Thursday, October 13, 2011

Listening to the debate yesterday, I started to have some questions about Herman Cain's 9-9-9. All I knew was that it was to throw out the tax code and replace it with a flat 9% tax on personal income; a flat 9% on corporate income, and a 9% national sales tax. I didn't like the notion of a national sales tax because it's not progressive. The details of this plan are unavailable, but the 9-9-9 is a first stage after which it will be replaced with a 30% sales tax.
“Whatever one thinks of the Fair Tax, it makes not the slightest bit of sense to have a plan that requires fundamental changes to the federal tax system twice to achieve its objective,” [former George W. Bush economic policy adviser Bruce Bartlett] wrote in a Tuesday New York Times op-ed. “One of the prime selling points of the Fair Tax is its simplicity, and the 9-9-9 plan is far from that.” Cain’s plan would do away with the complex system of deductions and loopholes that currently plague the tax code, but it would also redistribute the tax burden from the wealthy to middle and low income Americans, Bartlett states.
I found that quote after Cain was asked several times how we could be sure that Congress wouldn't just keep raising those rates and about the analyses by other economists who said it would work. His response was to assure them that it would pass, but declined to say why; that he knew it would work because his economics adviser had assured him that it would work. As to the concern that tax rates could kept where he set them, his answer was puzzling because, he said, as President he would veto any tax increases. He has steadfastly refused to name his other advisers, to protect their confidentiality, which I find puzzling as well. The economy is already in shock because of Obamacare and the uncertainty it creates in the minds of business owners. This sudden shift in the tax system .would not be like flipping a switch. There are some goud reason to give people an incentive to spend less, but our economy now depends on consumer spending, and I'm not sure how the progressivity of the current system will be retained. A 30% sales tax is likely to fall heaviest on those who have low income, although others dispute that.

Update: I found this about Rich Lowrie, who Cain says devised the plan.

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