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?
I believe he mentioned on Sunday that SS is not taxable as it was already taxed. Neither is dividend income like the growth on a 401K. I believe that answers your concern.
Cain has not proposed any cuts in government spending. Cain’s only proposal is a Liberal Tax and Spend Scheme.
Not if the income tax were entirely repealed first instead of following this incremental step towards doing that.
Considering his tax plan eventually has no income tax, I think He’d be on your side.
Meanwhile, he’s proposing drastic improvements, even if they are reversible (though he explains why that becomes unlikely politically).
Under the plan 401k portfolios would rise in value significantly with a corporate tax rate of 9% and the elimination of the capital gains tax. The cost of goods and services would also fall with the elimination of the payroll tax.
As for fair, the SS administration says it will be insolvent before I retire, making my rate of return on contributions $0.
A booming economy will do more to save SS than the current tax code would ever do. Retirees should be more concerned about that instead of buying new goods and services. It also sounds as if “empowerment zones” would potentially buffer the impact on retirees.
Ditto!
Cain is nothing more than a Stalking Horse Candidate for Romney to split up the Conservative Vote so that Romney can win the nomination with less than 30% of the vote. Cain endorsed Romney in 2008 and he will endorse Romney again in 2012.
Didn’t see the dupe when I posted, maybe my FR search skills are lacking. :-)
He supported the TARP bailout in the strongest language possible, to the point that he wrote articles extolling the virtues of a bailout.
Government shouldn’t pick winners & losers
Q: Mr. Cain, you initially supported the TARP program?
CAIN: I studied the financial meltdown and concluded on my own that we needed to do something drastic, yes. When the concept of TARP was first presented to the public, I was willing to go along with it. But then when the administration started to implement it on a discretionary basis, picking winners and losers and also directing funds to General Motors and others that had nothing to do with the financial system, that’s where I totally disagreed. The government should not be selecting winners and losers, and I don’t believe in this concept of too big to fail. If they fail, the free market will figure out who’s going to pick up the pieces.
Source: 2011 GOP primary debate in Manchester NH , Jun 13, 2011
The 9-9-9 plan makes much of end of payroll taxes offsetting the sales tax, but retirees have already paid payroll taxes and now they pay income tax on their pensions and withdrawals from 401ks. So retirees appear to pay 18% with no offset via the end of payroll taxes. Why is this a fair deal for retirees or workers who have already paid payroll taxes for years? (This is not a statement, I’m looking for an answer.)
2. Your contributions to your 401k avoided a 28%+ (?) marginal income tax rate. They will eventually be taxed at 9%. Sweet deal for your generation!
3. We need a humming economy to be able to afford to keep your checks coming from the earnings of current workers who have little hope of receiving the same benefits without drastic change.
4. The sales tax will merely reveal the embedded tax in goods, not necessarily increasing the total cost.
5. If those whose earnings become your monthly check are celebrating this plan, you might want to keep the golden geese happy by supporting it too.
6. It might cost you something to save our nation from socialism. Wouldn’t that be worth it?
All part of the ol' switcheroo. Can you imagine how little preparation the GOP would have after buying all its advertising for a run against Obama if the Slave Party pulled it at the convention?
This is why I have advised conservatives not to run against "Obama," but to direct their attacks against "Democrat policies," linking them directly to socialism. It helps especially in the run to take back the Senate, and this time, we cannot suffer a center-left majority that is only nominally Republican. This is where the GOP really hurt us in Nevada and New Jersey in 2010. Having those two Senate seats is a big deal when the turnover is only one third of the Senate every election.
Cain’s National Sales Tax & Spend Scheme is a terrible idea. What is needed is a cut in government spending.
Cain’s outline of his spending cuts are on his website, and have been for some time.
Consider the situation:
(1) America elects a non-politician who runs on the promise of enacting a specifc tax reform plan.
(2)Congress refuses to enact his plan.
What would the 2014 congressional elections look like?
The patience of the American people has run out with politicians. It has simply run out. If #1 & #2 came to pass, I would expect the 2014 elections to be a bloodbath for Republicans. Literally guys that had been there 20 years would get kicked out.
Something would pass. Whether it would be exactly 999, I don't know. But politicians are about saving their hide before saving their power.
I’ve heard this argument before and as a spouse to a retiree, it interests me a lot, too. I’m voting for him though, because I think this is the best deal for my kids and grandchild.
What did you search under, keywords or title?
I didn’t say that tax cuts and spending cuts can’t exist, bubba.
I said that Cain proposed a Liberal Tax and Spend Scheme without any proposal for Tax Cuts.
I didn’t say that tax cuts and spending cuts can’t co-exist, bubba.
I said that Cain proposed a Liberal Tax and Spend Scheme without any proposal for Spending Cuts.
Which would result, even if true, in a deficit of about $1.5 trillion, given current spending. What is Cain proposing to deal with that?
I put in “9 responses*” in the search field.
Cain Train ping!
Is it your opinion that Cain won’t propose any tax cuts?
Its early yet. There’s a lot he hasn’t fleshed out yet.
Cain has proposed no Spending Cuts, only a Liberal Tax and Spend Scheme with a gimmicky name, 999.
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