Posted on 10/17/2011 11:08:56 AM PDT by RockyMtnMan
Do you know why candidates for office tend to be reluctant to propose detailed plans? Because they know the plans will be flyspecked and picked apart by just about everyone. Inviting criticism doesn’t help you to get votes.
But fear of criticism prevents you from conceiving solutions to problems. So even if avoidance of criticism helps in propelling you to an election victory, how are you supposed to effectively govern? How are you supposed to fix the problems you told everyone you were going to fix? That’s why I’m happy to see so much criticism of the 9-9-9 plan I’ve proposed. It shows that people are thinking seriously about a substantive idea. When people stop obsessing over “gaffes” and campaign strategy, and start honing in on fixing the country’s economic problems, we are getting somewhere. This is not to say, of course, I’m going to leave poorly founded criticisms of the plan unanswered. Certain objections to the plan are circulating in the usual places, driven by the same kind of thinking that has left us with a stagnant economy, $14 trillion in debt and mounting entitlement obligations. These criticisms deserve responses, and here they are:
Claim 1: The 9 percent sales tax, which is one third of the formula, is regressive and hurts the poor, many of whom pay no federal income taxes now. Response: This claim ignores some important aspects of the plan. One is that we eliminate the 15 percent payroll tax, which allows for no deductions at all – not even for charitable contributions. Some critics have argued that the poor still come out behind because employers pay much of the payroll tax. That demonstrates a basic misunderstanding about how compensation works in the business world. An employer decides to accept a certain cost-of-employment for each employee, and the employer’s share of the payroll tax is part of that cost. It comes out of your compensation whether you realize it or not. Also, a flat tax is not – by definition – a regressive tax. Everyone pays the same rate. And it is not an added tax, but a replacement tax, whose total burden is determined by the consumer’s spending decisions. Finally, the best way to help the poor is by spurring economic growth, which the current tax code will never do, and which the 9-9-9 plan is specifically designed to do.
Claim 2: Creating a new tax is merely setting the stage for higher rates on all taxes, as untrustworthy politicians will surely raise them. Response: First of all, that is not a criticism of the 9-9-9 plan. It is a criticism of politicians. If you don’t want the rates raised, don’t elect politicians who will raise them. Even if we repealed the 16th Amendment and eliminated the income tax, as some demand in return for establishing a consumption tax, politicians could raise that rate too. What’s far more important here is the fact that the very simple, flat-rate structure of the 9-9-9 plan, which allows no deductions, loopholes or exemptions (with the exception of charitable contributions for the income tax), is a far more growth-friendly tax structure than the mangled mess of rates, taxes, exemptions and ill-conceived incentives we have today. It virtually eliminates the massive compliance costs of the current tax code, and it restrains the size of government. By taking away the politicians’ gateway drug of loopholes and deductions, we make it much more difficult for them to mess with the tax code. Having said that, any plan could be criticized for what it would look like if someone messed it up. The plan as I’m proposing it is a huge improvement over the status quo.
Claim 3: The plan redistributes wealth from the poor to the rich. Response: It does no such thing. It is fair and neutral, taxing everything once and nothing twice. What’s more, we are getting ready to propose empowerment zones for economically struggling areas in which the rates will be even lower. That will allow the poor to benefit even more from the plan than they already would.
Claim 4: The plan should have included a pre-bate to offset the sales tax. Response: The last thing we need is to establish another federal entitlement, which the proposed pre-bate would quickly become. And it’s not necessary. The consumption tax replaces ones already embedded in prices. It’s not the prices that would increase, but the visibility of the taxes being paid. Right now, money is deducted from your paycheck and you never see it, so it doesn’t feel like you paid a tax. But you did. With the 9-9-9 plan, you feel it, and I suspect a good many people who clamor for higher taxes will start to feel differently as a result. But they won’t be paying more than before. They’ll just be more aware of it.
Claim 5: The business tax represents a new tax on labor. Response: Paul Krugman of the New York Times makes this claim because we do not allow businesses to deduct the cost of labor from their taxable revenue. But the claim is bogus for several reasons. First, we are reducing the corporate tax rate from 35 percent to 9 percent, so the tradeoff is a much lower rate paid on more of a company’s income. Second, we treat capital and labor the same, both with the corporate tax and with the income tax. That is fair and neutral. What’s more, the current system taxes both capital investment by business and capital gains by individuals. That’s a double tax, and the 9-9-9 plan eliminates it.
Claim 6: The numbers don’t add up. The 9-9-9 tax wouldn’t generate enough revenue. Response: Several groups apparently “ran the numbers” and came to this conclusion, including Bloomberg News and the Center for American Progress. Our report, which they do not appear to have read, demonstrates that it generates the same revenue as the current tax code, and our methodology is visible for anyone to see. Those who are making this claim should release their scoring so their methodology is as visible as ours.
Claim 7: The 9-9-9 plan is a really an 18 percent value-added tax plus a 9 percent income tax. Response: That’s an argument? That some might be able to give it a disagreeable label? What we have done is split the incidence of the tax so it is harder to evade – since you’d have to dodge two taxes, not just one, to save the 18 percent. And by eliminating loopholes we’ve made that virtually impossible to do anyway. I don’t really care what people call it. What matters is how it works.
