Cain: For the poor, it's '9-0-9'

[gilliam]

**(CNN) - **GOP presidential candidate Herman Cain clarified his much talked-about “9-9-9” tax plan Friday, saying those who fall at or beneath the poverty level would have a different plan: “9-0-9.”

Cain took heat over his proposal, which replaces the current tax code with a 9% corporate tax, a 9% income tax and a new 9% national sales tax. Opponents have argued the middle part of the plan would increase taxes on the poor, who currently pay little to no taxes.

But Cain fired back Friday, saying in a Detroit speech that those paying no taxes now would continue to pay zero taxes under his plan.

“If you are at or below the poverty level, your plan isn’t 9-9-9 it is 9-0-9,” Cain said. “Say amen y’all. 9-0-9.”

politicalticker.blogs.cnn.com/2011/10/21/cain-for-the-poor-its-9-0-9/

Plan seems to be evolving. I kinda figured it would. This is a good sign. It shows the candidate can grow.

 

[Cider]

But he still wants the poor to pay a 9% national sales tax on all goods and services.

 

[gilliam]

But he still wants the poor to pay a 9% national sales tax on all goods and services.

Yea, he still thinks prices will magically go down and incomes going up with the reduction of the other taxes. I just don’t see it happening.

Personally, I like the idea of a flat tax, but Cain’s idea of a sales tax is too dangerous for me. I don’t trust the government at any level with this.

 

[mlund]

But he still wants the poor to pay a 9% national sales tax on all goods and services.

It sure beats the 22% they are currently paying - not to mention the 7.65% no-deductions-allowed FICA they pay on any wages they earn (and the 7.65% of their wage-costs they the gov’t collects from their employer too).

• Marty Lund

 

[TMC]

And so it begins. He first says his plan is 9-9-9 for everyone, until someone points out to him that is horribly unfair to the poor. So he adds an exemption to try to partially fix that. Maybe next someone will point out that putting a national sales tax AND business transfer taxes on food is a terrible idea (which it is)–or point out any of the many other serious flaws in this “plan”–requiring him to add exemptions or other tweaks to fix those problems. Of course, he will have to make up that lost revenue somewhere, so he will have to tweaks rates, maybe only on the wealthy to make the plan slightly less regressive. Then there will be the next thing, and the next thing. Pretty soon it looks pretty much like the tax code we have now.

Here is the real question - why didn’t he realize all these flaws when he unveiled his super-simple 9-9-9 plan? I am begining to think the answer is that he doesn’t really know what he’s doing. His fumbling answers on abortion and serious miscues on national security only add to that perception.

 

[Ahimsa]

Nein, nein, nein.

 

[mlund]

Maybe next someone will point out that putting a national sales tax AND business transfer taxes on food is a terrible idea (which it is)

Actually, it isn’t. Your average Embedded Taxes in a product or service purchased under the current system is just over 22%. Even with maximum carry-over the business tax would make up 9% of the final price of a product - $0.09 out of every $1.00. A sales tax would stack that up to a $0.18 total, which is still less than the current burden of $0.22 on every $1.00 you spend.

Here is the real question - why didn’t he realize all these flaws when he unveiled his super-simple 9-9-9 plan? I am begining to think the answer is that he doesn’t really know what he’s doing. His fumbling answers on abortion and serious miscues on national security only add to that perception.

Because they aren’t economic flaws in the plan - they are political flaws in how one can market the plan. It’s way harder to show people the math than it is to just say, “The poor don’t pay income tax and you’re going to kill them all!!!11111shiftone.”

• Marty Lund

 

[He_Man]

It sure beats the 22% they are currently paying - not to mention the 7.65% no-deductions-allowed FICA they pay on any wages they earn (and the 7.65% of their wage-costs they the gov’t collects from their employer too).

• Marty Lund

Yep. I pay 36% Federal, and 6% state to MD.

So close to half of my salary goes to a government in some form. Disgusting.

 

[mlund]

Yep. I pay 36% Federal, and 6% state to MD.

So close to half of my salary goes to a government in some form. Disgusting.

Yeah, even after deductions for home mortgage interest, children, and a joint standard deduction my household has an effective Income Tax Rate of around 15%, plus 7.65% on SSI/Medicare, and about 5% to the State, and then I pay 22% in Embedded Taxes whenever I buy something, plus 9% State Sales Tax. Not counting local government taxes, vehicle registration taxes, etc. The government takes over 50% of everything I make, and our combined income doesn’t come close to 6-digits.

Meanwhile someone making minimum wage on their own with 40 hours on 50 weeks and just their Standard Deduction has an effective Income Tax rate of 6%, plus 7.65% SSI/Medicare, plus 2% State Income, plus 22% Embedded Taxes, and then lumps a 9% State Sales tax on anything that’s not medical services or raw groceries. Mr. Minimum Wage is looking at government taking around 38% of everything he earns under the current tax codes before any temporary tax credit tricks come into play. Even if you rigged the credits and such to reduce his Federal and State Income Taxes to 0 the Fed still gets its FICA and all the Embedded Taxes still come out to the tune of 30% of his income.

