My Problem with People Who Readily Accept Herman Cain's 999 Tax Reform Plan.

This diary is a response to this good diary by “The Sophist” from which I quote in part:

<b>If You Assume The Policy Will Be Corrupted…</b>

First of all, if the base assumption is that no matter how great an idea might be, DC politicians will find a way to corrupt it… why is the 999 plan singled out for special treatment? What makes anyone think that Romney’s 87-page PDF Economic Plan won’t also be instantly corrupted and changed? Or the FairTax that many people are gung-ho for, claiming that it is superior to the 999 plan. Superior how, if the assumption is that Congresscritters will instantly transform it into a basket of giveaways and boondoggles? Or even a Flat Tax?

The second bolding in the quote was added by me and that is what I am addressing.

That answer is simple.  We agree with Herman Cain.  He says that the FairTax is where he intends to end up.  If it was not better why would he want to move past the 999 plan to get to the FairTax at a later date?  The skeptic FairTaxer inserts here “Or does he?”

I really can’t speak for all FairTax activists but I can point out something.   The FairTax enthusiasts are rather suddenly divided into two camps.  One large camp is generally OK with the 999 plan because they simply LOVE them some Herman Cain.  They apparently have listened to him for years and have grown to trust him.  They trust him to follow through on his plan.  They trust him when he says we will end up with the FairTax in the end.

Not everyone listens to Herman Cain on the radio and even within the ranks of those who do, there is a distrust of him because of his endorsement of Governor Mitt “Tail Spin” Romney last election.

The other camp is not so trusting.  Some even outright oppose his candidacy all together.  They think he has abandoned the same FairTax that he himself had said our economy needed.  They think he simply concocted a more palatable, watered down, have-it-both-ways FairTax-Lite plan merely to placate income tax supporters.  A lot of these people have not been listening to him on the radio.  They don’t trust him to be able to keep the liberal democrats and republicans in DC from redirecting his 999 plan.  They think we will end up in a worse taxation situation than we are currently in.  In  short, they pretty much agree with Dan Mitchell.  They don’t see the need in a watered down version that allows both a federal income tax and a federal sales tax at the same time. (h/t Aaron Gardner)

Here’s the pretty daisies found in Cain’s 999 tax reform plan (as I understand it):

The first “9” in Cain’s 999 plan would leave more money in the average working person’s pay check.  Personally, I love this aspect because I happen to be one of those people.  As it is, employees are paying 5.65% FICA plus whatever their income tax rate is.  The employer more than match that with 7.65%.  All of that is done away with and replaced with 9%.

The second “9” would be the new corporate tax rate.  It would be lowered to 9% from the current 35%.  This would make the USA much more competitive in the eyes of businesses looking for places to build new facilities.  That means more jobs because we will have less government interfering with cash flow.  In other words, the USA would become an instant magnet for investment. 9% is a drastically better rate.  Nevertheless, it should be zero.

The third “9” would mean that more people have skin in the game because everyone who buys new things will pay the federal point-of-sale-consumption tax.  It is not a hidden VAT tax either so people will see the exact tax when they make new purchase.

One more really great thing about it is that filing our taxes will become very simple.  People like myself will not have to pay several hundreds of dollars every year merely to file taxes.

I agree that The Sophist is right about citizens needing to stay vigilant  as voters.  I think we citizens have been pretty vigilant since Obama was elected but that did not stop us from having ObamneyCare dropped upon us like an anvil, did it?

Here comes some nasty little thickets (as I understand it):

I don’t doubt that Republicans will hold the house and hopefully Cain (or Perry) will be the next President.  If it is Cain and he gets his plan implemented, none of us can say what will happen in 2014.  The pendulum will swing back sooner or later and conservatives will have even less control than they do now.  All the vigilance in the world will not stop the liberal democrats and republicans from raising the tax rates.

Under Cain’s 999 plan, both taxes would be legal and there to be abused at will by an insolvent and out of control federal government.

The income tax can be abused right now because we actually have it now.  In contrast, right now, the sales tax cannot be abused because we simply do not have it.

Under the FairTax, the entire income tax is thrown out and it is not replaced with any form of an income tax at all.  Under the FairTax, the federal income tax is replaced with a federal point-of-sale consumption tax on only new products and services.  The FairTax does every good thing that Cain’s plan does except it does every one of those good things much better.

Superior Controls:

Within the FairTax bill is a provision that stops the income tax from being collected while the FairTax is law.  There is also a sunset provision that says that in seven years (I think this should be changed to 2 years) the 16th Amendment must be repealed.  (This must be more than a simple repeal.  It must be an aggressive repeal.)  If the 16th is not repealed within the set time, the FairTax goes away and the income tax comes back.  That last part will not happen.  After people see what their pay check looks like and they see what an economy looks like that has not been being slowly poisoned to death by the income tax, most FairTax supporter’s feel very comfortable betting that the 16th Amendment will be repealed.

Cain’s plan to bridge from where we are now to the FairTax is admirable but it is also very dangerous.

Mr. Cain needs to do a much better job courting the FairTax activists who have battled the “We’ll end up with both!!!!” meme for so long.  His plan is exactly what we have argued would not happen.

One more comment should be made clear to Mr. Cain: All it would take for this 999 plan to sink like a lead balloon would be for Governor Perry to endorse the FairTax as written the way Huckabee did last time around.  Why vote for a candidate touting the FairTax-Lite when you can vote the real thing?  😉



Is it a three man race yet? Go Herman Cain!


P.S. if you live near or in West Tennessee, please come to the Herman Cain Campaign stop on October 14th in Bartlett.