The idea behind Herman “Citizen” Cain’s 9-9-9 plan is, there will be a 9% personal income tax, a 9% business (corporate) tax and a 9% national sales tax. This will replace all other federal taxes (the capital gains tax, social security taxes, the death tax, etc.).
There are several criticisms, the chief two being, (1) 9-9-9 today will become 20-20-20 tomorrow; and (2) everything is going to cost 9% more. These criticisms are less problematic than you might think.
First off, any tax is subject to being raised; so one cannot argue 9-9-9 is a bad plan because it might become 30-30-30; of course that could happen-this can happen to any tax structure. However, because of its transparency and its wide-ranging effect, people would be a lot more concerned if politicians decided to raise their taxes (right now, 50% of taxpayers could care less if taxes go up). Any Congress and President which passed 30-30-30 would find themselves ALL voted out of office next time around, no matter what their party.
Secondly, there will be no change in the cost of this or that thing that you buy. Sure, there is a 9% charge added on top of the cost. However, corporations and businesses will see a much lower tax rate (from 35% to 9%), so they will be able (and willing) to keep their prices low. There would be several months of price adjustment, but in an ailing economy, stores want cash flow, which means, offer as low of a price as possible.
I watched an anti-Cain commentator on television the other day who argued from both sides of his mouth. First of all, he said the 35% corporate tax which is removed would not have an effect on any price of any item; but that the 9% business/corporate tax would. You cannot have it both ways! Reducing a tax from 35% to 9% may not have a net effect of a 26% reduction of the price of goods, but it suggests that, there will be some reduction of prices—easily more than 9%. The likely outcome would be, things would cost less, not more, once this tax kicks in.
Bear in mind, this is going to pull in taxes from people who have had great tax breaks in the past (billionaires who literally pay no taxes); as well as taxes from the 50% of Americans who do not presently pay federal taxes; as well as taxes from those who “live off the books.”
This is what a true fair share is all about; this is what shared sacrifice is all about. Furthermore, there will not be a portion of the population who simply votes to get more benefits, not matter what the cost (as it will now cost them).
Now, this is in no way a panacea. For instance, Democrats will still come up with wonderful social plans which won’t cost a thing; and then, we are all shocked and surprised that they cost an extra $100 billion a year. But that is politics, and conservatives will have to be able to make smart arguments to counter these “free” social programs.
Can Cain’s 9-9-9 tax plan be tinkered with and will it be tinkered with? Of course. I suspect, in the end, food will be exempt from the national sales tax. We all eat food; so we will all probably agree to that.
The two popular deductions for the interest on a home mortgage, state property taxes and charity may or may not find themselves thrown into the mix. Even though I would personally benefit from all of those deductions, I also have to recognize that the tax code could not be built around my own particular desires. However, as a country, we like home ownership and we like charity; so these things may find their way into Cain’s 9-9-9 plan.
In any case, imagine what it would be like if we were starting from scratch and about to vote for or against the tax system that we now have. Which way would you come down on that vote?
Finally, with the elimination of the capital gains tax, you are going to see all kinds of movement in the market of houses, stocks, gold etc.; they will be quickly bought and sold, because there is no longer this 15% capital gains tax. You may not realize this, but a landlord can sell one of his properties, and end up paying more in taxes than he gets at closing. That is because of the way our taxes are structured. When it comes to stocks and bonds and mutual funds, some people hate to buy or sell these, because then, they will have to engage in all kinds of bookkeeping in order to figure out their loss or gain, so that they can pay taxes on it. This eliminates the bookkeeping.
This would give large and small businesses some certainty (4-8 years of easy to figure taxes); which is key when it comes to investment and to the growing of businesses.
All of this would increase the velocity of money considerably, which will jump start our economy. Throwing money at an economy, as we have seen, does not work. Increasing the velocity of money dramatically changes the economy.
From Conservative Review #199 (HTML) (PDF)
A retired math teacher who spends most of his time exegeting the Old Testament and, once a week, puts out an ezeen.
