I became a big admirer of Herman Cain back in the 1990s when he was a member of the National Commission on Economic Growth and Tax Reform (aka, the Kemp Commission).
I worked as a staffer for the Commission and was able to observe Mr. Cain in action over a period of several months. Suffice to say I like what I saw. Unlike many people in DC, he is not an empty suit.
That doesn’t means he’s perfect, as illustrated by his support for the TARP bailout, but he’s definitely on the right side of the dividing line between those who want freedom and those who want statism.
And his victory in the Florida straw poll is bringing lots of deserved attention to his campaign, leading several people to ask what I think about his economic agenda.
To get right to the point, it’s a very Reaganesque package of lower taxes and more freedom that can be divided into three parts.
1. His short-run plan, which he calls the “Immediate Boost,” is to slash personal and corporate tax rates to 25 percent and eliminate the capital gains tax.
2. His intermediate plan, which he calls the “Enhanced Plan,” eliminates the death tax and the payroll tax. But the most important part is the 9-9-9 plan, which is a 9 percent tax rate on personal income, a 9 percent tax rate on corporate income, and a 9 percent national sales tax.
3. His long-run agenda, which he calls the “Fair Tax,” is to eliminate all personal and corporate income taxes and adopt a national sales tax.
This all sounds great, but let me do a bit of nit-picking. I want to focus on part 2, particularly the 9-9-9 plan.
It’s fine in theory. Heck, it’s great in theory. It means low tax rates on productive behavior. It means no double taxation of saving and investment. And it means no corrupt and inefficient loopholes.
What’s not to love about a plan that achieves all these principles?
But here’s the problem. If you happen to be one of those people (such as me) who does not trust politicians, then we run a grave risk if we ever let the crowd in Washington impose any sort of national sales tax without first getting rid of all income taxes.
I have faith that Herman Cain’s heart is in the right place, but years of experience in Washington have taught me to always assume politicians will grab more power and more money at every possible opportunity.
This is why I made this video, explaining why a national sales tax is only acceptable if the Constitution is amended to permanently bar any form of income taxation.
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.
Mr Mitchell, you are absolutely correct. While Cain’s heart may be in the right place, in four years the political climate will once again shift back to the Democrats when the voters see our county’s continuing decline due to Cain’s inexperience and lack of clear and effective foreign policy (he’ll tell you what he will do about Afghanistan AFTER he’s elected… do I hear an echo of Pelosi and the health care bill, “you’ll find out what’s in if after it’s passed” here?). Then who knows what the next Bilderberg approved puppet will do what that ‘Fair’ tax. I am also concerned that while Cain wants to tax us in two ways instead of one, he doesn’t seem to have a very clear plan on how he will reduce spending. I would put that as a more immediate cure to the economic woes than to instill more ways to tax the breaking backs of hard working Americans. Also Cain has flip flopped on several issues. For example he changes his mind on the return to the Gold Standard nearly monthly. He also seems to rely more on what his ‘advisors’ tell him instead of studying the issues himself, lending him very open to ‘advise’ from sources that will ultimately continue to undermine our Liberties. In reality, Cain is another pretty face with a professional, yet folksy demeanor but who is not a deep thinker and does not understand the root of the problems we face. Therefore, I suggest, to anyone who truly cares for this Great Country, to give a lot of thought to who can be a consistent and knowledgeable leader. That one person is Ron Paul .
A national sales tax, with or without an income tax, is unfair to anyone who has saved over his working life. Those savings were highly taxed when they were earned. A national sales tax is a further tax on saved capital, and a way to tax the delayed consumption that those savers hoped for.
It is an increased tax on retirement, unless it is adjusted to exempt savings.
Cain’s 9/9/9 plan is pure gimmickry designed to mislead people into thinking they were paying lower taxes. The 9% income tax plus 9% sales tax adds up to 18%, but corporate taxes are passed through anyway, so that really adds up to 27% more or less. Why is that better than what we have now? Also, I don’t see how we can eliminate the payroll tax under that scheme.
Government should only have the right to tax everything once, period. That would argue for a single VAT tax based on value added at each stage of production, and complete elimination of income taxes, payroll taxes, sales taxes, and death taxes. The VAT should also apply to imports — since that’s the only category that gets away scot free under the present system –despite the real cost to us in domestic employment, home grown research and development, and local and state taxes. VAT taxes collected on imports would also help reduce what we have to collect domestically and offset the competitive advantage from cheap labor markets overseas. The erosion of jobs in our economy over the last 40 to 50 years proves conclusively that free trade is killing us. Unless we can have fair trade, and control it unilaterally, America is doomed.
Estates should not be taxed at all. They are the primary source of new funds for investment and, quite often, for educating another generation as well. Further, this is money that has already been taxed.Why should government get its greedy hands on this generational transfer of family assets, when corporations are never under the same burden. To force the sale of family-owned farms or the breakup of family-owned businesses to pay estate taxes is nothing more than a very destructive tax on families themselves, whether rich poor, and an attack on a basic pillar of economic and social stability.
