Friday, October 14, 2011

Cain's 9-9-9 Plan

Herman Cain, one of the Republican candidates campaigning for the Republican nomination, has what he calls the 9-9-9 plan. It consists of a 9% flat income tax on individuals, 9% flat tax on business income, and a 9% federal sales tax.

While I have heard some Republicans deride the plan as simplistic, there hasn't been much of an outcry about the idea of a national sales tax, especially a sales tax as high as 9%. The only state sales tax that comes close to 9%, actually over 9%, is Tennessee, and the only reason that isn't too awful is because Tennessee is one of the few states that doesn't have state, county, or city income taxes, except for tax on interest/dividends.

9% is high. 9% is even higher when you consider that it is only one source of income for the federal government under this plan. A 9% tax on income, which would probably be put in place with fewer deductions overall, plus 9% in sales tax would be an enormous amount of revenue streaming into the government.

Every time a person bought a pair of shoes, clothing, an appliance for their home, materials for running their businesses, supplies for schools, and so forth, the government would be getting a cut.  Prices on consumer goods would experience a 9% increase from the perspective of the buyer. This would crush the economy more than a general increase in income taxes, or the removal of deduction loopholes.  If the average person had to pay 9% more for their annual purchases, excluding food, it would put the brakes on consumer spending almost immediately.

Currently, a large portion of the population, once deductions and credits are taken into account, doesn't pay anything close to 9% in income taxes. Suddenly removing those deductions while simultaneously creating a 9% sales tax would decimate the middle and lower classes. Not only would people be bringing home less money, but when they went to use that money, it would buy fewer goods at a higher price.  It would squeeze people at both ends.

This is a horrible idea and I don't understand why Republicans, overall, aren't taking Cain to task on this.


MInTheGap said...

I think that part of the problem is that Cain's presentation is easy to grasp and that carries easily in the soundbites that are basically what you have in debate. Furthermore, it's easy to throw stones, harder to come up with your own plan.

JSA said...

I agree with both you and MinTheGap. It's a *terrible* idea. I think it shows how mesmerized the tea party base has become by their own laissez faire rhetoric -- they're willing to punish the poor and reward the rich, blindly believing that will someday accrue benefit to *them*. Insanity.