CSMonitor Economist Mom: Cain's 999 plan: Not sane tax policy

[flpoljunkie]

Emphasis mine. Cain, of course, does not bother to mention that local and sales tax would be on top of his 9% national sales tax. Talk about regressive!

Cain's 999 plan: Not sane tax policy

By Diane Lim Rogers, Guest blogger
09.29.11

What is an example of how we’re NOT “evolving” on tax policy? The fact that proposals for “flat taxes” seem to be back in vogue. Take Republican presidential candidate Herman Cain’s “999 Plan.” A reporter called me about it, which was the only reason I went to the Cain website to check it out for a few seconds, which was all it took to “get” what his proposal is basically about: (i) switching to a consumption-based tax system that exempts income from capital–which on its own is “regressive”; (ii) switching to a single (”flat”) marginal tax rate schedule–which on its own is (also) “regressive”; and then (iii) switching to a not-just-double-but-triple tax of consumed income (instead of saved income) through the 9 percent business tax (exempting capital income) and the 9 percent sales tax (which naturally exempts savings) that are layered on top of the 9 percent income tax (which exempts capital income as well)–which means all that regressivity I already listed is tripled! Where did the 9 percent rates come from, I was asked by the reporter–and would it be revenue neutral? My response: “probably because 9 is one digit long” and theoretically, yes, it’s possible that a triple tax on consumed income with no or few exemptions which has an effective rate of 9+9+9 or 27 percent could indeed be revenue neutral. (From Cain’s description of the 999 base, it’s not clear what is exempt other than charitable deductions–oh, and all of capital income, of course.)

I don’t know if I’ll feel compelled to say anymore about the Cain tax plan unless the candidate actually seems to have a decent chance of getting the Republican nomination, but on the way to seeing if that happens I hope people recognize how insane his tax plan is (without needing any detailed analysis). This is one plan where my biggest reaction to the plan is not that it doesn’t raise enough revenue. Like I said, theoretically it could, but why would we ever want to do it that way?

It’s sort of an example of what I called “Neanderthal tax policy” in my Tax Notes column. So please don’t take it seriously. Yeah, I know–it’s hard to believe I can say you should take the guys from Comedy Central–Jon Stewart and Stephen Colbert–more seriously than some of these presidential candidates when it comes to their wisdom on tax policy. But you should.

http://www.csmonitor.com/Business/Economist-Mom

[safeinOhio]

1. Does he get to add another 9

for SS and MC?

[ChairmanAgnostic]

2. Nein.

[flpoljunkie]

3. In fact, Cain's '999 plan' eliminates all payroll taxes--both FICA and Medicare