the debate's time than the ideas floated by any other candidate.

Of course, this isn't to say that any of them praised Cain's idea. Far from it. In fact, everyone who had an opportunity took shots at the plan.

[JohnKinAK]

The 9-9-9 will reduce overall taxes.

When a Corporation is forced to pay taxes on production, the cost of the taxes is part of the wholesale price of the product. Therefore as much as 35% of new retail prices is based on corporate income taxes passed on to the consumer. You pay corporate taxes when you purchase new goods and services, its just hidden. Therefore retail prices will drop as much as 26% with the removed corporate income taxes. The additional 9% sales will then be added on top, with an overall saving of 17%. Therefore “Seniors”, the “Poor” and and everyone else will actually have more money in their bank accounts. And that’s not including the removal of SS and Fica payroll taxes. It’s a Win for everyone, not to mention it will may America COMPETITIVE for BUSINESS with the rest of the world. It will bring back many of the jobs EXPORTED due to high taxes to China, India, Pakistan etc...

[JohnKinAK]

There is nothing in the Constitution preventing this Provision in a Law. The Provision wouldn’t apply to all laws just to the specific law. When the Fair Tax is implemented it will have a provision that requires the rescinding of all other tax laws and 2/3 vote.

[DTxAg]

The 9-9-9 will reduce overall taxes.

No, because according to Cain the 9-9-9 plan is revenue neutral, which means it will raise the same amount as the current tax system, it just redistributes who pays them. I've already gone through the lists in other threads, but examples of who pays higher taxes include seniors, average families, "the poor", and small businesses. Seniors pay no taxes now on their SS benefits, under Cain's plan they get hit with a 9% reduction in spending power. The average family at the median income sees their spending power drop 11% under Cain's plan. The whole point of the 9-9-9 plan (I've been told anyway) is to make "the poor" and everyone else players in the system. Small businesses get hit with higher taxes on payroll (9% vs. 7.65%) because of the way the corporate tax is defined.

Do you have a cite for the assertion that 35% of a product's price is based on the corporate tax rate? The majority of a product's cost is labor and materials, plus some transportation costs, maybe some R&D.

Look, I understand that IN THEORY the plan is based on the assumption that businesses will lower their prices eventually, which you HOPE offsets the extra taxes owed by these groups. Good luck convincing those voting blocks of that.

[DTxAg]

When the Fair Tax is implemented it will have a provision that requires the rescinding of all other tax laws and 2/3 vote.

The law that says "You must have a 2/3 majority to increase taxes" can be repealed by a simple majority vote in Congress and a willing President. At that point, all bets are off.

[Fred]

Regarding seniors on paying more taxes...

Folks you are all overlooking the tax that will go to ZERO!!!!

IT IS CAP GAINS!!! IT GOES TO ZERO!!!

Anyone with any kind of investment will welcome this, seniors are exactly that, investors.

[DTxAg]

Seniors on Social Security pay no income taxes on their benefits if they have no other income. Cain's plan places a 9% sales tax on their purchases. Tax increase? Check.

Seniors on Social Security with other income pay taxes on the other income and part of their Social Security benefits. A couple getting $25,000/year in SS benefits and earning another $25,000 in income would pay something like $850 in taxes. Under Cain's plan, they would pay $2,250 in income taxes on the $25,000 wages plus be subject to a 9% national sales tax. Tax increase? Check.

Seniors who fall into the lower tax brackets pay a 0% or 5% capital gains tax. Cain's plan is a flat 9%. Tax increase? Check.

Seniors who fall into the higher tax brackets pay a 15% capital gains tax. Cain's plan is a flat 9% on that income, plus a 9% tax on the spending of that income. Tax increase? Check.

Basically, seniors won't see a tax increase if they don't spend their money.

[Fred]

Courtesy of Brookhaven the 999 calculator

http://www.freerepublic.com/~brookhaven/

[GatorGirl]

Capital gains tax is cut to zero and it is not considered income subject to tax.

So your last two scenarios aren’t accurate.

I know lots of Seniors up in The Villages and many love Cain. They understand the tax plan and they’re willing to support it if it means turning things around.

They have children and grandchildren who will benefit from this plan. Apparently not all Seniors are selfish bastards like the ones in the AARP commercials.

[GatorGirl]

Well seeing as the law that implements the tax is the selfsame law that requires 2/3 to increase it, repealing that law will repeal the tax.

Then they will have to sell it all over again but with MORE tax burden. Yeah, that’s going to happen! /s

[DTxAg]

While I appreciate Brookhaven’s chart, my criticism still stands. The 9-9-9 plan increases taxes on seniors in numerous situations. Seniors vote, and in large numbers. The same can be said of multiple (large) voting groups. The 9-9-9 plan never sees the light of day if the person proposing it gets slaughtered in a general election because he wants to raise those groups’ taxes while his opponent wants to raise millionaires’ taxes. If anyone can explain how we win in that situation, I’m all ears. (Keep in mind, I’m probably voting for Perry in the primary still months and months away, but I will vote for Cain in the general if Cain wins).