Finally, an even more fundamental problem is the demographic one. The 43% decline in our birth rate since 1960 implies a huge drop in demand. The one countertrend is the epidemic of obesity caused by the relative decline in population compared to food supply. Because food is still cheap, we now eat twice as much — and that’s killing us, too. Moreover, the population decline is worldwide — most notably Europe and Japan. But China’s rapidly aging population will soon go off the cliff, too, all compounded by the declining demand for Chinese goods in the West. This could happen quite suddenly and quite soon, making the present crisis seem minor by comparison. When it happens, we’re in for it..
dennis, but you would now have everyone paying not just half of the country including drug dealers hookers and illegals or just people visiting.
also the payroll tax being gone, you didnt add that into you math. you are also only taxed on what you buy, i see large purchases a problem with mindset but in the end the taxes are spread to more “tax payers”. having a small business that coughs up 80k or so in payroll tax. i would love to cut that from our overhead and add 9percent to material purchases. everyone including the corporation itself would get a raise
With a sales tax, I have a certain ability to limit the amount of tax I pay. For instance, I can buy seeds and plant a garden rather than buying food at a grocery store. I can learn to shoot and hunt. I can buy fabric and make my own clothes. I can choose to spend less on goods that I must buy.
Unfortunately, I am not in Warren Buffett’s income bracket where I can limit the taxes I pay on income by calling my income capital gains. I am also not in a position to pay lobbyists to get me special breaks from the politicians who would love to help me out, in exchange for some hefty campaign contributions.
Sadly, we will never exchange a sales tax or a flat tax for our current tax system because the only way to get the political class to relinquish its power is by a revolution, unless a miracle occurs and the American people wake up to how the political class, both Republicans and Democrats, are shafting them.
How would the National sales tax plus state & local taxes affect the auto and large items purchases? Paying 18-20% on top of a car purchase would make me think very hard about making these purchases
Maybe the cost of these big items will be reduced and the extra 9 percent will wash or even be less
If I’m not paying any income tax (and Dan is right that we cannot allow the imposition of a sales tax without the elimination, at the Constitutional amendment level, of the income tax), I can more easily afford to pay a larger sales tax on large purchases. Furthermore, I’m in control of what I pay–I can choose to buy a less expensive car. As it is, given my income and wealth, I have very little control over what I pay in taxes.
I generally agree, Dan, especially when it comes to income tax vs. tax on consumption. Living in a no-income-tax state is awesome, and taes on consumption are better for a host of reasons. Just one point: the VAT is bureaucratic, costly to handle and collect and invites fraud. I’d prefer a straight federal sales tax. But I definitely agree with all your other points.
Following my “single tax” proposal, we also need to end the fiction of Social Security and FICA as an insurance premium, when the money is just rolled over and used to pay current expenses anyway. Leading to those fictional IOU’s as well, which are simply more debt backed by the “full faith and credit” of the U.S. — bought back presumably by another generation of taxpayers. That’s the real fraud in Social Security. Best solution is to fold it all right into total taxes while maintaining the essentials of the program. Let’s face it: Social Security is welfare for the elderly because we don’t want them dying in the streets. The so-called retirement is a fiction, too. 30% of black males die before 65 after paying into SS all their working lives. Ditto for 20% of while males and 20% of black females. Raising the retirement age will simply jack those percentages up by at least 50%.
As for Charlie’s comment, by all means lets tax drug dealers, hookers, bookies, illegals or anybody making a fast buck while visiting.
“Roy:
How would the National sales tax plus state & local taxes affect the auto and large items purchases? Paying 18-20% on top of a car purchase would make me think very hard about making these purchases”
1. You would have more money because you would be paying less taxes.
2. I don’t think there would be any tax on used cars, so you could just grab one of those.
Dan, what if the “9-9-9 plan” is enacted with an automatic ten-year sunset, so that the tax structure returns to the: “phase 1″ status (on the theory that it will take ten years to get: “phase 3″ passed –if it can pass.)? That is, the 9-9-9 structure will/would be temporary whether or not “phase 3″ ever comes.
Btw, I’m not the other Charlie upthread.
You don’t want a VAT, you want the FairTax. They are similar in that they are both consumption taxes, but that’s just about it. If possible, the VAT is even more prone to corruption than the income tax. A VAT is a tax at every stage of production. It is hidden in the price of a good. Some countries show the total VAT on a sales receipt, but no country breaks down the VAT to show how much is taxed at each stage. Lobbyist can bribe politicians for exemptions, loopholes, and tax favors at every point of production. If the US passed a VAT, lobbyists and special interest groups would storm the hill faster than flies on sh…honey.
