I’ve got some big problems with 9-9-9


Putting aside the fact that 9-9-9 does sound suspiciously like a pizza slogan from our Godfather’s Pizza candidate, it has several big problems in my mind.

First, I don’t even count the Bloomberg projection of lost revenue.  I would be willing to concede the plan has the potential to create growth, which over 2-3 years, would aggregate past the needed 10% growth to cover the discrepancy in revenue creation.  Plus, I don’t really trust Bloomberg projections to begin with.

Lowering the corporate tax rate is a no-brainer.  I’m not sure 9% is the optimal number, nor that it’s not.  Cain has not made that case though.  It’s more likely 9% was chosen though because when paired with 9% sales tax and 9% income tax, he’s got a catchy slogan.

The 9% sales tax is unconstitutional.  The commerce clause of the Constitution gives the federal government only that authority to regulate those parts of commerce with sufficient interstate impact.  Conservatives have long tried to put the brakes on liberal expansion of government and regulation into areas of the market by defending this limit on federal power.  Cain’s plan obliterates this line of defense by seeking to tax all manners of commerce and spending.

The 9% sales tax is also going to be rather unpopular in practice.  Again, I do not ascribe to the liberal criticism that food and medicine would go up 9%.  It’s understood that as business taxes go down, that hidden cost passed along to consumers goes down.  Even after a 9% sales tax, the end price of products, such as food and medicine, may go down.  But people will still dislike it for two reasons.  One, every time they pay that 9%, they will identify it as a Republican tax or Cain tax.  Two, where market competition is insufficient to optimize prices, product costs will actually increase 9% thereby lending credence and leaving popular belief with the liberal criticism of the plan.

Finally, the 9% income tax is problematic.  Gone is the child tax credit.  Gone is the home mortgage interest deduction.  Gone is the charitable giving deduction.  This is a significant tax increase on the poor and middle class.  For those making under X, they will be worse off.  And “X” probably includes more than 50% of voters.

Some of Cain’s defenses of the plan are bogus. 

One fair criticism is that 9-9-9 can become 10-10-10.  Or 12-12-12.  Liberals love to spend and as they seek more revenues, these rates may climb.  Cain’s retort was in the last debate that he’d require a 2/3 vote to increase the rate from 9-9-9, that he would veto an increase.  Short of a presidential veto (which is only good while he’s in office), the only way to have such a prohibition on increasing the 9-9-9 rate is to amend the Constitution.  Why?  Because it’s, again, unconstitutional to try to alter the legislative requirements for enacting, modifying or repealing laws away from the majoritarian rule under the Constitution without a Constitutional amendment.

Cain selling the plan as simple and bold is really a non-seller to me.  The economy is not simple, so why should simple be an optimal approach?  The economy is incredibly complex.  When Cain criticized Romney for having a complex approach to dealing with the economy, I thought that incredibly naive.  First off, as Romney rightly pointed out, Cain’s 9-9-9 is not an economics plan.  It’s a tax reform plan.  That may be an important piece of an economic plan, but there are literally hundreds of issues other than tax reform.  Second, “bold” does not buy any more points with me than “hope and change.”  I don’t care if its “change” or “bold change.”  How about whether it’s effective change.  Obamacare was “bold” too, but that boldness does not make it good policy.

I like the pro-growth aspects of the proposal, but not any pro-growth plan will suffice.  I wish more folks who wanted health care would have ascribed to not any health care reform plan would suffice.  As always, the devil is in the details.

At this point, there’s a lot to like about Cain, but his plan has some serious flaws that need further development.  Besides 9-9-9, his dubious regulatory repeal plan, and his interesting “Chilean” model for social security reform, Cain does not have a lot of plans on the table.  As a candidate, he needs to articulate clear positions on a host of other issues before I could support him.



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16 Comments Leave a comment

I posted this in another diary.

windwaker24 Sunday, October 16th at 9:26PM EST (link)

Here’s a calculator if someone wants to figure out there tax liability under 9-9-9:

http://www.nerds4cain.com/Blog/archives/723

I don’t fare too well. I hope others do okay.

did it

WA_Cowboy (Diary) Monday, October 17th at 12:39AM EST (link)

right now, I’m part of the 47% that pays no income taxes.

According to Cain’s plan, my tax would increase by $5000 annually. and yes, I did calculate the disappearance of the 15.3% payroll tax.

While I am a sick enough person to say that I don’t pay enough taxes….I don’t think I could handle them going up by $5k in one year either.