@MataHarley:
I think I’m understanding this a little better now. Assuming for a moment that each company involved in the chain of production is doing business as a corporation, under the 9-9-9 plan they will each pay 9% federal corporate tax rate on their net income rather than the current 15% to 35% rate. So it seems to me that in most cases prices will come down at the retail level. Whether they come down enough to offset the 9% retail sales tax, I can’t say for sure, but let my throw out some numbers.
I’ve seen estimates that 23% of the cost of items produced and sold in the U.S. are embedded federal income taxes. But that’s the cumulative percentage. Let’s just guess that 10% of the cost of an intermediate good is federal income taxes. So it would seem that if the corporate income tax were reduced from 35% to 9%, the price at each stage of production might come down by about 3% (9/35*10%) , so if a product went through…say…4 stages before it got to the retail store, the price might be reduced by around 11% (.97^4). That would more than offset the 9% retail sales tax, but not by a heckuva’ lot.
That’s the play Cain is making, John Cooper. The thing is that set prices of a corporation’s services or goods were not necessarily based on what their taxes due were at the end of the year. Don’t forget, they currently have a ton of write offs that also go away. I don’t know of one businessman who, as a result of his end of the taxes, says “I have to raise the prices on my services because I paid a lot of taxes this year”.
Unlike an unpredictable tax bill at the end of the year, a VAT style tax based on their direct profits is a predictable add on. I don’t see this bringing down prices for the consumer. They will pass that predictable cost along part of their baseline costs.
@MataHarley:
I haven’t drilled down to that level. Could you itemize some deductions that will disappear?
Let’s not forget that the President proposes, and Congress disposes. Whatever Cain’s plan might be, Congress will have their way with it if he is elected.
Dang, John Cooper… I sure can’t itemize every deduction with this wieldy tax code, but the IRS has a page on this that includes everything from personal expenses (i.e. entertainment, mileage, fuel, even business clothing) to vehicles, depreciation of assets, improvements to your business building/home office (% used for business) like roofs, paving driveways/parking lots etc. This is on top of the direct business expenses, beyond the costs of the goods or service. Each year my CPA has been able to take my gross plus deductions down to a taxable amount of perhaps 40-45% of that gross. All of which is likely to go away. I am a flow thru tax payer, so it ends up on my individual filing, not a business filing, as many small businesses do.
That said, I may gross the same amount any two years, but be responsible for different tax liabilities, based on what deductions I might have available that year. So I sure can’t be figuring the price of my services, based on what I think my taxes may be. But if any business knows there’s 9% on my profits, combined with added 9% on any improvements or added business assets or services at the retail level, Ithey’ve got some predictable costs to consider, and would likely pass it along.
It’s hard to run the numbers since it depends on each individual businesses product or service/ amount of improvements they’ve been able to do, and tax bracket they end up in. It becomes further complicated by having to pay retail sales tax on any improvements or services you do annually for personal or business as well.
It’s anything but simple. Personally, I would have been happier had Cain gone the flat tax route instead of adding yet another tax to the fray.
Cain has said that he prefers a flat tax, but this is just a small step toward that direction. Regardless of the details, I really appreciate that – thanks to Cain – people are now talking about this stuff.
I’m not aware that the 9-9-9 plan is going to eliminate any business deductions. Supposedly he discusses the issue in this video (to which I am listening right now):
If it doesn’t eliminate the confusing deductions that make the code complex, just what does a “simple” 9-9-9- accomplish at all? And you can bet that the plan would be far from revenue neutral.
As far as preferring a flat tax… I was more under the impression that he favored abolishing all income and business taxes, and just having a national sales tax. Different approach, and would require a Constitutional convention to repeal the 16th. But I don’t know… seems the more I hear him talk, and add a few more exceptions, the less simple and clear it is.
I think he’d benefit from embracing something similar to what Perry is supposed to be coming out with… altho who the heck knows what that is either until we see it. But I’m good with some bold proposals from any of them as a starting point for debate. Then they need to move on to entitlements… like that’ll happen…. LOL
Capital gains tax is not paid on the original investment amount. It is only assessed on the profits. For example you on selling stock, to subtract the original purchase amount from the amount the stock sells for, AND on dividend profits. If you are not subtracting the original investment amount, then you who is cheating yourself. If you are businessman who is not keeping proper records, you’re asking for trouble. That’s why you (and businesses) have to keep records, so that you know what was spent so that you can figure out what if any profits were made. Capital gains tax is NOT double taxation, and should not be grouped with inheritance tax, as that is comparing apples with oranges. Inheritance tax is not paid by everyone who inherits, that is a continual myth put forward by the anti-inheritance tax crowd:
@MataHarley:
It is infinitely simpler than our present tax code; and all of the taxes are out in the open and not hidden, like a portion of the FICA tax or the embedded federal taxes in goods and services.
