Cain's '9-9-9' tax reform plan will hurt the poor and middle class

The more you read about Herman Cain's 9-9-9 Tax Reform Plan, the more you realize it is a gimmick for now and would open the door to more taxes not less.  In fact, the two groups hurt the most by this plan are the poor and a lot of the middle class.  Who benefits?  The wealthy.  There are not exemptions to the Cain sales tax plan so you when go buy a gallon of milk you can add on 9% and if you live in a state that taxes groceries, your 8.25% sales tax you are already paying is now going to be 17.25% to buy a gallon of milk.  On my receipt from Walmart, I paid $8.27 in state/local sales tax and under the Cain plan I would be paying $15.09 on a bill that was $87.50.  That means almost 1/5th of my bill would go to sales tax under the Cain plan.

As it stands, the 9-9-9 plan scraps a host of taxes already on the books – including levies on dividends and capital gains, the estate tax and the payroll tax, which funds Social Security.

Where is all this money going to come from to keep Social Security solvent?  There is no plan to make up the deficit for Social Security and Medicare which now is at 15% split between the employee and the employer.  You are going to add 9% sales tax, cut the tax code, and do away with the employment tax?  Give me a break as this should make no sense to anyone who thinks.

No Thank You!  This was obviously not well thought out as most gimmicks like this with the title 9-9-9 or 0-0-0 are as they are rushed to get out in the public domain during election cycles and then crawl back under a rock waiting for the next power point presentation in the next election cycle.  Don't candidates ever both to actually study a plan before they release it to the public?  When I first saw that Cain wanted this plan in addition to the income tax at a lower rate, was going no way.  Guess he forgot about our local sales tax since he probably doesn't do a lot of shopping.  On my budget, it is a non-starter!

This Cain Plan is getting hit from both sides and the article that struck me the most was from someone who had worked for Herman Cain.  He likes him but this knows this plan is a non-starter as long as we have the income tax.  Daniel Mitchell had this to say:

Let me put it more bluntly. A national sales tax – such as a Fair Tax or a VAT – would be a less destructive way of raising revenue than the current tax system. 

But any form of national sales tax, if imposed on top of the income tax, would be a disaster. The experience of Europe shows that national sales tax are a money machine for big government. 

This is why a national sales tax can only be put on the table after the income tax is repealed. But since I don’t trust politicians, we need to also amend the Constitution to repeal the 16th Amendment that allowed income taxes. 

But since many Supreme Court Justices seem oblivious to the Constitution, we would actually need to replace the 16th Amendment with a new amendment that is completely unambiguous about banning any tax on income in perpetuity. 

In other words, the income tax needs to be sealed in a lead vault, buried under 10 feet of concrete, and then covered by a foot of salt so nothing can ever grow back to haunt the American people. 

Once these things happen, then we can adopt a national sales tax. See, I can be open-minded and reasonable.

Like Mitchell, I don't trust politicians in DC when it comes to my tax money and how they think they know better how to spend it then I do.  I don't get this plan as those who can afford it the least are hit the hardest and  to those with a lot of money, it is a drop in the bucket.  When you lower the tax rate and take away all the deductions, those people paying taxes at a 15% rate jump to 18% and with no deductions so the amount they pay will be much more.  The middle class gets clobbered.

Instead of gimmicks and fancy names like 9-9-9 that people liked without reading the details in a poll, give us some real tax reform and close the loopholes.  On the other hand, I don't believe in giving back tax dollars as part of earned income tax credit which is a refundable federal income tax credit for low to moderate income working individuals who get back more than they pay into IRS. That makes no sense.  There is so much that can be done to close the loopholes and streamline the tax code which is where the emphasis needs to be.

Does Cain realize that income tax is part of the Constitution?  With that you would have to get an amendment to destroy it before any plan like this would work.  Frankly we don't believe that is ever going to happen so this gimmick is just another in a long line of gimmicks that won't work until the Income Tax is repealed.  Once again another candidate, another non starter for a tax plan.

Rick Santorum is right on his analysis that Pelosi and Reid will turn 9% into 19% because he understands how DC works which is why having someone with no experience to speak of in Government should be a non-starter for a candidate.  There is no track record for Cain who said this spring he will sign no bill over 4-5 pages which shows a lack of knowledge how Government works.  All we know about his executive experience is that he made a profit with the Godfather Pizza Chain not by improving the chain but by cutting over 50% of the pizza places (Aiming to cut costs, Cain, over a 14-month period, reduced the company from 911 stores to 420 putting a lot of young people out of work.  Domino's has taken a different track to become profitable by improving their product not closing a group of pizza places.

Now we have the Cain tax plan that frankly is DOA when you have people in Congress who cannot be trusted as those who understand government know this will open up a new revenue of spending by the liberals while still keeping the tax code.  Naive is the word we would use for this plan as witnessed by Cain's own remarks:

Cain has also given more detailed rebuttals to the charge that his plan would give Democrats an opening to raise taxes, suggesting that critics were using tired assumptions about his proposals. The candidate also says that, as part of implementing 9-9-9, he would ask lawmakers to require  a two-thirds vote to make changes to the plan.