“If you put the Federal Government in charge of the Sahara Desert, in five years there’d be a shortage of sand.” – Milton Friedman

I'm in the 53%

windwaker24 Monday, October 17th at 1:11PM EST (link)

and my taxes rise under his plan. I pay $2,000 more. I’m honestly scared right now. :(

 
 

I don't fare well either.

jackdaniels11 Monday, October 17th at 7:28PM EST (link)

My family’s taxes would go UP under 9-9-9. This plan is a non-starter. It doesn’t even pass the sniff test among people like me who are against ALL NEW TAXES.

What does Cain think that his campaign slogan will be? “Read my lips — 9% national sales tax”?

 
 

999 probably not unconstitutional..

harpsichord (Diary) Sunday, October 16th at 10:04PM EST (link)

Taxes appear in US Constitution Article 1:
Section 8;
………
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States
………
Section 9;
……..
No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.

No Tax or Duty shall be laid on Articles exported from any State.
…….

The Sixteenth Amendment allowed the income tax to not be proportionate etc. among the States.

The “no tax or duty on articles exported from any State” language will be problematic, but I think a national sales tax is feasible.

Keep in mind that the payroll tax is elliminated under 999. That is essentially a 15% tax on most wages.

To dismiss 999 because of “problems” that will have to be “ironed out” ignores that fact that our current federal tax system is a compliance and corruption nightmare. I certainly admit that you can shoot holes in 999. But there’s already CHASMS in the current system.

I’m taking a close look at 999, and not expecting to see magic or virgin beauty.

Replaced by

clintonformccain Sunday, October 16th at 11:33PM EST (link)

Keep in mind that the payroll tax is elliminated under 999. That is essentially a 15% tax on most wages.

Replaced by an 18% tax on ALL wages. The employer pays the “coporate tax” (really a VAT) of 9% on all wagesand benefits paid to employees. Then, the employee pays an additional 9% flat tax on the same wages.

People are overlookng the fact that the new corporate tax replaces a tax on profits with a tax on gross revenues. The only exemptions are the cost of raw materials purchased from US companies and capital investment. There are no other business expense deductions.

 
 

paint, charitable contribution deduction is retained in 999

GregInFla (Diary) Sunday, October 16th at 10:10PM EST (link)

Read the plan again:

9% Individual Flat Tax.

Gross income less charitable deductions.

Also, given the lower mortgage interest rates, most lower and middle income taxpayers get zero deduction for mortgage interest, since the standard deduction has remained high while the mortgage rates have declined sharply.


– A true evolutionist would let endangered species die off. Think about it.
– The sign outside the courthouse said no signs allowed. So I took it down.
– Atlas Shrugged is now on the non-fiction aisle at Amazon.

 

Shifting the tax burden TABOO

tommyc Monday, October 17th at 4:14AM EST (link)

47% of american pay NO federal income taxes. This is a BIG problem for America!!! Why is it a big problem ? Because that is nearly a voting majority!! Bottom line if the taxes NEVER are increased on the poor and middle class 9-9-9 going to 20-20-20 shouldn’t be the big fear of the GOP. The big fear of the GOP should be the 47% turning into 60% . As Progressive view shifting the tax burden up the income scale and the GOP fears flattening the taxes that is whats going to happen. Just maybe everyone seeing that 9% sales tax or CAIN tax would help generate outrage over $16 dollar muffins and million dollar shrimp treadmills.

The GOP #1 priority should be flattening the tax rates with 999 or some other reform. This election is the GOP opportunity to PROVE to America that a flat tax or a Fair Tax or 999 is better for upper and lower income tax payers than the current Progressive tax because it means economic growth for all.

To channel Chris Christie

“Look no one should pay zero taxes Period End of story. If that means poor people are going to have to pay more that 0 so be it. Everyone in the country has clean water and safe food and NOBODY is going to free load. Look here in America we have programs like food stamps and well fare if people need help surviving they are going to get it. But the days of using Tax Code to try and provide that help are over! It hasn’t worked and the 70k page code (AKA catalog of political favors) is proof of that. The only people our current tax code helps is tax lawyers and special interest.”

Finally the good shouldn’t be the enemy of the perfect 999 is not the end all be all solution. We need Cut Cap and Balance, We need EPA and LRB reform., National right to work legislation, and to drill baby drill. Yet, if we are not going to get an 18% flat tax or repeal the 16th amendment in the next 24 months 999 is the best we have.

Herman Cain has done what not GOPer in history has be able to do. He has rallied mass public support behind a flax-fair tax hybrid and gives the GOP a real chance to pass such a bill with a Red White House and Congress.

Even if he is not the nominee if the GOP is willing to stick with the current tax code over 999 well then it would make sense why candidates keep going to MSNBC debates.