What we want is the FairTax. The FairTax is a one time tax at the point of sale. The FairTax eliminates the income tax, payroll tax, corporate tax, inheritance tax, AMT, and so on. The FairTax exempts all purchases up to the poverty level making it better for the poor. The FairTax is simple and completely transparent. No lobbyists, no special interest bribes, and no using the tax code for social engineering. It has been called the largest transfer of power from the gov’t to the people since the Declaration of Independence.
I understand what Cain is trying to do with 9-9-9. He wants to unit the Flat Taxers with the FairTaxers but it’s a bad move. He needs to dump 9-9-9 and go back to the FairTax.
FairTax: Those who Understand It, Demand It.
Inflation is the most regressive & destructive of all forms of taxation. It is the consequence of government spending directly through apportionment or subsidy & indirectly through tax or regulatory action.
Every unnecessary bomb we purchase & deploy, every subsidy or tax break we hand to a bank, grower, producer, or distributor, every unnecessary school, prison or “infrastructure” monument we build, every contract we sign to grant preferential treatment to some groups over others, every law we execute to grant preferential treatment to one special interest, and every bureaucracy we start & feed… we pay for in the price of every product we purchase. That’s what makes us poorer.
Leadership is not trying to come up with a tax scheme to finance the inflation beast. Real leaders would dramatically reduce the scope of government in exchange for a society of personal responsibility, acknowledge our old government cannot meet our past promises to our citizens & creditors and renegotiate them, let our system of intervention inflated prices deflate, and abandon central economic planning.
What tax system remains? The tax system necessary to finance a limited government with some transfers to those most vulnerable from the necessary changes. This should be able to be financed with a simple consumption & services tax and/or a limited liability organization income tax based on GAAP (we don’t need the tax code).
I live in Cook County, Illinois, just outside of Chicago. We already have a (combined local, county, state) sales tax of over 9%. I haven’t been able to get an answer on how an additional 9% national sales tax would ever fly – over 18% total, including on every part or material used to make every item? Open to clarification.
Karen, it would fly because right now you pay 40+% in income and hidden taxes (economists have shown that there are roughly 22% in hidden taxes in every good purchased). If you were able to keep every penny of your money, federal income tax free then you would have a lot more money to spend on goods and services.
Do you think a foot of salt will be enough? In addition to your “repeal and replace” the 16th amendment arguement, you would do well to look in to the need to eliminate the trade deficit.
The USA does not have a ghost of a chance of economic recovery until we tackle this problem head on. We are importing unemployment and poverty while exporting jobs and assets. Tariffs should be levied on the imports coming in from the grossly over populated countries at a level that would achieve balance. The result would be a rapid increase in manufacturing jobs in the US.
ClydeB – Two of the founding principals of the FairTax are that it had to be Border Neutral and Industry Neutral. Right now every export coming out of the US has roughly 22% hidden taxes in it, making US goods non-competitive, while at the same time untaxing imported goods. The FairTax will balance the playing field. All exported goods will be tax free, while all imported goods will have the same tax imposed on them as US goods. It will then be up to the people, not gov’t, to pick winners and losers.
With respect to manufacturing: Bill Archer, the former President of the House Ways and Means Committee, had Princeton Economists survey 500 foreign CEOs and ask them what they would do if the US passed the FairTax. 400 said their next manufacturing plant would be built in the US. The other 100 said they would move their entire company to the US. In a recent survey, economists predict that the FairTax would create 10 million jobs in just 2 years. With 15 million unemployed that would drop the unemployment rate to 3% (statistically full employment). Do your research on these comments, I’m not making them up.
FairTax: Those who Understand It, Demand It.
Excuse me, but a VAT is NOT a nondestructive tax. It’s one of the most destructive forms of taxation there is.
I think you need to do some more research on this as it allows taxation on so many levels that prices can soar, productivity diminishes and you’d need a bigger bureaucracy than the IRS to track it. It gives the government access into every level of society and encourages businesses to move jobs out of the country.
I challenge everyone to go to http://www.fairtax.org and learn about the legislation before trying to shoot down the concept. Also, where is it written in the Constitution that ANYONE should be exempt from paying their part of the government operating expense. NONE.
Rightly, the 16th amendment must be replaced with an amendment that states the Federal government shall never have the power to tax income.
There $500,000,000,000 ANNUAL compliance cost imbedded in the present IRS Code. With fair tax that goes away. Consider the 7.6 billion man-hours needed for federal tax compliance, which equates to 3.8 million full-time jobs.Those are hours of lost productivity. Fairness comes with the pre-bate distributed to each household monthly. Taxes on necessities are returned to the taxpayers. Taxes are collected ONLY one time on Retail Goods and services. Used items are exempt from any tax. Finally, there are imbedded taxes in all retail item very near the propose national retail tax rates. SO you earn a dollar and your receive that dollar without any IRS attached. Never again fear having your home or property seized and sold for non compliance. Also, we include three areas not not being used… illegal trades and transactions. the cash economy that includes illegal workers and foreign visitors. I find the idea of paying my retirement at the cash register very appealing, as I would have those pre-bate checks directly deposited into my retirement account each month.