• Marty Lund

 

[TMC]

Actually, it isn’t. Your average Embedded Taxes in a product or service purchased under the current system is just over 22%. Even with maximum carry-over the business tax would make up 9% of the final price of a product - $0.09 out of every $1.00. A sales tax would stack that up to a $0.18 total, which is still less than the current burden of $0.22 on every $1.00 you spend.

Because they aren’t economic flaws in the plan - they are political flaws in how one can market the plan. It’s way harder to show people the math than it is to just say, “The poor don’t pay income tax and you’re going to kill them all!!!11111shiftone.”

• Marty Lund

So you don’t think shifting a huge part of the tax burden from the upper middle and upper class to the middle and lower class is an economic flaw? I do. And either Cain thinks its fine to do that, or he had no idea what the real impact of his plan was. I’m not sure which would be worse, but both are disqualifying to me.

 

[mlund]

So you don’t think shifting a huge part of the tax burden from the upper middle and upper class to the middle and lower class is an economic flaw?

And there is the problem - you’re basing your question on an entirely faulty premise. You’re confusing these two things:

1.) What entity the government says they are taxing

2.) Which person’s pocket actually gets picked to pay the government

One thing studying business accounting has taught me well is that businesses don’t assume the real tax burden, they merely extract the government’s tax money out of their customers. If they can’t do that successfully they move or liquidate so shareholders can invest in other business ventures that can do that.

The tax burden rests squarely on the back of the consumer who has no one left to pass the buck to. That’s the reality of the 22% Embedded Tax Rate in the cost of goods and services you buy even if the government says you aren’t paying taxes.

My family is squarely middle-class. Under 9-9-9 my effective Income Tax Rate drops from 15% to 9%. My Embedded Tax Burden drops from 22% to 9%. My FICA drops from 7.65% to 0%. My National Sales Tax Burden rises from 0% to 9%. So I go from 45% of my wages being eaten to 27% of my wages being eaten. That works fine by me.

The fact that it also helps combat the tax penalty portion of the trade imbalance with China and provides huge incentives to invest in U.S. business is just gravy.

• Marty Lund

 

[mlund]

Oh, by the by, this draft of the actual 9-9-9 plan’s math is dated from September:

hermancain.com/docs/999_Scoring_Report.pdf

hermancain.com/docs/999_Scoring_Tables.pdf

Of particular note are tables 6, 10a, 10b, and 10c, as well as page 6 of the report.

Relief for lower income taxpayers will inevitably be part of any tax reform. To illustrate the effect that progressivity could have on tax rates, we will later derive the rates needed to allow a refundable exemption equal to the poverty level of income. This is the same as a refundable credit equal to the tax rate times the poverty level of income. This simplifies the estimation as the aggregate poverty amount is just subtracted from the gross tax base for each proposal.

Table 6 shows the poverty thresholds and number of families by size of family for selected
years 2000 through 2010. The poverty grant is the sum of the threshold times the number of families for each family size group. For example, the average family would receive an
exemption of $14,764 in 2008, reducing the tax base of each proposal by $2.0 trillion.

Without the poverty exemption the plan would actually balance out at revenue neutrality at around 7-7-7 (table 10b), so 9-9-9 (table 10c titled “Adding Poverty Grant to Tax Reform Proposals”) is already factoring in a poverty-line credit - hence the “9-0-9” for the poverty-line clarification that’s come up today. It’s not a new invention. It was actually included in the original numbers.

It’s becoming very obvious that Mr. Cain’s critics haven’t read the scoring report for the 9-9-9 plan and aren’t interested in the truth, just their own political capital.

• Marty Lund

 

[seekerz]

The fact that it also helps combat the tax penalty portion of the trade imbalance with China and provides huge incentives to invest in U.S. business is just gravy.

• Marty Lund

How well do you think that provision would go down with the WTO gestapo? After beating various governments into submission on various global trade agreements, will it simply sit by while one of the beneficiaries of that submission thumbs its nose at the rules? That show would be interesting to watch…

 

[ringil]

Yep. I pay 36% Federal, and 6% state to MD.

So close to half of my salary goes to a government in some form. Disgusting.

awww. . . .

Do you need that money to give to charity?

 

[JonNC]

**(CNN) - **GOP presidential candidate Herman Cain clarified his much talked-about “9-9-9” tax plan Friday, saying those who fall at or beneath the poverty level would have a different plan: “9-0-9.”

Cain took heat over his proposal, which replaces the current tax code with a 9% corporate tax, a 9% income tax and a new 9% national sales tax. Opponents have argued the middle part of the plan would increase taxes on the poor, who currently pay little to no taxes.

But Cain fired back Friday, saying in a Detroit speech that those paying no taxes now would continue to pay zero taxes under his plan.