So you want to raise my taxes

Neil Stevens (Diary) Monday, October 17th at 4:58AM EST (link)

Cool story, bro.

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I agree with your basic premise

kyle8 (Diary) Monday, October 17th at 6:33AM EST (link)

After several rounds of Republican sponsored tax reforms we have gotten to the point were a large amount of people no longer have any “skin in the game” so to speak, so they don’t worry too much about taxing the rich, or wasting money.

I just doubt that the 9 9 9 plan is the way to go about changing it.

“Nothing works like freedom, Nothing succeeds like liberty”
Kyle

 

i think all the candidates would agree

WA_Cowboy (Diary) Monday, October 17th at 3:54PM EST (link)

that the tax code needs an overhaul. They probably differ in approach to that overhaul.

the point is that to take someone like myself, who currently pays no income tax and raise that tab by $5000 annually isn’t going to sit well with me or many people.

I actually really like the plan that Paul Ryan laid out in his Roadmap with a small addition. Generous standard deduction, 10% income tax on income less than $100k for individuals (believe it is $200k for families). 25% on all income above that level. No more loopholes. No more deductions that apply to some and not others. The only thing I would add to the plan is a minimum tax in the neighborhood of $100-$200 per household. That way everyone has a skin in the game.

As Fair as 999 sounds, it will be a political suicide because it would raise taxes on many of the 47% — and not by a little, but substantially. you can’t just take people who are receiving money from the tax code and suddenly have them start paying. As fair as it is that all people should pay it just won’t work.

And I don’t buy the argument that businesses will pass the payroll tax savings on to their employees in direct salary — at least not right away. perhaps after a year or two of increased profits in the bank.

“If you put the Federal Government in charge of the Sahara Desert, in five years there’d be a shortage of sand.” – Milton Friedman

Political Suicide?

tommyc Monday, October 17th at 11:02PM EST (link)

If Republican’s win the White House, odds are they will take the senate with a pretty strong majority (and have the advantage in 2014 again)

This would provide a political environment in which republicans have a reasonable chance of passing real conservative economic legislation like drill baby drill, cut cap and balance, national right to work legislation, reform the EPA, the DoE ect…(shrink gov’t), Repeal Dodd-Frank,repeal Base line budgeting, and reform SS and Medicare as proposed in the Ryan Plan and if Herman Cain does get elected especially if its a land slide election (if he peels jews and blacks it could be) even 999 could be passed.

Additionally companies and banks are not over leveraged they are VERY well capitalized, there are trillions that would flow in from zeroing out repatriated profits and the Euro Zone has a chance of bottoming out before 2013.

The stage would be set for an economic boom of historic magnitude.

While I am a believer that 999 would in fact drive prices down and make american enormously business friendly, even if democrats spun it as a tax increase on 47% . When economy starts growing at 3,4, or even 5% growth that would validate once and for all, the progressive tax code isn’t the best option for american including the poor.

Further more success of 999 for everybody could help the republicans build real support for repealing the 16th amendment.

but a substantial increase in taxes paid

WA_Cowboy (Diary) Tuesday, October 18th at 9:48AM EST (link)

among the 47% would get “blamed” on republicans. See my comment above under the first coomment — my taxes go UP by $5000 under the new plan. I’m sure I’m not the only one.

No politician wants that hung around his neck.

I’m not even saying that 999 doesn’t have its merits — I think it does. There’s just no way that a family’s taxes can increase that substantially and not have it bite you politically in the end.

“If you put the Federal Government in charge of the Sahara Desert, in five years there’d be a shortage of sand.” – Milton Friedman

 
 
 
 

Can we please stop with all the uninformed attacks against 999?

nick2253 Monday, October 17th at 3:01PM EST (link)

1) One of the really important features of 999 is that it is a (pizza) slogan. Not only is it marketing genius, it makes 999 something that every American can understand and get behind. Romney’s million-and-a-half point plan doesn’t provide that same kind of connectedness. Also, since people know their tax code as 999, then if someone tries to make in 10-10-10, then people can easily recognize the disparity, and say “hoooold on a second!”

2) Sales Taxes are not unconstitutional. Read Article 1, Section 8, Clause 1: “The Congress shall have Power To lay and collect…Excises…” Excise taxes are a broad class of taxes that include any tax levied on inland transfers (as opposed to, say, tariffs, which are levied on boarder transfers). Currently, the US levies excise taxes in both specific amounts (cents/gallon of gas) or ad valorem (x% of the value of the transaction). 999 is proposing an ad valorem excise tax on all point-of-sale transactions of new goods.