Also, the consumption tax will ferret out money from those who, otherwise, do not pay taxes.
For me, the more good ideas, and I consider this a good idea, the better.
Just as most of us would vote for anyone but Obama; many of us would rather see anything other than our present tax code.
@John Cooper:
My memory is, a 100% consumption tax. Am I recalling that incorrectly?
@Ditto:
This tax, all by itself, is a nightmare to figure out…especially if you pay monthly into this or that mutual fund.
@Gary Kukis:
My wife and I pay capital gains nearly every year on dividends, and a few times when we have sold stock. It’s not that complicated at all for stock holders, as your brokerage provides you with all the information you need. You just plug in the numbers and do the math. I fill out our tax forms myself every year, but if you use a tax service or Turbo-tax (C) it’s even easier.
@John Cooper:
If that’s true, that’s truly insane!
@MataHarley:
It depends upon the write-offs; most of those were done in special circumstances. The sort of write-offs I take in my business would not change. They are just simple business expenses. It sounds as if I won’t have to spread out my losses over a period of time if I choose not to.
Gary, I’m not sure how you get to here from there in assuming your “simple business expense” write offs will continue. That is part of the existing tax code. And as Herman Cain, himself, points out when comparing his plan to Perry’s and Romney’s, the 9-9-9 plan scraps the current existing tax code – which includes all the write offs as we take now. Ironic since existing IRS write offs help us determine net profit. Cain’s plan is unclear about how net is determined… what will be allowed to be written off and not. After all, what is deducted today goes away with the bath water. So it’s just another not-so-clear moment of the plan.
Of course, of late, Cain’s been coming up with more added “exceptions”. But all write offs and tax credits currently in the IRS tome – which includes how you deal with loss spreads – are supposed to disappear. If it’s got an IRS before the code number, it’s gone…. in theory. Considering Congress, actually succeeding in making the entire IRS code book disappear would be an act worthy of Houdini’s applause in itself.
Perry is only unveiling his plan today, so we haven’t seen his devil in the details.
@Gary Kukis: Re: banning cash. I knew the government would try to ban cash sooner or later, but I never figured Louisiana would be the first to do so. I have said for years that if a flat tax ever becomes law, the government will have to ban cash – the reason being that people will try and get around the tax by just dealing in cash and not reporting the transaction (Think: Italy or Greece). A flat tax will of necessity usher in a police state where the subjects may neither buy nor sell without government knowledge and permission.
I can think of many things that people can now produce at home and sell for cash – firewood, for example. If someone goes out in their wood lot and cuts, splits, stacks, sells, and delivers several cords of wood, do you really think they’re going to pay a 20% flat tax on their “income”? I don’t.
@Gary Kukis:
And illegal.
In an appeal it will be overturned.
WHY?
Simple.
Printed on all paper money is this:
“Legal tender for all debts, public and private.”
There can be no exemption.
Something I think should be pointed out. If these various tax plans can be portrayed as regressive, by the Democrats and MSM, they will. This could easily end up in fueling the Dem’s class warfare campaign. If the voters are convinced that the GOP candidates all want to cut taxes for wealthiest while raising taxes even more on the lower and middle class, this issue could end up getting Obama re-elected. It is very important to make all these plans clear as day with no ambiguous hedging around. Frankly, I think it is a mistake for GOP Presidential candidates to put out their own new tax system plans, when it can only be a suggestion to Congress, and it will go against the winner in the general election. It would be better to say that they want to work with Congress to rebuild and reform the federal tax system, and state clear and firm no-compromise goals.
