Ok, time for a little math:
Under the current system, which has about 22% hidden taxes in everything we buy, a shirt that costs $30.00 at the store to you includes 22% hidden federal taxes ($6.60), and then if you have a State sales tax of 9% on top of that, the shirt ends up costing you $32.70 at the register.
Follow me so far?
Under the HYPOTHETICAL Cain plan, where that hidden 22% federal tax goes away, that same shirt now has a retail price of $30.00 - $6.60 (the hidden federal tax that will go away) = $23.40.
So the shirt has a store price of $23.40.
Follow me?
THEN, you pay 9% STATE sales tax = $2.11 STATE sales tax.
AND you pay 9% FEDERAL sales tax = $2.11 FEDERAL sales tax.
So the ultimate COST to you, the consumer, at the register, with this horrible extra tax, is:
$ 23.40
+ $ 2.11
+ $ 2.11
= $ 27.62
So, if this hypothetical is correct, you would save $ 5.08 on this shirt.
That’s a savings of $5.08/$32.70 = 15.5% of the cost of the item.
A savings of 15.5%.
A savings of 15.5%.
A savings of 15.5%.
Follow me?
This is obviously over-simplified, because I haven’t included the 9% corporate tax, and I haven’t included anything for market competition, etc. But you can see that it just MIGHT not be as bad as you think it is. Can’t you?
Perhaps ‘over simplified’ is the key here.
I have been alive long enough to know that merchants will not willingly reduce the cost of their merchandise if there is a profit to be made in not doing so. This entire plan seems to hinge on this assumption that merchants will do something that is against their nature. Now, I’m sure there will be instances of free market competition that may result in lower prices for some items; however, I am equally sure that there will be many incentives to not reduce prices and pocket the difference instead leaving the country with a brand new national sales tax that will NEVER GO AWAY and the same old stagflation.