Max Pruger – I have no quarrel with what you are saying. I still believe that very little will be gained so long as we fail to address the trade deficit and the underlying cause.
The grossly over populated countries of the world will do what ever it takes to keep as much of their population working as they possibly can because the alternative is total disaster. We are seeing the effects here in an approximately 25% underemployment figure. We have an unsustainable load on the treasury that is “peanuts” compared to what will happen in Taiwan, South Korea, Germany, Ireland, UK, China and many more if we are successful in regaining our own market for domestically produced maunfactured goods.
I’d love to see your scenario play out successfully. We can return to the level of prosperity we once had, but only with a solid maunfacturing base. Tax code manipulations, regulations tinkering and/or all of the other proposals coming out of Washington will have no beneficial effect, in my opinion.
Sam – To anyone who finds fault with the present tax scheme. Just check out a VAT scheme. You will like the present system.
The very last thing we should consider is a VAT. As you say, there are way too many ways to corrupt it.
Fair tax is the only solution.
The real issue is not income, it’s spending. Cain doesn’t talk about it. When he does, I’ll be listening.
I see you are right the income tax has to be abolished first. I like the flat tax and think a 10 10 7 would be best with 7 based on the Fair Tax. That’s because it’s a little better for the low income citizens.
Hi ClydeB – We are on the same page. The FairTax will bring the manufacturing base back to the US. Again, research Bill Archer’s comment. 500 of 500 top foreign CEOs said they would either build their next manufacturing plant in the US or move their entire company here. Every company in the world wants to be in the US but due to high corporate taxes and stringent anti-business regulations they are all forced to move out. The FairTax fixes this.
By removing the 22% hidden taxes, the FairTax will also even out the trade imbalance. There will no longer be a competitive advantage to manufacture overseas. Granted labor will still be cheaper but the cost of transportation, and doing business overseas will even things out.
Pass the FairTax and the US will once again become the best place in the world for manufacturing.
FairTax: Those who Understand It, Demand It.
Andrew_M_Garland- Your savings would never enter the picture unless you spent it, under a consumption tax or the Fair Tax scheme.
That is one of the most beneficial characteristics of the plan. Your earnings, savings, investment gains or what ever form your assets take are yours to keep. Only at the time of spending does the tax apply. Wages, dividends, interest and inheritances at 100% can certainly accumulate much more rapidly than as it is now with the present scheme.
Max Pruger – I believe that you as well as the economists are over looking or down playing the effect of the over populated countries of the world.
The situation has dramatically changed since the US was a manufacturing powerhouse and the envy of the world in our prosperity.
Per capita consumption and it effect on employment is key. Unless and until this enormous problem is addressed we will stay in economic decline. Fair tax or not. Again, in my opinion.
JSmith – Cain talks about cutting spending all the time. He talks about doing a deep dive into every single gov’t organization in order to cut fraud and waste. Every single one of them, no sacred cows. This is exactly what he did when he turned around GodFathers pizza and several other companies. He also said he would completely defund the EPA, Department of Education, along with several other agencies.
If you don’t trust politicians, why would you advocate taxes at all?
What you are telling me is that paying a “fair” tax to people you don’t trust is somehow rational.
@Sara – As much as I would like to pay no taxes, I do understand that the Federal gov’t is suppose to provide the services enumerated in the Constitution. The term “Fair” refers to the means of imposing and collecting the tax, not on what the tax is used for.
If you have a better or “fairer” way for the gov’t to provide the services they are suppose to without a tax, please post it here.
To ClydeB wrote: “Your savings would never enter the picture unless you spent it,”
What do you think savings are for? In your model, they are for keeping in the vault until you die. No. Savings are for future consumption, where they would be subject to yet another “consumption” tax of at least 10% and more like 20%.
Part of the beauty of new “consumption” taxes is that they are an implicit tax on savings. The only choice of the saver is to adjust the timing of the tax by not buying something. That is little comfort.
@Andrew – But under the FairTax, you get to choose when and how you pay the tax and unlike the income tax, you are never double taxed with the FairTax. With the FairTax, you can save and invest tax free, try that with the income tax. Only when you decide to spend the money (ie. consume) do you pay taxes. When you eliminate the income tax (typically 20%) and payroll taxes (15%) for a total increase in income of 35%, does a 20% sales tax look that bad?
Remember, it’s not about NO taxation, it’s about the fairest way to impose and collect a tax.
@Max Pruger
A Fair tax is not terrible going forward, but it also engulfs all accumulated savings which have already been taxed. Those must be exempt, or the Fair tax also taxes retirement. The Fair Tax is unfair if it is also a wealth tax.
Andrew_M_Garland – Point well taken. I should have been taking the same approach since I have very little income.
My opinions and concerns have been stated in the context of the nation and its survival, not my personal situation.
