Analysis of Herman Cain's 9-9-9 Plan

[superjoe76]

The Ron Paul plan. Shrink government enough so that the IRS can be abolished and replaced with NOTHING. Cain has not impressed me with his reluctance to want to abolish any agencies. Without drastic cuts, who cares how we are taxed? We are broke! A better 9-9-9 plan would include 9 Federal bureaucracies to abolish.

I love that line. I have heard Paul say it a few times and it still gets me!!

 

[ATOMonkey]

Consider that the current corporate income tax rate (you can call it VAT I guess if you want) is about 25%. Reducing that to 9% is a 16% reduction in taxes on consumer goods and services.

The lowest gross income tax bracket is 10%. (Cain has said you can still deduct charitable contributions from your gross income) Then it goes up to 15% after $8500 and 25% after $34,500. Since the average income is about $60k, the average gross taxable rate is going to be about 12% without deductions. That's a 3% reduction for single folks without a lot of deductions. Figure it's a wash or a couple % increase for families.

Now we add the 9% retail tax, which partially offsets your 16% tax reduction from corporate income, bringing the total tax reduction on retail goods to about 7%.

For seniors, we've removed the death tax, and all investment taxes, and reduced the price of retail goods by 7%, and/or increased their investment ROI by reducing cost to business in which they're invested.

Ok, so we go to Cain's webpage and we find out that the 999 plan is a stepping stone to the fairtax.

Phase 2. We repeal the 9% corporate tax. We repeal the 9% income tax, we repeal the 6% (is that what it is now) FICA tax, plus the 7% employer FICA tax. We repeal ALL other taxes and increase the rate of the retail sales tax from 9% to 23%. We repeal the 16th amendment while we're at it.

Don't forget that the fairtax is phase 2 of the 999 plan. Not openly discussed in debate or anywhere except his website really.

Not only does this sound like the right thing to do, it also sounds do-able. It will stimulate economic growth, and control government spending through accountability, by only having ONE tax with ONE rate. If you change the rate, people are going to know EXACTLY what will happen to prices.

The icing on the cake would be a balanced budget amendment as well. Here's to hoping and dreaming.

I'm encouraged by the 999 plan, and all of the people who seem to support it. While it's not my favorite (I would support going straight to the fairtax), it does seem realistic.

monkey out

 

[melensdad]

Rambone, just to correct a huge error in your OP, there is a HUGE DIFFERENCE between a national "sales tax" and a "VAT" or "Value Added Tax" but you imply they are the same. NOT EVE CLOSE.

You tend to so vastly over-exaggerate your posts that you lose all credibility and people who believe your posts as fact are simply misled. I don't know if you honestly try to deceive people, try to panic people, or if you simply don't know the difference when you make your posts.

 

[yotewacker]

999 means I will have to increase my sales price for HVAC about 7% at least. If The company pays 9%. Now some times we pay no sales tax on labor. So that to will go to 9%. WE nee just one flat tax. But it's a step in the right direction.

 

[melensdad]

999 means I will have to increase my sales price for HVAC about 7% at least. If The company pays 9%. Now some times we pay no sales tax on labor. So that to will go to 9%. WE nee just one flat tax. But it's a step in the right direction.

The national sales tax is taxed to the consumer, not between businesses. This is NOT a "VAT" tax as Rambone implies. A VAT tax charges the tax AT EACH LEVEL when a good is sold. A nationals sales tax only charges the tax at the END of the chain of transactions when it is sold to the consumer.

So if your customers are in the 25% tax bracket today and they pay 9% income tax under the Cain plan and then 9% national sales tax that means that the HVAC unit is actually about 6% less expensive to the consumer.

 

[CarmelHP]

The stuff these guys are predicting are results of the evolution of his plan. What if THIS happened?!?!? Um, yeah. Well, even so it would be better than what we have now. As for tax deductions etc, why would someone who was previously taxed 20% that managed to get down to 18% after deductions prefer to have the current system than start at 9% that would just be stupid.

Few taxpayers are paying 20%. For most people, a 9% tax rate would be about the same as they are paying now, HOWEVER, they would be socked with a 95 sales tax on the other end. If they have an LLC or S-Corp pass-throughs that they're currently using to shelter from SE tax, then we can expect those to be taxed at 9% also. Most people would have to exceed about 100K in household income before they receive any kind of benefit from the Cain plan, and maybe not even then, depending on their current allowable deductions that would be lost.