Claim 8: Some people (like Herman Cain) who may live off capital gains, would pay no income taxes. Is that fair? Response: First, one of the benefits of the 9-9-9 plan is that, even if someone doesn’t pay much or any of one of the taxes, he or she is still likely affected by the other two. More to the point, though, everyone has the same opportunity to work hard, earn capital and put that capital at risk. Whatever I have earned has come from hard work, good decisions (and some bad ones), a willingness to take risks and a constant honing of strategy. Nothing is stopping anyone else from doing the same thing. I realize many are being told there are no opportunities available to them, but that is not true and I wish people – for their own sakes – would stop listening to such doom and gloom and come to understand all the opportunity that truly exists, and learn how to access it.
Claim 9: It won’t pass. Response: Politicians propose things that can pass. Problem-solvers propose things that can work. One of the worst instincts of Washington types is to judge an idea not on its substantive merits, but on their perception of its political viability. I do not underestimate the challenge of getting any good idea through Congress, but I have said all along that if you propose a good idea, and the people understand the idea, they will pressure Congress to pass it. So there. I welcome the robust discussion and the many questions that are being raised about the 9-9-9 plan. Asked and answered. What else do you want to know?
>> “The kids in NYC are morons being led by professional radicals , they don’t even know that much” <<
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And they’re grossly over paid at $21/hour.
I appreciate your report, but you make lots of hard-to-accept assumptions about Cain, and I wonder if you can direct me to Cain’s actual words on the subject, so I can weigh for myself.
Apparently this means you too.
Hence, post to me in a condescending fashion that, because I don't support Rick Perry for President, I don't know what I'm talking about, that he is a patriot simply because he knows it's popular to appear to be a supporter of the Second Amendment (or whatever), then that poster will get that assertion shoved right down his or her throat.
I will not support this glad-handing, pandering, back-slapping empty-suit huckster for the Republican nomination for President under any circumstances.
>> “I don’t see an answer to the question: Is Social Security taxed?, either.” <<
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SS recepients spend essentially all of their receipts, so obviously it is taxed at 9% under this silly proposal.
Cain needs to lose this albatross quickly, or it will kill his candidacy.
I know. Where do they get off calling it a VAT? It isn’t even close.
I agree about the noob, but we do need to find a way to get Cain to drop this 999 loser before the general election.
Yes, that is for State sales tax. But that doesn’t answer the question wrt 999.
Many people here are saying that the 999 plan taxes all sales inside the production chain eg. the bread maker pays 9% tax to the flour maker and the flour maker pay 9% tax on his purchases from the farmer etc... I want confirmation that the 9% sales tax applies only at point of retail, and only on new goods (and not inside the production chain where producers buy materials to make other products such as the VAT tax does).
He could update his website to say something straightforward like “9% sales tax only applies to the retail sales of finished product to end users” or something that is explicit and definitive. I am pretty sure that it only taxes retail sales of new goods, but I think he needs to say it better.
The 999 crap is not ever going to make it through congress anyway, so why take all the flak for a useless decoration?
Yes, I am in Cain’s camp by default; there is nowhere else to go, so I’ll do all I can to make him viable.
999 isn’t his plan anyway; its been around since the early ‘80s in SIM City.
>> “Many people here are saying that the 999 plan taxes all sales inside the production chain” <<
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That is an assumption based on typical congressional behavior, not an actual stated feature of Cain’s version of 999.
>> “this may make accounting jobs hard to find if they get rid of the IRS” <<
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Don’t take down your shingle yet.
How about Professional consultants? They’ll be fighting to show that most of their contracts consist of expenses, like labor, and other secondary professional consultation expenses, and thus we’ll have an IRS type agency anyway for the consumption tax.
9% income tax - helps middle class, upper class
9% corporate tax - helps upper class, exec. bonuses
9% sales tax - hurts lower class (essentials), middle class (please, may I put another coal on the fire?), and the upper class (Botox diet!)
Presumptive BONUS: This will create Jobs.
Presumptive REALITY: Corporations are absolutely drowning in cash and NOT hiring today, as it is.
Furthermor, as soon as the spigot turns off at the Federal Reserve, bond prices are going to go into freefall. Add that sales tax on top of rampant inflation, and that’s ballgame.
Money is absolutely DIRT CHEAP. That should tell all of you something about what the problem is. It’s not corporate taxes. It’s the Federal Reserve.
This plan will not address the underlying cancers in the economy:
1) Government spending
2) The Federal Reserve
Excellent post...the wife and I are nearing retirement and any plan with a national sales tax is a "non-starter" for us. Our income/saving were fully taxed at about 14% federal and about 38% total (all state, local, federal taxes) and now as we are planning several large purchases (truck/RV) 9-9-9 & "Fair" Tax are proposing large sales taxes!! (In addition to our current 8% state sales taxes) Start talking about tax reduction and government cuts and then we can talk about tax reform ie. a 10-15% flat tax.
401k's are not tax-free, they are only tax deferred.
Your money that you draw out of your 401K will be taxed, wouldn't you like it at the lower 9% rate? It wasn't taxed when you put it in the 401k, because they are going to tax it when you withdraw it. 401k's are not tax-free, they are only tax deferred. All of the retirement accounts will have taxes collected upon withdrawal.
The more I see of this 999 proposal, the less I like it. Even if it is stipulated, that it would be good for the country, it seems that it would also be a political disaster for him. He would be killed by the Democrats.
>> “He would be killed by the Democrats” <<
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Precisely, and for nothing, since there is no visible path through congress for it.
Are you going to have room in your RV for your kids and grandchildren if they are jobless and homeless?
>> “wouldn’t you like it at the lower 9% rate?” <<
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I think you mean at the 9% +9% +9% rate?
The minimum would be 18% if the third 9% tax was not on income or consumption.
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