@Ditto, that’s a given. However any tax plan that is not progressive is, by nature and definition, regressive. So it will be a given that all plans presented by the GOP will be falling into that category, and be used by the Dems as an assault on the poor. Not a surprise, really.
IRS reform is a big issue. Unfortunately it’s as unpopular an issue as the entitlements, and career politicians are scared to death to rock the sinking boat. We could probably triage the IRS reform down if they’d actually deal with entitlement reform first. But that won’t happen either. And since they are intrinsically linked – being as more and more revenue is needed to support the increasing costs of entitlements – the GOP is going for the easier shell shock issue in IRS reform.
@Nan G, I’m not as sure as you that the LA legislation that regulates cash purchases will be repealed. It’s not an outright ban, and also re categorizes who is a professional second hand goods retailer, as opposed to a hobbyist. When I read the bill, it still allows for cash receipts under particular circumstances from those second hand vendors, but only with personal ID documentation from the purchaser.
So I was scouring around to see if any attorney, anywhere, had weighed in on LA specifically. Not that I can find yet, but give it some time…. they will eventually. Or else the lack of observations mean it’s relatively obvious that the state regulating (newly defined) second hand vendors accounting practices is well within their authority.
INRE the “legal tender” bit, there is an attorney, Adam Freedman, who did do a law-for-dummies article at the beginning of Sept 2011 about the legality of businesses refusing cash, and the meaning of “legal tender”.
Indeed, many businesses – from Apple for their iPhones to the airlines – refuse to accept the “legal tender” in cash form, but will accept that “legal tender” in another form. This is not illegal.
Now we find something slightly in reverse.. a state is mandating the conditions under which a business may accept a wad of dollars, instead of an electronic transmission of those dollars. This goes to the heart of the meaning of “legal tender”, as Freedman describes. It’d be an interesting case to examine, but I’m betting it passes the court’s smell test.
And, as @ I said in comment #85, when I linked the text to the bill and the vote, I’m not thinking that this is going to be a plus in Jindal’s column. He could veto as a matter of principle, but it wouldn’t go anywhere. You can’t blame the Dems for this one. I linked the vote there, and it was dang nigh unanimous, and more GOP co sponsors than Dems.
Ditto
yes and after they can go to what they will do for JOBS like RICK PERRY IS CONCENTRATING ON DOING
they have said enough, time to give another goodies
which is expose the DEMOCRATS
bye
@MataHarley:
Thanks for the post about legal tender and private businesses, Mata.
You are correct that, so far, government must accept dollars in payment.
Now this is a government imposing a paper trail on businesses and not an outright banning of that government in accepting paper money.
So, it is a weird case.
Eliot Ness would never had been needed if all transactions had to have a paper trail.
WaterGate would have been over in a flash, too.
So, I can see the LA lawmakers’ rationale.
A week ago an entire bridge was stolen for the recycling of its metal parts.
We have ”new” types of criminals.
Maybe the time has come for new ways to thwart them.
If this catches on I may have to get some checks printed.
Actually took more time to read the 12 pg bill that was enacted, Nan G. It is an amendment/addition to an already existing law. When you read the the bill text, you can see that most of the “cash purchases” and demands for records (for those with business locations) are directed at those acquiring and reselling the used goods. They didn’t try to aim this at garage sale shoppers, tho it does pull both a person doing a garage sale into the net if they do a garage sale more than once a month.
I’m finding it hard to tie this language to a purchaser at a garage sale tho. Unless that person is purchasing items for resale at his own (more than once a month) garage sale – thereby requiring him to get a receipt from the sellers saying he is the legal owner and the item is paid for in full – it doesn’t seem to be applicable. Also exempt are items that are under $25.
I see the intent of the law. I can also see the confusing mud it kicks up. Nothing new when it comes to the elected ones, at the state or national level.
@MataHarley:
Thanks for all the legwork, Mata.
I have a sister-in-law who not only put herself through college but has taught her three children how to do this too:
She trolled garage sales for cheap baby clothes.
She bleached and excellently cleaned them, dyed them a fresh pastel, added embroidery or edging (covering a multitude of sins) and sold them for good money at swap meets.
She could multiply her initial investment by a thousand percent!
And she had fun doing it, too.
All cash.
