He misses the point, either deliberately because he can't answer it, or because he doesn't understand the point, which I doubt.
The problem is that people who have SAVED money did so under the old income/payroll tax rates. When you spend money you previously saved, you will now get hit with a new 9% tax that you didn't before, but you don't get any of the "savings" from the 9% income tax. You DO get savings from the drop in corporate tax rates, but it's not enough to offset the 9% sales tax.
A really good company has a 25% profit margin. So if they produce a $1000 product, they make $250, and pay 35% tax on that $250, or $87.50. Under Cain's plan, they now pay 9% tax or $22.50. So, before the purchaser paid $1087.50 for the product. Now the purchaser pays $1022.50, plus the 9% tax on $1022.50 (92.02), for a total of $1114. That's a $27 increase in the cost, or 2.7%.
For someone who saved money, that's a 2.7% tax on their savings. That is the disparity the pre-bate is supposed to address, and Cain is ignoring it.
I'll also note a glaring inconsistancy in his argument here.
In THIS answer to a "false claim", he says: "The last thing we need is to establish another federal entitlement, which the proposed pre-bate would quickly become." Thus, he acknowledges that anything put into his plan could easily be misused and abused. But in an earlier "false claim" answer, he chastized his opponents for arguing that politicans couldn't be trusted with a new tax, saying that wasn't his problem and we should elect better politicians.
Well, if we can just elect better politicians, and we aren't supposed to judge plans based on what they "might become", why is he saying we can't have a rebate because we can't control what it would "become"? His new sales tax is a brand new taxing authority, and we aren't allowed to argue this is a danger. And he proposes empowerment zones, which are clearly a new federal "entitlement" to go with his 9-9-9 plan, and I'm guessing we aren't allowed to argue that THOSE would be abused either. But here we can't ask for a pre-bate, because it is a new federal entitlement?
Sorry, but on the pre-bate, Cain is dead wrong. His new propsal is a tax on savings, hurting those who lived within their means, those who saved for a rainy day, and those who retired with their own nest egg. It is great for people who have no savings, who maxed out their credit cards, because their purchases weren't taxed, and now the income they get to pay for those purchases is taxed lower because we are supposed to get the money when they spend it. But they already DID. (Hmm -- I wonder how he took THAT into account, the hundreds of billions of income dollars that won't get taxed at all because it's paying off purchases already made).
>> “He misses the point, either deliberately because he can’t answer it, or because he doesn’t understand the point, which I doubt.
“The problem is that people who have SAVED money did so under the old income/payroll tax rates. When you spend money you previously saved, you will now get hit with a new 9% tax that you didn’t before, but you don’t get any of the “savings” from the 9% income tax. You DO get savings from the drop in corporate tax rates, but it’s not enough to offset the 9% sales tax.” <<
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Excellent analysis.
Cain needs to lose this albatross quickly, or it will kill his candidacy. None of his answers will fool anyone that really understands the accounting.