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

[ATOMonkey]

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.

999 eases people into the fairtax. It's right on his 999 website. 999 is phase one of his tax plan, fairtax is phase 2.

If I told the Average Joe that I would abolish the ENTIRE tax structure and replace it with one sales tax of 23%, he'd look at me like I had an arm growing out of my head.

 

[ATOMonkey]

For your reading pleasure...

http://www.hermancain.com/999plan

Herman Cain's 999 Plan



Vision for Economic Growth

• The natural state of our economy is prosperity. Freedom ensures that.
• We must get the government off our backs, out of our pockets and out of our way in order to return to prosperity.
• Policy uncertainty is killing the economy.

Economic Guiding Principles

1. <LI sizset="13" sizcache="8">Production drives the economy, not spending.
   • We can not spend our way to prosperity.
   • Government spending IS taxation.
   • Government spending is like taking a bucket of water from the deep end of the pool, pouring it in the shallow end. Then they HOPE that the water level will CHANGE.
   <LI sizset="17" sizcache="8">Risk taking drives growth .
   • Business formation and job creation are dependent on entrepreneurs taking risks.
   • Investors who fund those entrepreneurs likewise take risks.
2. Measurements must be dependable.
   • A dollar must always be a dollar just as an hour is always 60 minutes.
   • Sound money is crucial for prosperity.

We Must Unite Not Divide

• When one party seeks to spend so that the other party must focus on cutting, we must unite around economic growth.
• Unite all tax payers, don’t divide them into “income” tax payers vs. “payroll” tax payers.
• Unite those wanting to eliminate deductions with those seeking lower rates.
• As a first step, unite the “Flat-Taxers” with the “Fair-Taxers”

Economic Growth is the Key

• This is the worst recovery since the Depression.
• If the President’s goal was to tie for last place with the previous worst recovery, he failed by 6 million jobs.
• If we had a typical recovery, 13 million more Americans would be employed today.
• That means more tax revenue, less government spending and 13 million less people opposed to reasonable spending cuts.
• The Super Committee must deliver a robust growth solution.
• America can’t wait for 2012, we need growth NOW

Phase 1 - 9-9-9

• Current circumstances call for bolder action.
• The Phase 1 Enhanced Plan incorporates the features of Phase One and gets us a step closer to Phase two.
• I call on the Super Committee to pass the Phase 1 Enhanced Plan along with their spending cut package.
• The Phase 1 Enhanced Plan unites Flat Tax supporters with Fair tax supporters.
• Achieves the broadest possible tax base along with the lowest possible rate of 9%.
• It ends the Payroll Tax completely – a permanent holiday!
• Zero capital gains tax
• Ends the Death Tax.
• Eliminates double taxation of dividends<LI sizset="42" sizcache="8">Business Flat Tax – 9%
  • Gross income less all investments, all purchases from other businesses and all dividends paid to shareholders.
  • Empowerment Zones will offer additional deductions for payroll employed in the zone.
  <LI sizset="45" sizcache="8">Individual Flat Tax – 9%.
  • Gross income less charitable deductions.
  • Empowerment Zones will offer additional deductions for those living and/or working in the zone.
• National Sales Tax – 9%.
  • This gets the Fair Tax off the sidelines and into the game.

Phase 2 – The Fair Tax

• Amidst a backdrop of the economic boom created by the Phase 1 Enhanced Plan, I will begin the process of educating the American people on the benefits of continuing the next step to the Fair Tax.
• The Fair Tax would ultimately replace individual and corporate income taxes.
• It would make it possible to end the IRS as we know it.
• The Fair Tax makes our exported goods and services the most competitively internationally than any other tax system.