Legal sales at the swap meet, even paying tax and a rent for the space.
She still made out like a bandit!
Some people are just able to look at a situation and see gold in it.
Others never will.
So if she lives in Louisiana, just tell her not to get a storefront, and only one garage sale a month.. LOL But you can also see that it can be huge, unclaimed income out of the eyes of government too. Many I know on disability or SS supplement their incomes out of necessity with such under the table type ventures.
The about-to-be-viral Herman Cain ad:
http://nymag.com/daily/intel/2011/10/herman_cain_ad_smoking_cigarette.html?imw=Y&f=most-emailed-24h5
I have to be the most anti-smoking person in the world. I’ve never had a cigarette in my mouth in my life, much less taken a puff. I’m all in for the most restrictive laws against 2nd hand smoke and the highest tobacco taxes possible.
But, strange to say, I found the ad pretty darn powerful. I like it that someone actually has the guts to do something that says “I’m not going to try to be something I’m not, just so that you’ll like me. This is who I am and this is who works for me and what you see is what you are going to get.”
Refreshing, actually.
– Larry Weisenthal/Huntington Beach, CA
@Nan G: American ingenuity. 🙂 Since it’s used stuff which is being sold, it would not be affected by Cain’s plan.
Speaking of which, one of the big pluses with Cain’s plan is, a sales tax flushes out some money from those who manage to avoid taxes otherwise…illegals, drug pushers, and the like.
@openid.aol.com/runnswim:
Out of curiosity, where do you come down on the legalization of marijuana? How do you feel about states or cities banning certain kinds of unhealthful things, like transfat?
@MataHarley:
Not necessarily, a flat percentage tax on all income at all levels would be fair overall. (It may be more “regressive” than the current system, but a truly regressive tax system would tax lower and middle-classes more than the wealthiest.)
Sure, but I thought that it should be pointed out.
On the other hand I’m against any GOP plans that do not in fairness include capital gains as taxable income.
I have a question. It’s been said that Cain’s 999 is not a VAT, but in an article Cain wrote in Nov 2010, he says the following:
I’m not pleased, and actually find it very disturbing, that just under a year ago Cain claimed a national sales tax is a VAT and now he claims it isn’t. This country needs a leader who is consistant, not an on-the-job trainee.
@just me 95: OMG He was saying he does not want the VAT tax on top of the taxes we have now. His plan get rid of taxes we have now.
It is not rocket science.
@Stix: That’s a bit snarky and I don’t see a need for that. I’ve already said a few times I don’t like 999, so there’s nothing hidden here.
He doesn’t actually get rid of all the taxes we have now. His plan doesn’t include a repeal of the 16th Amendment and it reduces taxes to 9%. He gets rid of capital gains which, I believe, it’s been pointed out will be a benefit to those who live off their capital gains because they will only pay the national sales tax. He also gets rid of deductions except for donations.
My point is that either Cain understood a national sales tax worked like a VAT back then, or that he now understands a national sales tax is not a VAT. Examples here have shown a national sales tax may very well work as a VAT.
I also read this piece which gives the following example:
I’m not about to be swept away on any Cain ‘train’ just because so many others seem to be doing it. To me, it feels eerily like the Obama hype of 2008.
@just me 95: A VAT tax is a hidden tax which taxes production at several levels. Cain is proposing one tax, at the retail level only. Not the same as a VAT tax.
There are 2 more reasons to support Cain’s plan:
The 9% tax for corporations and individuals is so small that most people will do very little to circumvent that tax. If a corporation faces a 35% tax on their profits, they are going to use tax attorneys and lawyers to mitigate against this high percentage rate in any way that they can. However, for 9%, it is simply not worth the trouble.
I suspect that there are some people who hide income in order to lower their taxes; but, at 9%, there is less reason to do so.
Finally, have you seen all of the press that this $5 B of A charge got? The key was, this was a very clear charge that everyone was aware of. The same will be true of the 9% national sales tax. Having such a clear tax, out in the open is going to keep that tax low. Politicians are not going to say, “Let’s raise that to 20%” because they will not get reelected. This is why politicians LOVE hidden taxes.