While a consumption tax will hurt me individually, I believe the present disaster is doing far greater damage and that is damage to the entire nation.
@Clyde – Make sure you understand the difference between a standard consumption tax and the FairTax. I think it is highly unlikely that you would come out worse under the FairTax. Independent economists have shown that the poor would come out roughly 40% better under the FairTax than the current system.
FairTax: Those who Understand It, Demand It.
@Max –
I suspect you are talking about the working poor.
The point Andrew and I share is that we realize no benefit from the elimination of the payroll and wage taxes. Again, hypothetically, we only have savings.
Our concern is what happens when we spend our savings. The pre-bate that is built in to the Fair Tax plan (assuming it would stay in the final bill) would give us some protection, but in reality, we, individually, will probably not benefit from the Fair tax.
To all –
My compliments to each and every commentator. Your civility, respect and common decency transcend that of every group I’ve seen posting on any subject, bar none.
Thanks.
@Clyde – I’m referring to retired as well as the working elderly. I recommend you go to the Fairtax (dot) org site and enter your information into the calculator. I think you will find that you will still be better off under the FairTax than the current system. Also, below I posted the FAQ regarding the FT and senior citizens.
What about senior citizens, retired people, and anyone on a fixed income?
As a group, seniors do very well under the FairTax. Low-income seniors are much better off under the FairTax than under the current income tax system.
Some erroneously believe that people who live exclusively on Social Security pay no taxes. They may not know it, but they are paying hidden corporate income taxes and employer payroll taxes whenever they buy anything. Under the FairTax, seniors pay $0.23 out of every dollar they choose to spend on new goods and services.
Plus, seniors, like everyone else, receive a monthly prebate, in advance of purchases, for taxes paid on the cost of necessities which more than pays for all of the taxes they would pay if they received the average Social Security benefit amount and spent it all. If seniors choose to work, they are freed from regressive payroll taxes, the federal income tax on wages, and the compliance burdens associated with each. They pay no more hidden taxes on goods or services, and used goods are tax free. There is no income tax on their Social Security benefits.
The income tax imposed on investment income and pension benefits or IRA withdrawals is repealed. Pension funds, IRAs, and 401(k) plans had assets of $12 trillion in 2004. An income tax deduction was taken for contributions to most of these plans. All beneficiaries and owners of these plans expected to pay income tax on them upon withdrawal, but are not required to do so under the FairTax.
All owners of existing homes experience large capital gains due to the repeal of the income tax and implementation of the FairTax Plan. Seniors have dramatically higher home ownership rates than other age groups (81 percent for seniors compared to 65 percent on average). Homes are often a family’s largest asset. Gains are likely to be in the range of 20 percent.
The FairTax makes the economy much more dynamic and prosperous. Consequently, federal tax revenues grow. This makes it less likely that federal budget pressures require Medicare or Social Security benefit cuts.
@Max –
Great food for thought. The next hill to climb is to get the legislation introduced without it being watered down, critical components removed and/or insistence on retaining the 16th amendment.
Passed as written and implemented in its entirity would be a tremendous achievement.
We still need the jobs that imports are syphoning off to really make things work.
And guess who wants to do just that (get rid of the income tax completely) and happens to ALSO be running for president RIGHT NOW? Ron Paul.
@Sara: “Government, even in its best state, is but a necessary evil; in its worst state, an intolerable one.” – Thomas Paine
So, yes, government is necessary. Our Constitution was designed to limit the potential devastation of a corrupt, out-of-control government, but that Constitution has been itself corrupted by the legal system, by lawyers who have found a way to benefit themselves at the expense of the country.
Still, there are certain things that the federal government must do, and having a sales tax rather than an income tax limits the power of Congress (which is why we will probably never see a sales tax replace the income tax).
Of course, if we were able to move to a sales tax, there would be less attraction in becoming a senator or representative. If we could force Congress to cut its incredible benefits, that would also remove the sharks who see government as a means to enrich themselves.
The income tax is a form of power, and it is power that corrupts, not money (except in that money is a form or means of power). That is reason enough why we should have a sales tax instead.
I could never support Cain due to his pro-bailout advocacy and refusal to answer anything on foreign policy.
[…] This Dan Mitchell post led me to this one, where I learned: I’ve already said nice things about Herman Cain, but someone needs to ask him whether he still thinks TARP was a good idea, as he wrote back in 2008. […]
I dislike the FairTax idea. The biggest turn-off for me is the “prebate.” I just think that sending every person in the country a monthly check is clunky and just plain stupid. Of all the states that operate off a sales tax and no income tax, how many of them send out a prebate check to every state citizen every month? Yeah, I can’t think of one either.
If they scrapped that portion I could get behind it.
Jobber, are you an anti-FairTax troll? This is the exact same wording and I mean verbatim, other trolls have posted on other FairTax sites. The Prebate guarantees that no one pays taxes on essential goods and services up to the poverty level. The Prebate is equivalent to exempting the first 20,000 in income under an income tax, however since the gov’t will no longer be able to reach into your paycheck and forcefully remove funds, a monthly transfer is the easiest way to do this.
