You have to give Caine this: he understands sloganeering and how to use it effectively, and his “plan” does what Regressives love most to do — it redistributes still more money from poor, working class, and middle class people to the already-rich.

There is no such thing as the 9-9-9 tax

by Ezra Klein

Let’s get something straight: There is no 9-9-9 plan. Not, at least, in the sense that most people think there is.

Herman Cain has not proposed three entirely separate taxes — one a 9 percent corporate income tax, another a 9 percent consumption tax, and then a final 9 percent personal income tax. Rather, he has proposed an 18-9 plan: an 18 percent consumption tax and a 9 percent personal income tax. Or maybe he has proposed a 27 plan: a straight 27 percent payroll tax on wage income. Depends on which tax professor you ask and how deep into the details you want to go.

As Daniel Shaviro, a tax professor at New York University, notes, “a key part of 9-9-9’s intuitive appeal is the idea that, not only is 9 a low number, but the plan’s three 9’s appear to be spread out.” The only problem? The business tax and the sales tax are “effectively the same tax.”

The business tax is not a corporate income tax. It’s essentially a value-added tax. And a value-added tax is simply a form of a consumption tax. To tax wonks, this is comedy gold. Here they have spent years arguing whether a sales tax or a VAT tax is the better way to tax consumption, and Cain just went ahead and put both taxes in his plan. “So two of the 9’s in the Cain plan are simply redundant versions of almost the same thing,” writes Shaviro. That’s how you get to an 18 percent consumption tax.

But if you go deeper with the tax wonks, they’ll tell you that in the long run, all income is spent. This is the really long run we’re talking about here, to be fair. This is a long run that can last multiple lifetimes, as a father passes on savings to his more spendthrift kids, who hand it over to their more spendthrift kids. But in that world, Shaviro says, “a wage and a consumption tax are ultimately the same. Wages are ultimately spent. I guess you could burn your wages. but otherwise, you’ll spend them.”

That’s how USC tax professor Edward Kleinbard, in an extremely thorough analysis, can conclude that “the 9-9-9 thus replaces current law’s payroll tax and income tax with a new system that is the economic equivalent of a 27 percent payroll tax on employees.”

Yikes. It’s fairly well understood that in our current tax system, the income tax is progressive, in that the rich pay more and the poor pay less, and the payroll tax is regressive. Cain’s system is that system on steroids: There’s no longer a progressive income tax; all there is is a regressive payroll tax. A huge regressive payroll tax. “The 9-9-9 Plan would mean a huge tax hike for the working poor and middle class,” writes Kleinbard. Bruce Bartlett makes it even more straightforward: “The 47 percent of tax filers who now pay no federal income taxes will pay 9 percent on their total income,” not to mention another 18 percent on the goods they purchase.

So what does Cain say about this? Well, usually he deflects the question. But my colleague Jennifer Rubin got his economic adviser Rich Lowrie to confront it directly. And Lowrie says that this just wasn’t something he or Cain was interested in when developing the 9-9-9 plan. He called it “Washington thinking” to worry about who would pay how much under the new system, and he “repeatedly refused to say how much more of the tax burden would be borne by the poor and middle class.”

There are other problems and oddities in the plan. For instance: Cain says it’s just a step on the way to implementing “the FairTax” proposal. But as Bartlett writes, “whatever one thinks of the Fair Tax, it makes not the slightest bit of sense to have a plan that requires fundamental changes to the federal tax system twice to achieve its objective.”

Moreover, the plan has all sorts of inconsistencies, obvious oversights and simple mistakes: Cain’s plan doesn’t allow employers to deduct the cost of their wages; he does allow them to make a tax shelter out of borrowing money to pay dividends; and he uses a sales tax, which is notoriously easy to game. Indeed, the plan’s holes loom so large that Kleinbard, in a dryly humorous section, explains that he’ll pass on assessing portions of the plan, such as its treatment of interest income, because he assumes they are an “inadvertent error.” The opportunities for tax evasion would be dramatic.

Which gets to perhaps the main way in which there is no 9-9-9 plan: This plan wouldn’t work. Not as policy and, as I expect Cain will soon find out, not as politics. Moving to an 18 percent consumption tax is, among other things, very bad for older voters, who make up a substantial portion of the Tea Party base. Jacking up taxes on the poor and the middle class even as you sharply reduce them on the rich and completely eliminate them on overseas income for corporations isn’t popular among anyone in the political system who isn’t specifically paid by the Club for Growth. The 9-9-9 plan is a great slogan. But the more seriously Cain gets taken, the more seriously the plan is going to get taken. And as that happens, it will soon become clear that it’s very poor policy.

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36 Responses to “Cain’s Regressive Plan”

  1. We bash capitalism but have corporatism. We fight wars for peace. We violate to protect We spend $ to save.

  2. Moore has it wrong tho – he is talking about capitalism but what we have is corporatism & crony capitalism.

  3. must not refer to republicans by that name anymore we must now call them the new fascist Corporate Corporatism Fascism

  4. lafflatime mohishmerg says:

    Find out about the Federal Reserve System. Why you do that RIGHT NOW? It is how YOUR MONEY works!!!! Turn off the TV & Read!!

  5. bommers ard says:

    Lower rates for young women tied to economy rates for the nation’s youngest mothers hit new lows last year – evidence that few forms of –

  6. sauni baldo says:

    And then at the end of the video I see an ad from “International Fellowship of Christians and Jews” for Israel nationalism. Funny how ads work….

