The failures of Cain’s tax plan

The details of Cain’s 9-9-9 tax plan reveal an unjust new system.

David Steinberg

From winning straw polls, to being the focus of a nationally televised debate, to leading in the national polls, Herman Cain has experienced a meteoric rise in the GOP primary this fall, with his marketable 9-9-9 plan in the forefront. However, when this plan was introduced, Cain was a middle-of-the-pack player in the GOP presidential race with all the cameras focused on then-front-runners Mitt Romney and Rick Perry. Now, with Cain enjoying the spotlight, more scrutiny has fallen upon his new tax plan, revealing its flaws, inconsistencies and unfairness.

Michele Bachmann cleverly attacked the plan, saying that when the 9-9-9 plan is turned upside down, the âÄúdevil is in the details.âÄù And while Democrats have been against this plan from the beginning, many Republicans are also coming out against it. Grover Norquist, the man behind the Americans for Tax Reform, an anti-tax group, has said that CainâÄôs plan is âÄúmore dangerous than the current one.âÄù He says âÄúitâÄôs like having three needles in your arm instead of one,âÄù referring to the 9 percent income tax, 9 percent national sales tax and 9 percent corporate income tax.

Other Republican disagreements come from the creation of a national sales tax, something that does not exist in the current tax code. This would be added to any preexisting state sales tax, which in Minnesota is 6.875 percent, in addition to any local tax. Therefore, the new sales tax with CainâÄôs plan would total 15.875 percent. States with no sales tax, like New Hampshire, would then have the burden of a 9 percent addition to the cost of their purchases. A final argument from Republicans comes from Mike Franc, Vice President of Governmental Studies from the Heritage Foundation. He says that as the government needs more money, they will be inclined to raise the levels of taxation and 9-9-9 could âÄúbecome a 15-15-15 plan âĦ and a 30-30-30 plan.âÄù

Arguments against this proposal from the Democrats are a little bit different from those of Grover Norquist, Michele Bachmann and Mike Franc. An extreme cause for concern with CainâÄôs plan would be the increase in percentage of income that the poor would be spending on taxes while the wealthy would be paying significantly less. The creation of more sales tax would disproportionately and unfairly affect the poor, since they spend a larger percentage of their income than the rich, who tend to save more.

And while this tax proposal does damage to the poor, it simultaneously helps the rich. Urban Institute, a non-partisan think tank, estimates that those who make more than $1 million pay 18 percent in income tax, which under CainâÄôs plan, would be cut in half.

CainâÄôs plan relies only on a national sales tax, income tax and corporate income tax, and it will erase current capital gains, payroll and estate taxes. Those who are wealthy are far more likely to be paying more in capital gains taxes, which will be gone under the new plan.

Warren Buffett, a big proponent of a tax increase for the wealthy, would likely pay next to no income tax under CainâÄôs plan, an example of how the wealthy would benefit unfairly. Buffett makes a vast majority of his money through capital gains, and his taxable income under 9-9-9 is a fraction of what he actually makes each year.

Herman CainâÄôs introduction of a new, revolutionary tax plan has gotten everyone talking about it, but as his stock rises in the GOP polls, more scrutiny will fall on the planâÄôs failures and partisan leanings.

 

David Steinberg welcomes comments at [email protected]