They just want to make people dependent on that monthly prebate check. It’s like a discount coupon.
@Dennis – Just curious, if we switched to a flat tax, do you think a certain amount of income (say the first $10K or $20K) should be exempt from income taxes or should people start paying taxes on the first dollar they earned?
My personal opinion is that I’m fine with eliminating the Prebate but I make a decent amount of money, so it won’t make much of a difference to me. The Prebate was included to add progressivity to the FairTax and exempt the truly poor from having to pay taxes. Do you think the truly poor who live at or below the poverty line should have to pay taxes?
[…] fiscal heroin to the welfare-staters, earmarkers, and subsidizers. As the Cato Institute’s Dan Mitchell explains, "we run a grave risk if we ever let the crowd in Washington impose any sort of national sales […]
Whoa, Dennis Howard. You said “Social Security is welfare for the elderly because we don’t want them dying in the streets”. Whats up with that commet? I wish I could have opted out of the SS system and invested my own money rather than have the government take it and use it for other purposes. SS is not welfare. If an insurance company sold an annuity, failed to establish appropriate reserves. and used the money for other purposes, they would be put out of business. SS is not an entitlement; it is money returned to depositers.
I love this message. But I have to suggest this message should put into the big picture or prospect of true democracy and anti-political-corruption in the economic terms.
Terrorism can be eliminated more effectively by financial means. The political corruption in USA democratic systems are doing more harm to USA citizens than all those violences against them in combination. In fact, IRA has killed more Americans directly or indirectly than all the wars can do in combination during last half century, considering TAX system is too complex for average Americans to deal with correctly.
I love this message. But I have to suggest this message should put into the big picture or prospect of true democracy and anti-political-corruption in the economic terms.
Terrorism can be eliminated more effectively by financial means. The political corruption in USA democratic systems are doing more harm to USA citizens than all those violences against them in combination. In fact, IRS has killed more Americans directly or indirectly than all the wars can do in combination during last half century, considering TAX system is too complex for average Americans to deal with correctly.
Social Security has been constantly robbed by the corruptive politicians at DC from beginning.
There must be a grass-root campaign to educate every American citizen how to eliminate the political corruption in DC, using the economic means and ways.
Tea-party did that because they are puppetted by another special interest group who needs DC them a favor of economy, in terms of tax and grants.
There must be a grass-root campaign to educate every American citizen how to eliminate the political corruption in DC, using the economic means and ways.
Tea-party did not do that because they are puppetted by another special interest group who needs DC them a favor of economy, in terms of tax and grants.
@Lowell You say “If an insurance company sold an annuity, failed to establish appropriate reserves. and used the money for other purposes, they would be put out of business. SS is not an entitlement; it is money returned to depositers.”
Of course, that’s the lie they use sell SS to the taxpayer, but if any insurance company used the SS premium money the way the government uses SS receipts, its board of directors would all be in jail. They’ve turned it into a shell game. Both sides do it.
Like the lie that the poor pay no taxes, when in fact SS security is a tax on their first dollar earned. New retirees in places like New York can end up with an 80% marginal tax rate. I know because it happened to me. They take back 50% on any excess you earn. If you are self-employed, you also pay 16% on those same bucks, plus NY city and state taxes on top of that. Then add city and state sales taxes. It may have been 90%! And that’s how they treat the recently retired.
Meanwhile, 30% of black males and 20% of white males and 20% of black females die before 65. All their heirs get is $255 death “benefit,” which wouldn’t bury anyone in a potter’s field. I know one poor guy who lost both parents at 65, and had to beg and borrow the money he needed to pay for their funerals. And he was unemployed at the time!
The obvious, honest solution is a genuine retirement account that will have real value when someone dies, and the money goes to heirs who can then afford a decent funeral.
There is also serious inequity in the current system for families. Large families leave a huge benefit to society. At 92, my mother was getting a lousy $1000 a month from SS, while she had 22 children and grandchildren together contributing about $7000 a month into the system — in effect subsidizing 6 other people who left no children at all.
A childless couple who both have successful careers (and pensions in addition to SS) can live very well, while investing in no progeny to contribute to the next generation. While the father of 12 who dies of a stroke at 48 leaves his family in poverty. (An actual case.) God bless them, they still turned out well, but one can hardly say our system took care of them. Were it not for charitable friends, that family would have gone to pieces.
And what kind of man was their father? I knew him well, and his exemplary life should have earned him canonization, but his church didn’t think enough of him to even give him a eulogy. Obviously, no “system” can remedy such tragedies, but surely we are a cold, heartless society that can tolerate freeloaders up the gazoo and abandon the genuinely needy.
My point about Social Security was that we might as well consider SS premiums as taxes, and avoid both the con game and the lie that the poor pay no taxes. A graduated income tax going from 10% to 50% for those making a million or more a year would be fine with me, and skip the garbage.