  7. I do not believe there would be a cost of taxpayers money to audit such government agencies/bureaucrats. I do believe massive spending from federal government is causing US indebted, and of course massive spending cuts could the enormous deficits. But what I would like to see is to cuts an enormous amount of spending and eliminate the entire federal government agencies and foreign policy should be done thoroughly in the US Constitution, no more else! No more sissy stuff like lobbyists do!

  8. okay people put on your thinking caps, jewish conspiracy aside this all makes sense to me. you can trace these things to the news, shows, cases, etc. now i believe all Jews everywhere want to take over the world , you have some elitist guys who happen to be Jewish who happen to be involved, but as a majority no…the people we preach hate about here in the U.S. are….Muslims, and patriot/protest groups. it. dont expect Jews to be rounded up, happen right now.

  9. The American people have been offered two lousy choices. One, which is corporatism, a fascist type of approach, or socialist

  10. lironn ostani says:

    I’m opposed to corporatism in all its multifarious forms. Except for when it throws the type of Xmas I’ve enjoyed tonight.

  11. lavell danfielen says:

    Police forces in the US state of Colorado have dismantled the Occupy Denver encampment, evicting anti-corporatism protesters from the site.

  12. bather hoener says:

    Econ professor to run for president: Maybe the best person to take on issue number one — the economy — should …

  13. fenka nari says:

    Apple’s corporatism somehow manages to play teachers like a harp. It’s one of the most constrictive and manipulative corporations around.

  14. That woman could have had a medical condition or pregnant, just grabbed, slammed, and dragged her like she was

    This is a crying shame! No respect anymore for life, not even their own.

  15. krzyzer kolston says:

    ma come siete autoreferenziali che vi occupate sempre dell’internet che si occupa di voi che vi occupate di interent. e le vere tragedie?

  16. OSHAs’RegionV needs 2do the right thing and enforce the SOX whistleblower protection act as it was intended by Congress! END CORPORATISM –

  17. kimbris bragner says:

    How? They have a good economy Imagine!!! How come India is d way it is? India has more citizens with IQ’s over 12

  18. a puppet of the system too, soo it feels like someone is doing something about it…what we need is a real version on him that really does something about ti but on the low down, gather people and rattle some cages so we can create damage to their system, but of course we need money, and from the, who has the guts??????????????????????????????????????????????????????????????????????????

  19. aubittler says:

    Michelle loves Ellen! She is cracking up, just like we do, at everything she says. so endearing to see. Say what you want about the President and First Lady but they are the most first couple to enter the White House! Giving tons of interviews and dancing on Ellen? Gotta love that quality about them.

  20. checklepa sch says:

    Get Out With Love (Why Adam and Eve Were Really Kicked Out of the Garden) (Kindle Edition): Why is our economy t…

  21. By SUSANNE POSEL | OCCUPY CORPORATISM | MAY 13, 2012 The Bill and Melinda Gates Foundation was created over a decade ago. They have been responsible for vaccine programs across the globe. The Gates Foundation is focusing on controlling population in poor countries with drugs like Depo-Provera. By pouring funding into the supply chains and relationships with […]

  22. lubaierron block says:

    By 2021, health spending is likely to be nearly 1/5 of the national economy, at 19.6% of GDP, up from 17.9% in 2010. –

  23. Is SO SCARED of this ECONOMY & Lack of JOBS, that he & his MINIONS feel the NEED to SLANDER his OPPONENT Just to DISTRACT US?

  24. khiarden says:

    Who says men can’t multitask? Osborne has cocked up the economy whilst simultaneously singlehandedly scuppering any chance of a Tory GE win

  25. If Osborne wants to improve the economy in the long run he has to use a mixture of supply side policies followed by more spending –

  26. khoffris says:

    One city under hundreds of drones, One nation under surveillance
    Human Rights · New technologies · Privacy Rights · Targeted Individuals · US Police state · Fascism/Corporatism Watch. System of mass surveillance and data warehousing on law-abiding persons and citizens prompts privacy rights campaign …

  27. The staging for Billy Elliot the Musical is actually more directly about working class vs. corporatism (and anti-Thatcher) than the film.

  28. januccini mead says:

    Charity > Any government program | Now… With that said, charities are struggling in this economy. So… Strong economy > Handouts

  29. Debt jubilees and hyperinflation – why history shows that this might be the way forward for us all – History, Future. Now. –

  30. yayo pilia says:

    Posted by James Pomeroy While you were worrying that the UN was taking over Texas, corporatism was taking over America. While you were worrying about the End Times beginning with a second term for Obama, you were ignoring the role we all are playing in making life for our species (and countless others) more difficult, even impossible. While you were bemoaning the fates of countless zygotes and fetuses, numberless children were starving, malnourished, in need of clean water, dying by the scores, languishing in While you were shouting about oppression, screaming about your supposed loss of rights, spewing invective over the persecution of your religion, you were fighting to ensure only your god would be represented, and you were fighting to ensure that only “decent Americans” (the ones who look like you, or act as you approve, or accept the boundaries you would establish in their lives and to their livelihoods) have any rights, and you were fighting to ensure that no-one might…

  31. در مزیت صف های الهی و روحانی دوران طلایی امام بر صف های امروز ، کار جدیدی از سایت کیهانی کلمه: صف‌های دیروز، صف‌های امروز

  32. To any of you who still think that gov’t and corporatism are separate, please read this: These days it’s just blatant.

  33. “Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power.” ~ Benito …

  34. noglemauro kuwa says:

    no. Is the answer. Too bound by corporatism, or ignorance. Neither is an excuse to compromise future ge …

  35. wister stuckley says:

    American people have been offered two lousy choices. One, which is corporatism, a fascist type of approach, or sociali …

  36. lund drebelande says:

    Are you a university student from the Want to write an essay on Blue Economy & fly to Bali? Join …

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