Phase 1 Enhanced Plan – Summary

• Unites all tax payers so we all pay income taxes and no one pays payroll taxes
• Provides the least incentive to evade taxes and the fewest opportunities to do so
• Lifts a $430 billion dead-weight burden on the economy due to compliance, enforcement, collection, etc.
• Is fair, neutral, transparent, and efficient
• Ends nearly all deductions and special interest favors
• Ends all payroll taxes
• Ends the Death Tax
• Features zero tax on capital gains and repatriated profits
• Lowest marginal rates on production
• Allows immediate expensing of business investments
• Eliminates double taxation of dividends
• Increases capital formation. Capital per worker drives productivity and wage growth
• Capital formation will aid capital availability for small businesses
• Features a platform to launch properly structured Empowerment Zones to revitalize our inner cities
• We all know the Fed has tripled the money supply since 2008. They have been printing money out of thin air to finance the Obama spending machine. While true Fed reform that restores sound money may have to wait for my election, the best thing we can do now is to pursue policies that increase the DEMAND for dollars to help mitigate the risks associated with the increase in the supply.
• Pro-growth economic policies equal a strong dollar policy

 

[rambone]

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.

Since 9-9-9 is what he wants to give us, we need to discuss it.

 

[CarmelHP]

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.

You're trying to figure it out because it makes not a lick of sense. It doesn't bridge to FairTax.

 

[bigg cheese]

and yet that's what he claims to want... I like the idea of abolishing the income tax, if we can just go to sales tax (equally applied to all), but that's going to take an amendment or two to do, IMHO.

 

[Sigasaurus]

Herman Cain 999 Plan: Did It Come From SimCity? - The Huffington Post

Works on the video game must work in the real world!!!

 

[jamil]

As much as I hate the IRS, I don't think I want to see a national sales tax. Prices are in part determined by what we are willing to pay, so I don't believe reduced corporate taxes will cause a 1:1 price reduction. Since I already have a difficult time convincing my wife to let me buy guns and ammo, adding the tax will make it that much more difficult.

But, if they excluded guns and ammo from all sales tax, I'm in.

 

[rambone]

The other thing I keep thinking about is how a huge new sales tax is actually going to devalue the buying power of your already-earned dollars.

Your savings account will be able to purchase 9% less goods after the tax, than they could before the tax.

Oh and by the way, you were already taxed handsomely on that money when it was on its way into your savings account.

 

[DragonGunner]

Michelle Bachman says that if you take Cains 999 plan an turn it upside down it comes out to 666......wow.....she is soooooo smart....an I'm soooooo ashamed that I actually liked her awhile back....I see Cain just tied for first place with Rommney so must be people liking his 666.....I mean 999 plan....how much can get passed an what will get passed is hard to tell.

 

[ATOMonkey]

As much as I hate the IRS, I don't think I want to see a national sales tax. Prices are in part determined by what we are willing to pay, so I don't believe reduced corporate taxes will cause a 1:1 price reduction. Since I already have a difficult time convincing my wife to let me buy guns and ammo, adding the tax will make it that much more difficult.

But, if they excluded guns and ammo from all sales tax, I'm in.

It's a 16% reduction in corporate income tax and a 9% increase in sales tax.

Even if companies only came down 9% on price you'd still break even on the net cost.

However, with as much competition as there is, in the gun and ammo market, it's a safe bet that costs would decrease the full amount unless there was some form of collusion between OEMs.

 

[Expat]

I saw Art Laffer on FNC last night discussing the 999 plan. He said it sounds like a good plan to him.

He said the cost of goods in the long run should be the same. Corporate taxes are now included in the price of goods. So the cost should go down about the same as the new sales tax pushes them up.

 

[ATOMonkey]

The other thing I keep thinking about is how a huge new sales tax is actually going to devalue the buying power of your already-earned dollars.

Your savings account will be able to purchase 9% less goods after the tax, than they could before the tax.

Oh and by the way, you were already taxed handsomely on that money when it was on its way into your savings account.

You assume static prices. Once again, that's a bad assumption.

 

[mrjarrell]

I saw Art Laffer on FNC last night discussing the 999 plan. He said it sounds like a good plan to him.

He said the cost of goods in the long run should be the same. Corporate taxes are now included in the price of goods. So the cost should go down about the same as the new sales tax pushes them up.

That's assuming that manufacturers will decrease their prices with the removal of embedded taxes, instead of keeping the prices the same and pocketing the profits. Recent history shows us that the companies are more than willing to keep prices the same and take the profits, just look at what the airlines did when one of the taxes in their industry expired. They kept prices the same and pocketed the profits. There's no guarantee that the other companies won't do the same for their products.