3) Your “unpopular sales tax” attack is a misnomer. Assuming, as you say, the sales tax is so unpopular, then the worst case is that it gets repealed, and 999 becomes 99. And if Republicans go down as the “evil sales tax party,” what’s going to happen to the Democrats when they try to raise the corporate and/or income taxes, or even try to (re)introduce a new tax to compensate for the lost income? They’ll become the party of the “evil income tax increase” or the “evil reinstated payroll tax.” I’d much rather be the “evil sales tax party that introduced a flat tax and simplified the tax code” than the “evil restore the old tax code party that raised rates for everyone.” And I think that people are smart enough to see the massive savings that they get on the income/payroll side, and Cain will get as much love for that as he would hate for the sales tax.

4) The “999 is problematic” argument doesn’t really hold any water. First off, the charitable deduction isn’t gone. Secondly, we are replacing two huge taxes, the income and payroll tax, with one 9% income tax. Even if we get rid of every single deduction and credit, that would cause a tax decrease for a large majority of Americans. Also, the removal of the child tax credit and the home mortgage interest deduction are some of the best features of the 999 plan. Removing the child tax credit removes the horrible tax incentive to have children. And removing the home mortgage interest deduction does away with a tax-induced subsidy of the middle and upper class that fails to actually encourage new home buying. The interest deduction is actually redistribution of wealth at its finest.

5) Your attacks on Cain’s defense of the program is as dubious as your understanding of the Constitution. There is no where in the Constitution that specifies the requirement of a majority. In fact, the Constitution explicitly authorizes each House to choose its own rules: “Each House may determine the Rules of its Proceedings.” Many of the practices that the Houses observe reflects tradition and English Common Proceedings. This is how the filibuster started. If Congress wished to bound itself to a 2/3 majority to raise taxes, then it would be free to. It could then, just as readily, unbound itself to a simple majority. This is what’s going on with the “nuclear” option. But the reason why Congress won’t dare use the “nuclear” option is because of the risk from the other party, and the possible backlash from the American People. If you required 2/3 majority to raise taxes, but a simple majority went around that, I don’t think Americans would be flooding to the streets in happiness. Yes, there is no way to guarantee the 2/3 majority without a Constitutional Amendment. But this is a red herring: any tax plan could be increased by a simple majority. 999 is not especially vulnerable to this in any way.

6) You criticize Cain’s plan for being simple. Do you mean that only a complex tax code is sufficient to generate revenue for the Federal Government? The idea that we need a “complex plan” to fix the economy implies that government has some role in fixing the economy. Unlike Romney, who has proposed an in-depth, proactive plan to use the government to bring America back to prosperity, Cain is proposing a passive plan to do so: simplify the tax code, give businesses and consumers the stability and confidence in the government they need, and let the people and the markets bring themselves back to prosperity.

True or false...9-9-9 introduces a NEW FEDERAL TAX...

APA Guy (Diary) Monday, October 17th at 3:10PM EST (link)

Don’t add qualifiers like “but, but but…he reduces the federal income tax…”. Doesn’t 9-9-9 add another federal tax?

How confident are we that tax won’t be 10%…15%…20%…down the road when we need to “raise revenues”…and at what point will it be as progressive as the current income tax?

A flat income tax neither penalizes someone for success nor adds a single new tax to the federal roles. Not only is it far simpler and comon sense, it enjoys strong majority support according to a recent 2011 Ras poll. 9-9-9 has a damning flaw…like it or not.

I'm not arguing against a flat tax.

nick2253 Monday, October 17th at 4:51PM EST (link)

In fact, I think that we should move to either a flat income tax or a flat consumption tax. If I had a choice, I’d pick either over 999, but, for better or worse, 999 is the best shot we have of getting there today as no other (serious) candidates support anything close.

Now, a couple more points: 999 gets rid of all the current excise taxes. Yes, 999 adds a sales tax, but a national sales tax is a logical extension of the ever-growing excise taxes that we currently have. The idea that we won’t return to Civil War levels of the excise tax in the near future doesn’t hold much water IMHO. As deficits grow, politicians will naturally turn to such taxes as an additional revenue stream. I mean, Obamacare added a 10% excise tax on tanning booths. A national “sales” tax is on the way.

The argument that taxes will increase is a red herring. If we needed to “raise revenues” right now, what’s to stop Congress from increasing our current rates? In the worse case scenario, and 999 reverts back to the exact same convoluted tax structure we have today, passing 999 still reverts the tax code back to square 1 for a little bit. I don’t see how resetting the tax code is ever a bad idea.