Or convert SS into a genuine retirement program with all its revenues invested in the private sector and kept totally separate from grubby government hands. Add a fair tax on top of that, and there would be a chance that we might become an honest nation again.
[…] fiscal heroin to the welfare-staters, earmarkers, and subsidizers. As the Cato Institute’s Dan Mitchell explains, “we run a grave risk if we ever let the crowd in Washington impose any sort of national […]
[…] This all sounds great, but let me do a bit of nit-picking. I want to focus [on] the 9-9-9 plan.[H]ere’s the problem. If you happen to be one of those people (such as me) who does not trust politicians, then we run a grave risk if we ever let the crowd in Washington impose any sort of national sales tax without first getting rid of all income taxes. Read the article… […]
Its funny how the wealthy complain of an estate tax but from experience in the financial industry that majority of people that would have their estate taxed usually have money that have not been taxed at all and the government has given them “loopholes” to avoid taxation while living. the estate tax is a way to capture that money at death. there are ways to get around that. The smart ones buy life insurance to cover the taxable portion of the estate and more because the death benefit is transferred TAX FREE. A lot less money would be paid into the policy than paid out in taxed. its called Leverage. And I don’t understand why people think the capital gains tax is double taxation!? you pay regular income tax money on money invested and you pay a smaller tax on the interest earned. That money has not been taxed, so it is not a double tax. The interest is still considered income but taxed less so I don’t see that as being a bad thing.
Thanks for this entry. Your video was great but I wish you would’ve gone into a little more detail about Herman Cains plan in your writing.
Honestly, you really should discourage the 9-9-9 plan as it would be disastrous for some markets. It would not be implemented in the ideal way and we’d see prices for some very common goods go through the roof.
I would take Ron Paul any day to Herman Cain as Ron Paul actually saw the economic collapse coming, that is, he predicted it years in advance. Herman Cain gave the economy a “Clean Bill of Health” in 2007.
Ron Paul 2012
[…] like the overall approach of Herman Cain’s 9-9-9 tax plan. As I recently wrote, it focuses on lower tax rates, elimination of double taxation, and repeal of corrupt and […]
Then tell me, what objection, if any, do you have to Dr. Paul’s position that the best flat tax is 0%, and the IRS should be abolished? I don’t think Mr. Cain’s heart is in the right place. I think he left his heart in Kansas, with the FED. The FED is a banking cartel and they do not have my interest at heart. They have the interests of people like Goldman-Sachs at heart. I don’t know about you, but I didn’t get any bailout or TARP money forced on me as Wells Fargo did. I like the Constitution. I like the Constitutional idea that gold and silver is legal tender and that Congress should be minting our money.
If the tax revenue problem is with the wealthy’s ability to avoid paying taxes through loopholes, that flat 9% closes those loopholes. If the problem is that the middle class pays a real (and not nominal) tax rate of up to 11%, then the 9% gives some relief. If the problem is that the “poor” get tax rebates without ever having to pay one red cent into taxes, the 9% takes care of that.
The 9% sales tax is controlled by you, the consumer. The business 9%, well, I can’t speak to that because I don’t know enough of about that to even make some pedistrian opinion. I would imagine that some very large corporations want Cain to shut and some small business (those who actually PAY business taxes) are cheering about any break in taxes.
[…] Bartlett and Williamson make excellent points. As The Cato Institute’s Dan Mitchell has noted, imposing a national sales tax on top of an income tax would be an invitation to disaster […]
I agree wholeheartedly Lillian. For the life of me I can’t understand why any Libertarian would not give Ron Paul 100% of their support and even consider Cain.
[…] like the overall approach of Herman Cain’s 9-9-9 tax plan. As I recently wrote, it focuses on lower tax rates, elimination of double taxation, and repeal of corrupt and […]
Today, 9-9-9. Tomorrow, 10-10-10. Next week, 15-20-30. Next month, 20-25-35. Next year, 50-50-50.
I am really amazed how the government has convinced all of you that it is all holy and righteous … as long as you are all paying your “fair share”. But then again, it is not so amazing when one considers that the New AmeriKans have been acclimatized to Marxist foundations. And you’ll all still being paying off the interest a zillion years from now.
I love how the Fair Tax puts US companies on an even playing field. But with the need for a Constitutional Amendment and taxing everyone’s savings I don’t think it’s practical. Fortunately, I have figured out a way to have the exact same effect!
First, eliminate the corporate income tax. This is a no-brainer. If you want to tax rich people, that’s one thing, but don’t tax people producing goods and services.
Second, put a tax on all products coming from another country based on the difference between their sales tax (or final sale portion of the VAT) and the average sales tax in America (taking into account state and local). I believe in free trade and would sign a fair free trade agreement in a second but until then we have to be on a level playing field.
American companies would then have no corporate taxes and foreign companies would have to pay the same sales tax to our government as US companies have to pay to foreign governments.