 

[jamil]

It's a 16% reduction in corporate income tax and a 9% increase in sales tax.

Even if companies only came down 9% on price you'd still break even on the net cost.

However, with as much competition as there is, in the gun and ammo market, it's a safe bet that costs would decrease the full amount unless there was some form of collusion between OEMs.

Though ammo prices are a little better now than a few years ago, they still reflect more supply & demand influence than cost. You wont necessarily see a 1:1 reduction in prices just because cost is reduced by lowered taxes.

 

[ATOMonkey]

That's assuming that manufacturers will decrease their prices with the removal of embedded taxes, instead of keeping the prices the same and pocketing the profits. Recent history shows us that the companies are more than willing to keep prices the same and take the profits, just look at what the airlines did when one of the taxes in their industry expired. They kept prices the same and pocketed the profits. There's no guarantee that the other companies won't do the same for their products.

Airlines aren't a great example though. They anticipate that the Federal Government will collect that tax retro-actively once the new law is passed. Their tax reduction wasn't intentional. It could also be that the Federal government will pass a new law with a higher rate in order to collect the money it "lost." No one in aviation is viewing this as anything other than temporary.

If you make a permanent reduction to the tax rate, that businesses can plan around, you will see a corresponding drop in price, as firms compete to undercut each other on price.

 

[ATOMonkey]

Though ammo prices are a little better now than a few years ago, they still reflect more supply & demand influence than cost. You wont necessarily see a 1:1 reduction in prices just because cost is reduced by lowered taxes.

So, you don't think that that cost to produce has an affect on the supply of a product?

 

[teddy12b]

That's assuming that manufacturers will decrease their prices with the removal of embedded taxes, instead of keeping the prices the same and pocketing the profits. Recent history shows us that the companies are more than willing to keep prices the same and take the profits, just look at what the airlines did when one of the taxes in their industry expired. They kept prices the same and pocketed the profits. There's no guarantee that the other companies won't do the same for their products.

I don't think the airlines are any kind of an example of how to run a business very well, but I see what you're getting at. If they keep their prices artificially high that makes room for entry into the market for smaller airlines who can undercut their price due to lower overheads. I think it's easy to think that they'll just keep the extra money, but business is tough and from what I have seen more corporate type companies spend more of their time trying to figure out what cost they can cut and remove from their price to be lower than the other guys.

 

[CarmelHP]

As much as I hate the IRS, I don't think I want to see a national sales tax. Prices are in part determined by what we are willing to pay, so I don't believe reduced corporate taxes will cause a 1:1 price reduction. Since I already have a difficult time convincing my wife to let me buy guns and ammo, adding the tax will make it that much more difficult.

But, if they excluded guns and ammo from all sales tax, I'm in.

Well, Cain obviously can not hope to abolish the IRS or something like it, if his interest is to actually enact the FairTax. The FairTax has a large prebate entitlement component that is to provide payments to everyone. A bureaucracy will be needed to issue the prebate and to monitor the massive incentive for fraud and abuse. The sales tax portion would still have to be implemented and monitored, though the rose colored glasses set seem to think it will just administer itself. The sales tax applies to everything you spend on goods and services including rent and mortgage payments, essentially, and applies to state government purchases also.

 

[ATOMonkey]

I am quite critical of the "prebate" in the fairtax as well. It was an attempt to make the fairtax less "regressive."

I prefer the model that the states have adopted that exclude certain products such as whole foods, from the sales tax.

I think that "massive fraud and abuse" is a bit of an exageration though. As I've pointed out multiple times, show me the same abuse at the state level. It simply doesn't exist.

 

[88GT]

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!

Cain's plan isn't any worse than anything we have today. All this whining about the lack of a safety to keep the tax rates static is idiotic. We don't have a such a safety now. ANY plan, no matter who brings it to the light of day or what path it takes to better economic policy, will be subject to the same risk of Congressional perversion without the Constitutional amendments creating an effectively permanent hold on Congress's ability to change it.