Sunday, October 16, 2011

Herman Cain's Love Potion Number 9-9-9

Herman Cain’s “brilliant” and “simple” 9-9-9 tax plan for America isn’t just some publicity stunt or a promotion for a pizza pie with all the trimmings at one of his Godfather establishments.  The current GOP frontrunner actually believes that it would be the best way to spur a stalled economy and, at the same time, “simplify” a tax code many feel makes calculus seem easy by comparison.

Leaving aside the fact that, yes, the tax code desperately needs some kind of reform, a closer look at Cain’s “simplistic” proposal not only reveals a staggering lack of real tax code knowledge, if passed, it would end up being the greatest tax increase for middle and lower income earners since the federal income tax was introduced, while simultaneously ushering in the single greatest tax break for millionaires and corporations.  Here’s why.

For those of you who haven’t been paying attention over the last few weeks, Cain’s “simple” tax plan comes down to three components: a 9% federal income tax (supposedly flat, but with a few allowable deductions), a flat 9% corporate tax and a 9% national sales tax.  While proponents of the plan say that by eliminating virtually all tax deductions and simplifying the code it allows for the treasury to close loopholes and obtain new sources of revenue, most of that revenue would be disproportionately gotten from those who can least afford to pay it.  In the words of Bruce Bartlett, a senior official in both the Reagan and George H.W. Bush Administrations, the plan would be a “distributional monstrosity.”

Most middle-income workers count on the deductions that Cain would eliminate to reduce their overall tax rate.  For instance if you earn between $75,000 and $100,000 per year, the fact is you probably don’t even pay 9% by the time you file your federal return.  Under a Cain Administration you would in all likelihood pay more than you’re paying now.  Homeowners would be hit hardest as the interest and property tax deductions would be eliminated.  Only certain charitable donations would be retained.

As for the lower and lower middle-income groups, they would be devastated.  Roughly 30 million households pay no income tax at all, many of them living at or below the poverty level.  If Cain’s tax plan were to go into effect, many of them would be hit with tax rates that could approach a third or more of their incomes.  Families already struggling to make ends meet would find it impossible to survive.

And it gets even better from there.  Cain proposes to eliminate completely the payroll taxes that fund entitlements such as Social Security, Medicare and Medicaid, as well as estate and capital gains taxes.  If you’re a millionaire, you’re salivating over this proposal.  If you’re a part of the middle class, you should be peeing in your pants at the prospects.

Cain saves the best for last.  To make up for the lost revenue to the treasury, he proposes a national sales tax of 9 %.  But some economists have already said that 9% won’t be enough to make up the shortfall.  Estimates as high as 23% have been floated.  But even at the “paltry” 9% level, the burden to consumers would be immense.  With consumer demand already at record lows, a value-added tax – which is what Cain is ostensibly calling for – would drive the economy even further south.

And, as far as the deficit is concerned, the “simple” truth is that Herman Cain’s “simplistic” and regressive 9-9-9 tax plan would more than likely add to it, rather than reduce it.  And that’s because while it counts on the elimination of loopholes and standard deductions to potentially raise revenues, actual net receipts by some estimates could fall by as much as $300 billion annually.  Furthermore, with the addition of a national sales tax, it is overly punitive to most middle and lower-income wage earners who make up the vast majority of consumers in the country.

Ask any business owner – whether they employ two workers or two thousand workers – what’s the most important ingredient in their success and they’ll gladly tell you point blank: customers.  The more the merrier. 

With all the talk about the great engine of capitalism being the entrepreneur, the reality is that all the entrepreneurial spirit in the world can’t make up for a lack of consumer spending.  The more customers spend, the better the profit sheets look and the more likely businesses are to hire more workers.  You would think that someone with the supposed business acumen of Herman Cain would get that “simple” truth.  The fact is he does.  What he’s counting on is a majority of frustrated voters falling for the seeming “simplicity” of it, without of course bothering to find out the gaudy details. 

“Simply” put, the 9-9-9 tax plan would increase most Americans’ taxes and have profound consequences on the nation’s economy.  Even conservatives are skeptical about the tax plan.  Grover Norquist said recently that the Cain plan would be “like having three needles in your arm taking blood out.  It’s much more dangerous than just one.”  My guess is when more Americans find out about it, they will have a “simple” answer to Mr. Cain’s “simplistic” tax scheme.  They will “simply” reject it outright.  

15 comments:

Steve said...

Well, what do we expect from another corporate stooge funded by Koch Inc? Their goal is not to fix anything, but to continue the siphoning off of America's wealth. (Actually, I apologize for the stooge remark. It is an insult to Larry, Moe & Curly.)

Infidel753 said...

If Cain had the common sense needed to be President, he'd have done this kind of analysis himself before publicly airing the proposal, knowing that if he did air it, others would certainly look closely at it. What's the point of proposing a scheme which will immediately make him look like a fool as soon as its implications are made clear?

Like Perry and Palin, he seems to be just shooting his mouth off without forethought. Weighing one's words judiciously is for the little people.

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