 

[KLB]

The national sales tax is taxed to the consumer, not between businesses. This is NOT a "VAT" tax as Rambone implies. A VAT tax charges the tax AT EACH LEVEL when a good is sold. A nationals sales tax only charges the tax at the END of the chain of transactions when it is sold to the consumer.

So if your customers are in the 25% tax bracket today and they pay 9% income tax under the Cain plan and then 9% national sales tax that means that the HVAC unit is actually about 6% less expensive to the consumer.

You are leaving out the fact that the VAT is passed on at each transaction.

If there is a 10% VAT. A company buying parts will pay 10% tax on the cost of those parts, and then collect 10% tax on the sale price of their product. They pay the government the difference between what they collected and what they paid.

There is for the consumer little difference between the two. The difference comes in the incentive to collect the tax. Since a company can only recoup VAT paid by collecting it on their product. With a sales tax, they do not have that incentive, thus the government may collect lass tax overall.

 

[ATOMonkey]

The cain plan benefits people before they pay any taxes, by lowering the cost of goods and services.

 

[ATOMonkey]

You are leaving out the fact that the VAT is passed on at each transaction.

If there is a 10% VAT. A company buying parts will pay 10% tax on the cost of those parts, and then collect 10% tax on the sale price of their product. They pay the government the difference between what they collected and what they paid.

There is for the consumer little difference between the two. The difference comes in the incentive to collect the tax. Since a company can only recoup VAT paid by collecting it on their product. With a sales tax, they do not have that incentive, thus the government may collect lass tax overall.

Staying out of jail is incentive enough for most retailers to collect their state sales tax.

 

[melensdad]

You are leaving out the fact that the VAT is passed on at each transaction.

If there is a 10% VAT. A company buying parts will pay 10% tax on the cost of those parts, and then collect 10% tax on the sale price of their product. They pay the government the difference between what they collected and what they paid.

There is for the consumer little difference between the two. The difference comes in the incentive to collect the tax. Since a company can only recoup VAT paid by collecting it on their product. With a sales tax, they do not have that incentive, thus the government may collect lass tax overall.

NO SIR, please read it again. I pointed out that Cain's plan is NOT a "VAT" tax but is an end user "Sales Tax."

And I did, IN FACT, point out that a VAT TAX does charge taxes at each level.

There is a HUGE DIFFERENCE for the consumer between a national sales tax and a VAT tax.

What you are doing is MISTAKENLY ASSUMING that the Cain plan is a VAT tax when it is, in fact, a SALES tax at the end of the transaction chain.

Cain did NOT propose a VAT tax.
Cain did propose a NATIONAL SALES tax.
There is a DIFFERENCE between a VAT and a NATIONAL SALES tax.

 

[KLB]

Staying out of jail is incentive enough for most retailers to collect their state sales tax.

Since Governments are using VAT in many countries, they obviously do not agree with you.

If you make a product in your home and sell it to someone, you probably would not collect a sales tax. If you have paid VAT on all of the supplies you have purchased to make your product, you probably will to recoup the tax you paid.

 

[ATOMonkey]

I have no doubt that VAT "encourages" manufacturers and retailers to collect tax.

I'm just saying that we don't have any issue with retailers NOT collecting state sales tax.

Why fix a problem you don't have?

VAT increases the initial cost to do business, because you must secure the funds necessary to purchase your materials as well as the tax. This stifles economic activity.

A single retail tax does the opposite.

By creating more product, you actually increase the tax base from which retailers will collect.

 

[melensdad]

Since Governments are using VAT in many countries, they obviously do not agree with you.

If you make a product in your home and sell it to someone, you probably would not collect a sales tax. If you have paid VAT on all of the supplies you have purchased to make your product, you probably will to recoup the tax you paid.

Actually the big advantage to using a VAT tax is to hide taxes that people pay so people don't realize how much they are paying.

A sales tax keeps the tax very public and the people are very aware of what they are paying because the tax is visible at the cash register.

Its not that way with the VAT tax. With the VAT tax its sort of like the way we all pay our GASOLINE and TOBACCO taxes. The taxes are buried into the cost of the goods.