Add the Paul Ryan personal income tax plan. Privatize social security. Voucherize Medicare and Education. Stop all federal spending not in Article I Section 8 of the Constitution.
Economy fixed.
[…] Herman Cain’s 9-9-9 Plan Is Great in Theory, but… Look Before You Leap on Cain’s 9-9-9 Tax Plan Cain’s ‘9-9-9′ tax reform plan under fire from both left and right Herman Cain’s 9-9-9 economic plan gets lukewarm reviews from conservatives — and a Cain consultant Daniel J. Mitchell at CATO Institute […]
Anything is better than Obama. The economy is in such terrible shape, we need a bold plan to get back on track. Instead of nitpicking Cain’s plan, I am wlling to take a chance on him & hope other voters will have the courage to do so too. Any of the potential gop nominees would be good for the economy, compared to Obama, but why not shoot for great. Beat Obama with a Cain 9-9-9
I have concerns about the 9-9-9 plan.
I agree with you. I don’t trust govt anymore on anything.
I live in IL in suburb of Chicago. When we buy cars right now the local IL state sales taxes in cook country are 10.5 %. If they add 9% more a car would have a 20% tax. Do not forget that EACH time a car is sold (used cars) would also have the same sales tax. People need cars. This will be a huge burden on a lot of people.
I am on SS and DO NOT have any GOLD plated retirement plans.
fw – you seem to forget that the income tax will be lowered to 9% and the payroll tax will be completely removed. In addition, only new goods and services will be taxed, used goods won’t.
IL taxes used cars. New goods is a question also. When Ford makes car will 9% tax apply to dealer who will then pass it on to public when they buy it.
Once tax is in govt ALWAYS raises it. Like to home sales.
The little people, retired come to mind will be crushed by this. Many retired people do not pay much in taxes any way.
hi FW – sorry, I think I was unclear. The national sales tax has nothing to do with state taxes. There will be no 9% tax on used cars in IL. If however, IL wants to keep their sales tax they can but that’s independent of Cain’s plan.
You think that little people and retirees don’t pay much in taxes but you are wrong. You are paying all the hidden taxes that are included in the price of a goods and services. You mention cars so let me give you an example. Goodyear makes tires for a car. GoodYear pays their employees and pays the federal payroll tax of 15%. That tax is included in the cost of a tire when they sell it to the manufacture. This holds true with every single part made for a car. All these parts cost more because of gov’t taxes. Once the manufacturer gets all those parts they pay people to put them together. Once again, each employee has to pay payroll taxes which is then added to the price of a car. Finally when the end user buys the car all those payroll taxes and income taxes and hidden gov’t taxes are all included in the price of a car.
So in reality, every single consumer pays lots and lots of hidden taxes.
I like Bachman’s suggestion. Turn it upside down to 6 6 6. If 9 9 9 would pull in 18% of GDP, 6 6 6 would pull in 12%. That looks like a better number to me. Less government means less that the government can do to me. I have not noticed and propensity for the government to do for me.
Herman Cain spoke at the “Faith & Freedom” rally in Central Ohio this past Thursday. We have a story up on our website and exclusive video of the event, as we were in attendance. I don’t want to spam, but if you would like a link I would be happy to post it. Mr. Cain was well received by the “values voters” and shared some of what he has learned in his life with regard to his faith.
[…] bad part, as I explain here, is that Cain would let politicians impose a national sales tax at the same time as an income […]
[…] Herman Cain’s 9-9-9 Plan Is Great in Theory, but… […]
[…] like the overall approach of Herman Cain’s 9-9-9 tax plan. As I recently wrote [1], it focuses on lower tax rates, elimination of double taxation, and repeal of corrupt and […]
[…] like the overall approach of Herman Cain’s 9-9-9 tax plan. As I recently wrote, it focuses on lower tax rates, elimination of double taxation, and repeal of corrupt and […]
[…] bad part, as I explain here, is that Cain would let politicians impose a national sales tax at the same time as an income […]
[…] I prefer the flat tax. The 9-9-9 plan combines a 9 percent flat tax with a 9 percent VAT and a 9 percent national sales tax, and I don’t trust that politicians will keep the rates at 9 […]
[…] I prefer the flat tax. The 9-9-9 plan combines a 9 percent flat tax with a 9 percent VAT and a 9 percent national sales tax, and I don’t trust that politicians will keep the rates at 9 […]
[…] I prefer the flat tax. The 9-9-9 plan combines a 9 percent flat tax with a 9 percent VAT and a 9 percent national sales tax, and I don’t trust that politicians will keep the rates at 9 […]
[…] a prosaic tax. The 9-9-9 devise combines a 9 percent prosaic taxation with a 9 percent VAT and a 9 percent inhabitant sales tax, and we don’t trust that politicians will keep a rates during 9 […]
yes!it is your modified adjusted gross that they look at for ROTH contributions.