“If you are at or below the poverty level, your plan isn’t 9-9-9 it is 9-0-9,” Cain said. “Say amen y’all. 9-0-9.”

politicalticker.blogs.cnn.com/2011/10/21/cain-for-the-poor-its-9-0-9/

Plan seems to be evolving. I kinda figured it would. This is a good sign. It shows the candidate can grow.

I have a major issue with 9-9-9, and that is it institutes a national sales tax along side the continued existence of the federal income tax. How long would it take a Washington makeup such as that which existed up until the Scott Brown election before 9-9-9 becomes 19-19-19?
Eliminate all income (and capital gains) taxes first, then institute a national sales tax.

Jon

 

[Ghosty]

Yeah, even after deductions for home mortgage interest, children, and a joint standard deduction my household has an effective Income Tax Rate of around 15%, plus 7.65% on SSI/Medicare, and about 5% to the State, and then I pay 22% in Embedded Taxes whenever I buy something, plus 9% State Sales Tax. Not counting local government taxes, vehicle registration taxes, etc. The government takes over 50% of everything I make, and our combined income doesn’t come close to 6-digits.

Meanwhile someone making minimum wage on their own with 40 hours on 50 weeks and just their Standard Deduction has an effective Income Tax rate of 6%, plus 7.65% SSI/Medicare, plus 2% State Income, plus 22% Embedded Taxes, and then lumps a 9% State Sales tax on anything that’s not medical services or raw groceries. Mr. Minimum Wage is looking at government taking around 38% of everything he earns under the current tax codes before any temporary tax credit tricks come into play. Even if you rigged the credits and such to reduce his Federal and State Income Taxes to 0 the Fed still gets its FICA and all the Embedded Taxes still come out to the tune of 30% of his income.

• Marty Lund

The problem is that the “Embedded Taxes” won’t be going away as a cost to the consumer just because the taxes themselves do. Since people are already used to paying, say, 3$ for a loaf of bread there is absolutely no incentive for any bread producer to lower the cost by 22% just because the added taxes go away. Most will simply keep the price the same and pocket the added money (as happened with the airlines when their tax briefly expired earlier this year). The “tax” would remain, but instead of going towards services that the government provides (rightly or wrongly), it goes to the companies that produce the goods. The same goods at the same end-price that the consumer was paying anyway, but now without a portion of the money going back to the consumer in the form of, say, military defense.

Some businesses might lower the end price to edge out the competition, but that is much less likely in practice than in theory because they’re not losing anything by simply keeping the price as high as everyone else.

Peace and God bless!

 

[purplesunshine]

I am sold on flat-tax.

The only countries that are fiscally sound are under such a method right now. Is 999 the answer? Nope. But for what we get and what we pay there is a huge desparity.

And the thing about taxing the rich more and more is that eventually they, too, will run out of money.

 

[Raskolnikov]

Nein, nein, nein.

Clever. I speak German and I didn’t even think of that.

I would be interested in knowing how this 9-9-9 or 9-0-9 tax is going to come remotely close to funding the US federal government. First he’s going to have to elaborate what exactly he’s going to cut to implement this. 'Cause it’d have to be quite a lot, and all in a short timeframe.

 

[Raskolnikov]

The problem is that the “Embedded Taxes” won’t be going away as a cost to the consumer just because the taxes themselves do. Since people are already used to paying, say, 3$ for a loaf of bread there is absolutely no incentive for any bread producer to lower the cost by 22% just because the added taxes go away. Most will simply keep the price the same and pocket the added money (as happened with the airlines when their tax briefly expired earlier this year). The “tax” would remain, but instead of going towards services that the government provides (rightly or wrongly), it goes to the companies that produce the goods. The same goods at the same end-price that the consumer was paying anyway, but now without a portion of the money going back to the consumer in the form of, say, military defense.

Some businesses might lower the end price to edge out the competition, but that is much less likely in practice than in theory because they’re not losing anything by simply keeping the price as high as everyone else.

Peace and God bless!

And most major industries are dominated by several huge companies, they are ogilopolies, and in these markets, competition is not perfect, and there is quite a bit of ‘implicit collusion.’ So companies usually won’t lower their prices because they are all aware that they are uniformly better off keeping prices higher.

And if prices stay the same, consumption and therefore production will also stay the same, meaning there will be little need to hire new employees and unemployment wouldn’t go down much either.

 

[JonNC]

Clever. I speak German and I didn’t even think of that.

I would be interested in knowing how this 9-9-9 or 9-0-9 tax is going to come remotely close to funding the US federal government. First he’s going to have to elaborate what exactly he’s going to cut to implement this. 'Cause it’d have to be quite a lot, and all in a short timeframe.

My understanding is that Cain claims it is scored as revenue neutral. If that is the case, we still have to cut, what, 1.5 trillion, to get into balance.

Perhaps we could merge 9-9-9 with Paul’s budget proposal. :yup:

Jon