@just me 95:
This is what will jump-start our economy, as it will dramatically increase the velocity of money, because more and more assets will be sold. This also favors people who are in retirement, because they often have a variety of assets which they have accumulated (stocks, bonds, properties, etc.).
When you remove the hidden taxes and when you dramatically reduce the taxation of the companies providing goods and services, that will reduce the cost of those goods and services. We do not live in a static (unchanged) world.
Changes made to the tax code will not simply change the taxing percentages and everything else stays exactly the same. This is why it is possible to lower taxes and for the revenues to the government to increase. Under a static economy, higher taxes means more revenue and lower taxes means less revenue. However, under a dynamic economy, which means, the economy changes to adjust to the changes in the tax code, the right combination can maximize both the revenue to government and maximize economic growth at the same time (in fact, these things will naturally occur hand-in-hand).
Therefore, what we want is a plan that will jump-start the economy. Keynsians believe that, if the government throws money at the economy, that will jump-start it. Obama’s massive stimulus bill has proven that to be false. Supply-siders believe that, the greater freedom individuals and businesses are afforded (which includes more money kept by the individual or business), the stronger an economy will become, which means more money sent to the government.
If you studied Calculus, there is a sweet spot for most transactions–the ideal price that will bring in the maximum amount of revenue or the ideal tax that will bring in the maximum revenue. Cain, a mathematician, believes that his 9-9-9 plan hits that sweet spot.
Gary Kukis
hi,
there is also the fact of the GOVERNMENT’S BAD SPENDING HABITS,
which is the primary problem, because no matter how the tax figured out, if it has not being balanced by a strick reduction and kept discipline of reduce GOVERNMENT SPENDING IN ALL ASPECT OF ADMINISTRATION, THERE wont be any saving for the people,
because they will take the people’s money through the regulations of the many agencies, It has to be mentionned clearly as a pair by the CANDIDATES,
so far, only RICK PERRY did it.
bye
Yes, Gary. The national sales tax is a consumption tax at the cash register. There are no exemptions at this time for food or other necessities. We can only address the plan as proposed.. not as anyone would wish it to be with add on “exemptions”… altho those seem to be appearing more and more of late.
But when you discuss VAT, you choose to only addresses one leg of 9-9-9, while ignoring the pertinent one… the 9% business transfer tax. Even Cain’s own analysis, done by Fiscal Policy Associates, calls the the BTT a VAT… where the taxable amount is obtained by subtraction – the gross, less what is paid to other businesses and dividends.
What Cain is proposing is a abolishing current methods of corporate taxation in favor of a VAT tax for business, a national sales consumption tax that we do not have now, and continued income tax, with shaved down or amended rules for credits, write offs etc.
It would be foolhardy to argue that Cain is not proposing a new tax… a national sales tax… as well as shifting businesses over to a VAT style tax, all of which will be loaded on to the back end for the consumer at the cash register.
This all lasts as long as Congress likes the numbers. Post any Cain presidency, they may do whatever a new POTUS and Congress likes, except now they have a new 3rd stream of revenue… a national sales tax… plus the dangerous VAT taxes that drive up the costs of products.
As I said, anyone in the past who has gone the proposed way of consumption taxes has done so with the intent of total elimination of the income tax. This, however, is also temporary unless you strip the Congress of their rights to reimpose it at will via the 16th. This is the first time, to my knowledge, that anyone has suggested both a VAT and a national sales tax – on top of income taxes – that hasn’t been a Democrat.
Which brings me to @Stix’s observation:
And yet, that is exactly what he is doing, Stix…. adding a VAT *plus* a national sales tax on top of what we have now. He is not getting “rid” of anything simply by changing the % collected. He is adding to it, and proposing a new way of calculation of what is taxable via regulations.
None of that is permanent, and already we’ve seen that everyone wants to cling to particular favorite write offs… interest deductions, business expenses, etal…. the same types of write offs and credits that make our current code complex.
To provide Congress with a revenue base that is comprised of a newly added VAT, a newly added national sales taxes, on top of income taxes – altered only temporarily by regulations changing the taxable amount due – is like giving them an RPG with three grenades, and hoping they won’t find the virtually unlimited grenade cache you’ve hidden in the future.