I have no doubt that VAT "encourages" manufacturers and retailers to collect tax.

I'm just saying that we don't have any issue with retailers NOT collecting state sales tax.

Why fix a problem you don't have?

VAT increases the initial cost to do business, because you must secure the funds necessary to purchase your materials as well as the tax. This stifles economic activity.

A single retail tax does the opposite.

By creating more product, you actually increase the tax base from which retailers will collect.

EXACTLY. But also the SALES TAX is a much lower effective tax. In Cain's plan it is 9%. So 9% is the effective tax rate.

While with a 9% VAT tax, the effective rate will much likely be closer to 27% as the 9% VAT is charge when the manufacturer sells to a distributor, then the 9% VAT is charged when the distributor sells to the retailer, then the 9% is charged again when the retailer sells to the consumer!

 

[CarmelHP]

You are leaving out the fact that the VAT is passed on at each transaction.

If there is a 10% VAT. A company buying parts will pay 10% tax on the cost of those parts, and then collect 10% tax on the sale price of their product. They pay the government the difference between what they collected and what they paid.

There is for the consumer little difference between the two. The difference comes in the incentive to collect the tax. Since a company can only recoup VAT paid by collecting it on their product. With a sales tax, they do not have that incentive, thus the government may collect lass tax overall.

I don't think they got what you said.

 

[ATOMonkey]

I don't think they got what you said.

Why is that?

 

[rambone]

I don't remember saying that VAT = National Sales Tax. The article that I posted didn't say they were the same either.

Thanks.

 

[spearheadersarge]

Everyone is missing the main point I stated earlier. When a tax is levied, it is always small and everyone says its fair. Whenever the govt needs money they ratchet up the percentage until one day you wake up and the Nat Sales tax is at 24% because subsequent administrations added a point or two to cover some new spending project. Congress will NEVER, EVER cut spending. It's not their money, they don't care. We have got to stop spending money we don't have. I am opposed to any "new " tax without abolishing several others. If his plan is revenue neutral, then tell us where the other taxes are being eliminated. Notice I said eliminated, not reduced. I'm not going for the bait and switch!

 

[teddy12b]

Everyone is missing the main point I stated earlier. When a tax is levied, it is always small and everyone says its fair. Whenever the govt needs money they ratchet up the percentage until one day you wake up and the Nat Sales tax is at 24% because subsequent administrations added a point or two to cover some new spending project. Congress will NEVER, EVER cut spending. It's not their money, they don't care. We have got to stop spending money we don't have. I am opposed to any "new " tax without abolishing several others. If his plan is revenue neutral, then tell us where the other taxes are being eliminated. Notice I said eliminated, not reduced. I'm not going for the bait and switch!

One of the core reasons why they can rachet up the taxes without being thrown out of office is because there are so many small taxes already on the sticker prices of goods being sold before the sales tax even hits it. The tax code has to be simple enough that everyone with half a brain and a desire to know it can explain on demand if need be. With our thousands of pages of tax code it's full of loopholes, and gifts chosing who will win and who has to pay more to support the chosen few.

The tax code has to simple enough for everyone to understand and without exception.

 

[Zoub]

Or maybe that is the real for the 999, Soylent Green!!!!!!

And for the tin foil crowd, 999 seems really good until you read it upside down!!!!!!!

and in German it means No, No, No.

Moses (Charlton Heston) would know what to do.

New tax "ideas" are meaningless unless Obama care is repealed. I think most people do not fully comprehend how big the IRS will become when it is in charge of collecting unpaid medical premiums from both the indivdual and corporations. Most of those corps will be small to midsize, 25 to 300 employees.

More people will be exposed to tax warrants, frozen bank accounts and Govt. liens on assets such as homes or vehicles. When the IRS meets medical collections it will be carnage.

999 at least has the possibility of being more transparent, but there in lies the issue. Taxation with representaion or more of the same? We have to demand it but who will even propose it? So far just Cain. Tax reform needs to be part of the platform, along with killing Obama care, tied to all candidates. Then we can set the numbers.

Set them too high and you have the same result Prohibition had on booze, more Citizens will be criminals.

 

[bigg cheese]

Shouldn't there be a discussion on the fair tax instead? I'm trying to figure out why he has this 999 plan when he really wants to work his way to the fair tax.