I'm not an economist and I don't play one on TV, but Herman Cain wants us to "do the math" on his 9-9-9 tax program, so let's do some from the strictly layman's point of view. After all, that's who he's appealing to, right?
Let's take the 9 percent corporate tax first. To begin with, the current tax rate on corporate transactions is between 15% and 35%, so immediately, this plan will result in a minimum tax cut of six percent. Secondly, Cain's plan includes paid wages. So the logical thing for them to do is to take that out of the wages paid to the employee, just as they do with current payroll taxes. This amounts to a nine percent increase wage loss to the employee. For every $100 the employee gets today, under Cain's plan they would get only $91 after the company takes out the new payroll tax. A salary of $50,000 per year would turn into one of $45,500 overnight. So, while corporations benefit from a tax decrease, individuals get an even smaller piece of the pie.
Next, let's look at the nine percent personal income tax. On the surface it looks pretty good, but let's stop a moment and consider: no more deductions, no more refunds. What you pay is what you pay. Most people never stop to think about something called "real tax rate." This is the percentage of your income that you actually pay to the government, not the amount taken out of your check each pay period. If you get a tax refund now, under the Cain plan, that would go away forever. That $91 mentioned above now becomes $82.81 and the $50,000 annual salary that shrank to $45,500 shrinks even more to $41,405. You've lost a total of almost $9,000 per year under the Cain plan. How does that stack up to what you're actually paying now?
This is even more important if you are a lower-middle class or low income person. Most people in those brackets effectively pay no taxes because they get their entire tax deduction returned to them. But by Cain's program, it's gone, period.
Finally -- and this is my favorite -- is his nine percent sales tax. Now, exempt from this are "used goods." That means anything you buy from, say, a thrift store would not be taxed. Used cars are exempt and existing housing has recently been added to that list. But every other item you buy -- fuel for your car, groceries, new clothing -- every single thing -- you buy would, overnight, go up in price by 9%. Remember, this is an additional tax at the federal level, not in lieu of state sales taxes. So, taking Ohio as an example, where there is already a seven percent sales tax, Cain would effectively increase the cost of everything you buy to a total of 16% over the real cost of the item (Ohio's seven percent sales tax plus Cain's nine percent).
The last point I want to make -- and here, I find myself amazed to be agreeing with Michelle Bachman -- whoever things that those nine percents are going to stay nine percents, raise your hand. In fact, the most likely scenario that I can come up with, based on recent history is that one of them is likely to; the nine percent corporate tax, if anything, will be lowered over time as corporations angle to reduce their share of the national burden to zero (I personally believe they would charge the taxpayer for the honor of having them do business in this country if they could, but that's just my prejudice). But, just like your household and mine, the cost of doing government will undoubtedly rise steadily, and as the government needs more money, the sales tax and the income tax will undoubtedly rise along with it, so what Cain proposes today means nothing at all tomorrow.
I did the man Mr. Cain. I simply cannot see any virtue in your plan.