Cain honestly thinks that he can get a 2/3's vote required to make changes in his plan?  IOTW, it is his way or no way with the plan as he wants no changes.  Seems we have heard that one before.  The more I hear, the less I like for his plans for 9-9-9 along with Cain's plan to get it passed.  

Cain's '9-9-9' tax reform plan under fire from both left and rightBy Bernie Becker - 10/09/11 03:34 PM ET 

With Herman Cain surging up Republican presidential polls in recent weeks, his plan to dramatically overhaul the tax code is starting to attract questions – even from fellow conservatives.

Cain’s so-called “9-9-9” plan has liberals and tax analysts worried that the plan would not take in enough revenue, and that it would cause lower- and middle-income families to pay more.

But conservatives have a different concern – that Cain’s plan to install a 9 percent national sales tax, paired with income and corporate taxes at that same rate, would give Democrats a brand new tax stream to try to squeeze out more revenue.

Cain’s rivals for the Republican nomination, like former Sen. Rick Santorum of Pennsylvania, are not the only ones expressing that concern. Even Grover Norquist’s Americans for Tax Reform (ATR), while saying there is a lot to like about the 9-9-9 plan, says the idea could give liberals a chance to expand the nation’s revenue base.

“All Mr. Cain’s plan does is establish a new tax on the American people and, while a 9 percent tax may pass the Congress, Harry Reid and Nancy Pelosi will waste no time making 9 percent into 19 percent,” Santorum told The Washington Post. 

As for ATR, Ryan Ellis, the group’s tax policy director, said Cain’s plan to tax more on the consumption side was a positive step. But Ellis also worried that, if a new national sales tax was implemented, Democrats would try to use it to expand the scope of the federal government.

“The national sales tax in ‘9-9-9’ would be used by the left to be that new source of money if given the opportunity,” Ellis said. 

Meanwhile, Cain, who wowed the crowd at the Values Voter Summit on Friday, has tried to brush aside the critics.

The former Godfather’s Pizza chief executive told the social conservative conference – which shouted “9! 9! 9!” in unison with Cain during his Friday speech – that the potshots come with his new territory as a presidential front-runner.

“I'm just saying, you get this bull's-eye on your back,” Cain said. 

(snip) 

As it stands, the 9-9-9 plan scraps a host of taxes already on the books – including levies on dividends and capital gains, the estate tax and the payroll tax, which funds Social Security.
On his website, the Cain campaign also says the candidate would like to eventually put the Fair Tax into place in the U.S., which would completely eliminate the corporate and individual income taxes and implement a much broader national sales tax.

But while the Fair Tax proposal includes rebates for purchases on “basic necessities,” the 9-9-9 plan as described on Cain’s website does not mention any exception for food, clothing or other household goods.

Still, the 9-9-9 plan would allow for a few deductions, including on charitable contributions and for businesses’ capital investments.

Cain’s proposals come as at least some Republican candidates aren’t ready to totally shut the door on a consumption tax.

“The idea of a national sales tax or a consumption tax has a lot to go for it,” former Gov. Mitt Romney of Massachusetts said at a September debate. (Romney did add that he thought the Fair Tax disproportionately burdened the middle class.) 

But Curtis Dubay of the Heritage Foundation says many conservatives would not feel comfortable with a national sales tax unless the 16th Amendment, which established the income tax, was repealed, to totally cut off that vein of revenue.

Dubay also said he would be concerned about allowing a new stream of revenue with the current entitlement structure in place, given that officials in both parties have said that programs like Medicare and Medicaid need to be restructured.

“Having an easy ability to raise new revenue gives members of Congress the incentive not to really deal with the problems,” said Dubay, a senior policy analyst at Heritage. “That’s a fool’s errand.” 

For his part, Cain has said that his 9-9-9 plan was structured to be revenue-neutral, but some analysts have questioned that assertion.

For instance, the liberal Center for American Progress said that, based on 2007 data, Cain’s proposals would bring in far fewer tax dollars than the current system. And Bloomberg said that, based on 2010 information, 9-9-9 would have brought in close to $2 trillion, compared to the government’s actual collections of $2.2 trillion.

Cain has dismissed claims that his plan would be regressive as well, noting that the payroll tax, which 9-9-9 eliminates, takes up a large chunk of taxes paid by the lower and middle class.

But Roberton Williams of the Urban-Brookings Tax Policy Center, which is also working on an analysis of the Cain plan, isn’t buying that stance. 

“This plan very likely shifts more of the tax burden away from the rich and toward the poor,” Williams said.   

Excerpt:  Read More at The Hill

Unfortunately, I would agree with Williams that it shifts the tax burden away from the rich and toward the poor.  Doesn't take a genius to figure out when you pay no sales tax on milk in some states and now you would be paying 9% that it will hurt the poor and the elderly the most.

This is a gimmick like so many others because without the tax code being repealed, it won't work and will cost the poor and middle class a lot more money.