Oh yes, I remember you said above you haven’t studied the “empowerment” zones.. which are now being called “opportunity” zones, I guess. You can read more here about this. I’d say that just looking at the “opportunity zone advisory committee”, and their positions, will give you the gist of it.
Niger Innis: the National Spokesman for the Congress of Racial Equality.
Roger Campos: President & CEO of the Minority Business RoundTable (MBRT) – a CEO membership of the nation’s leading African American, Asian American, Hispanic American, and Native American businesses.
Gerardo (Jerry) H. Gonzalez: a trial attorney who specializes in diversity issues
@ilovebeeswarzone:
Absolutely, Bees, you are correct. Spending will be just as important as the tax. What Perry says about limited federal spending to 18% of the GDP would represent another sweet spot (ideally speaking). My problem with Perry, being a Texan, is two-fold: (1) he did nothing revolutionary during his time as governor; no reformation of the school system, government spending, etc. and (2) I saw no real reduction in state spending under Perry. Since I am a landlord, I can testify that we have a huge number of people getting free or nearly free housing here, when there is no reason for it. Since I used to be a teacher, I can attest to the lack of real educational reform which has taken place here. Under Bush and Perry, education costs doubled (at least) and quality went way down.
What Perry says is great. If he really intends to do all of that, I am all for him. However, when it comes to really holding to a budget, I would side more with a businessman than with a politician.
Obviously, I will vote whoever our nominee is; a box of rocks is better than Obama, and infinitely more teachable.
@MataHarley: Taxing business and corporations 9% is no more of a VAT tax than taxing them at 35%, as is done today. Technically, you could call it a VAT tax; but then so are the taxes which are paid today by businesses.
Even if I grant you that approach, those “VAT” taxes are being taken down from 35% to 9%, which would logically reduce the costs of goods and services.
I would reasonably assume, since Cain is a businessman, that normal expensing for businesses will be a part of their write-offs. The only thing that seems to be different (and I hope I am not mixing up plans now), that he would allow 100% expensing rather than requiring a person to use depreciation.
The write-offs which would be removed, I assume, are government incentives to do this, instead of that. For instance, hiring an employee who has been out of work for 6 months, has red hair and wears glasses.
But, most importantly is, these taxes are small, which makes it less likely people will try to get out of them (legally or illegally) and they are right out in the open, which will make it less likely Congress will try to change them.
What Cain is proposing is revolutionary. Whether he can sell it or not, I don’t know. But, obviously, he’s sold me on it.
Gary, standard corporate taxes, or flow thru individual income taxes are not the same as a VAT style sales/production/consumption tax that is predictable for pushing a product line down the retail chain. Final accounting for taxable income is a vague picture until the end of the taxable fiscal year. A predictable extra 9% a’top each sale is very predictable, and will be added as a cost as it moves down the line. Thus why even the Fiscal Policy Associates analysis for the Cain campaign described it as a VAT tax, derived by subtraction of investment (purchases from other business and dividends) from the gross.
I agree his proposal is bold and revolutionary. I don’t think it is wise, but I do think that Cain may be pliable for alternations for the better. And I appreciate the frank discussions on it’s structure, even tho I find them extremely flawed in concept.
The taxes being “small” doesn’t enter into the equation because taxes are only “small” for the length of time a Congress and POTUS deign to keep them small. And while they can increase income and corporate taxes at will, with this plan they can now increase three – not just two – taxes at will. And the structure will, indeed, hit the consumer the hardest and be disproportionate to the middle and lower income, who can not absorb VAT and sales consumption taxes as easily as those with higher income.
Gary Kukis
hi,
as a property owner and LANDLORD,
you have the first row of information to present your views with a logical conclusion
for other to
decide as very credible, which help many to arrive at the choice they are searching for.
thank you
I realize that corporate taxes are not the same as a VAT tax, but they are hidden taxes, nonetheless.
One of the great pluses for 9-9-9 is it applies to almost everyone and it is a transparent tax. Therefore, if a group of politicians vote for 20-20-20, that will be their last term in office. Ask Bank of America on their $5 charge. When the charge is right out there and obvious, changing it can bring grief to those who change it.