Thursday, October 13, 2011

Somebody Call 911 on Cain’s 9-9-9 Plan

“When you take the 9-9-9 plan and turn it upside down, I think the devil is in the details,” Michele Bachmann said in Tuesday night’s Bloomberg/The Washington Post debate in at Darmouth College, New Hampshire.

This plan’s been kicking about for a while now, but only in Andover did it really come into the light. Cain’s solution to America — and thus the world’s — economic misfortune is as follows. First, the entire existing tax code is scraped, in toto: the progressive rates of income tax; corporate income tax; the estate tax; capital gains tax; the payroll tax (and, though he didn’t mention it, you’d have to assume FICA, too).

In its place comes just three new taxes. One, a flat 9pc personal income tax levied on all individuals regardless of wealth or paucity, with room for charitable deductions. Two, a flat 9pc on all business income, save “all investments, all purchases from other businesses and all dividends paid to shareholders”. Three, and most controversially, a flat 9pc national sales tax, better known perhaps to European readers as Value Added Tax.

The problems with this scheme are numerous. Initially, I do not believe this could ever become law in the United States — as such, it reads like the Liberal Democrat manifestos of old, a pie-in-the-sky notion that sounds good when articulated, safe in the knowledge that it’ll never be implemented.

But more than this, nobody has any idea (or at least the Cain campaign is not saying) how much money this would raise. Last fiscal year, the federal government took in $2.2 trillion in tax revenue from individuals and corporations, in a system where the current highest rate for persons earning over $250,000 is 35pc (a rate never paid in full due to the rote of deductions available). Cutting the tax rates on the top 2pc and big corporations dramatically could only have a negative impact on the Treasury.

Whichever way you spin it, 9-9-9 constitutes a colossal tax break from the wealthiest in America, and a huge tax hike for the working poor. At this time, 47pc of Americans pay zero income tax, since they do not meet the minimum requirement. Under a Cain presidency, not only would they now lose 9pc of their income to the federal government, but they would suffer via the introduction of the 9pc VAT rate, raising the cost even of life’s essentials like bread, milk, and potatoes.

Not only is 9-9-9 anti-progressive, in its curtailment of the staggered tax code, it is also anti-conservative, since it constitutes a tax increase on nearly half of Americans in their income, and all Americans due to the sales tax. And, it is anti-American: by burdening the most destitute with such a crippling tithe, it kills whatever slims chance they had remaining of upward social mobility.

Worse still, 9-9-9 is just the beginning. Just wait until you hear about the Fair Tax…

Notes

  1. youngcontrarian posted this