[DTxAg]

Capital gains tax is cut to zero and it is not considered income subject to tax.

Must have missed that part in Cain's 9-9-9 plan. Care to point it out? Because it just says "gross income", and capital gains are income.

Then they will have to sell it all over again but with MORE tax burden. Yeah, that’s going to happen! /s

Ha, you think they'll sell it as increasing the tax burden on everyone? Hardly. It'll be the "let's repeal the 2/3 requirement so we can tax multi-millionaires" or something similar, and many will eat it up.

[DTxAg]

Well seeing as the law that implements the tax is the selfsame law that requires 2/3 to increase it, repealing that law will repeal the tax.

Missed this part. Absolutely wrong. They can pass a law implementing 9-9-9 and say 2/3 majority is needed to raise taxes, and a later Congress can amend the 2/3 to simple majority. No need to repeal the whole tax plan.

[SoJoCo]

There is nothing in the Constitution preventing this Provision in a Law.

There is nothing that allows it. The Constitution is not something that can be twisted to suit the circumstances any time you want. The Constitution is specific in identifying the circumstances under which a super majority is needed - treaties, impeachment trials, amendments, veto overrides. The suggestion that Congress can pick and choose what else to set that barrier at is ridiculous. What if the Senate said that presidential appointments needed unanimous approval? Or if the House decided that a super majority was needed to impeach someone to begin with? Would you say that was in keeping with the founders view of the Constitution? Of course not. If the Founding Fathers had meant for tax increases to require a super majority then they would have said so.

[GatorGirl]

Capital Gains are NOT income. That's why Buffett's secretary supposedly pays a higher tax rate than he does.

I guess she'll be voting for Cain.

Here's the evidence, straight from his website which you obviously haven't visited. It's okay, I haven't visited Perry's either.

The Phase 1 Enhanced Plan unites Flat Tax supporters with Fair tax supporters.

Achieves the broadest possible tax base along with the lowest possible rate of 9%.

It ends the Payroll Tax completely – a permanent holiday!

Zero capital gains tax

Ends the Death Tax.

Eliminates double taxation of dividends

Business Flat Tax – 9%

Gross income less all investments, all purchases from other businesses and all dividends paid to shareholders.

Empowerment Zones will offer additional deductions for payroll employed in the zone.

Individual Flat Tax – 9%.

Gross income less charitable deductions.

But it won't tax multi-millionaires. There's no way this could be perverted by Congresses to come to only apply to some people. Besides, isn't that what is happening now? So all the status quo candidates are fine with tax increases, too, by your logic.

[GatorGirl]

Brookhaven, your blog is amazing and very eye opening. Herman Cain is lucky to have your efforts. Best wishes!

[DTxAg]

I've visited Cain's 9-9-9 website numerous times. That's how I know, for example, that taxes on corporate payroll INCREASE from 7.65% to 9% under Cain's plan since payroll is no longer a business deduction (unless you're in an empowerment zone).

The IRS does count capital gains as income. For example, the IRS says "The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income." That's why you pay a lower rate on your INCOME tax return.

I read Cain's site as saying there is no separate capital gains tax, there is just a flat income tax. Since income includes capital gains, it's a 9% tax.

And if I'm wrong, just wait until you hear howls from every corner of the country when people realize Wall Street investment bankers now don't have to pay taxes on capital gains they earn paying the stock market.

[DTxAg]

Meant to say: And if I'm wrong, just wait until you hear howls from every corner of the country when people realize Wall Street investment bankers now don't have to pay taxes on capital gains they earn playing the stock market.

I can hear the campaign slogan now, "NO TAX FOR GOLDMAN SACHS!"

[dila813]

That’s politics

So they raise it,, then that person is fired

What we have now is a situation where 50% of the population is removed from the pain. We need to stop the madness.

[Crusher138]

Since when is payroll not a business tax deduction? From the IRS web site:

Payroll And Benefits

Typically, payroll expenses and employee benefits are the largest expense of small business employers. Payroll and employee benefits include gross salary, hourly wages, employee health insurance and administration fees for company retirement plans. Fortunately, payroll and employee benefits are a business tax deduction. However, the IRS requires employers to file annual and quarterly payroll tax returns. Periodically, the IRS matches amounts reported on annual payroll tax returns to amounts reported on annual income tax returns. Therefore, business owners must ensure payroll and employee benefits have substantiated backup.

[DTxAg]

Since when is payroll not a business tax deduction?

Because, from Herman Cain's 9-9-9 website:

Business Flat Tax – 9%

Gross income less all investments, all purchases from other businesses and all dividends paid to shareholders.

Empowerment Zones will offer additional deductions for payroll employed in the zone.

Businesses outside of empowerment zones pay 9% on gross income less all investments, all purchases from other businesses and all dividends paid to shareholders. Nothing there about payments to employees.

Inside empowerment zones, there is a deduction for payroll.