I like Herman Cain, and I really like his boldness in the campaign. But I’ve had some misgivings about his 9-9-9 proposal for a while now. And the more I think about it, the more concerned I become.
First and foremost, we have one major political/economic problem in our country—the size and scope of the federal government. No magic potion or tax reform idea will fix it. We must DRASTICALLY cut government spending and regulations, and insist that Washington do ONLY what it has been authorized to do in the enumerated powers. Tax reform can be an important part of the solution, but the core part is philosophical. Let’s not think that a create tax proposal can solve this problem. It can’t
Nonetheless, the means by which taxes are collected has contributed to the massive spending we see today and changing the system can make solving the problem a little easier. For example, WITHHOLDING income taxes and then “giving us refunds” every year masks how much the federal government is actually confiscating from our wealth AND how much the tax code is being used as a form of wealth redistribution. Requiring employers to pay half of our social security taxes creates the illusion that we are not really paying all of it. It’s no doubt that the system has been deliberately obfuscated so that average Americans think they’re getting a better deal than they really are. This is why many in the left are infatuated with a VAT.
With a more transparent system, average Americans would begin to see how much they are really paying, how little they are really getting, and how much is being redistributed and squandered. Questions of Constitutionality and the enumerated powers would make more sense to them if they really understand how much of their wealth is being extracted in the first place. I’m convinced most people are clueless to this reality.
An overhaul of the tax code/system could help. A national sales tax is more transparent than an income tax because we see it every time we make a purchase. It also reduces the social engineering and misallocation of resources by eliminating the tax brackets and deductions. While replacing the income tax with a national sales tax would not solve the spending problem, it could make the problem more apparent. The left would have to invent other ways to hide the EITC and other wealth redistribution schemes.
The 9-9-9 is an interesting proposal. It cuts corporate taxes—a definite positive. It would create a flat income tax rate and replaces much of the income tax burden with a national sales tax. These changes would make taxpayers out of the roughly one-half of Americans who have no responsibility to pay for the programs they demand from their politicians. That makes sense to me. But the 9-9-9 has no major problems. First, by ending payroll taxes, it would create a total disconnect between one’s individual contributions to retirement benefits and their distribution. Social Security and Medicare are in dire need of serious reform. Folding them into the general budget only guarantees that this will never happen.
Second, the 9-9-9 plan would create a new tax without ending an old one. Cain’s stated objective is to replace the income tax with a sales tax, eventually. But history tells us that taxes are usually raised and rarely eliminated. If a sales tax is introduced without simultaneously abolishing the income tax, I’d bet the farm that neither would ever go away.
I am a strong proponent of REPLACING the income tax with a national sales tax because for fairness, efficiency, and transparency reasons. If that’s where Cain wants to go, then why not propose the entire package now? Alternatively, if getting there from here is too difficult politically, then why not simply (1) reform Social Security and Medicare with a separate proposal, (2) create a low, flat corporate tax rate, (3) create a low, flat income tax rate with deductions only for income up to the poverty line and charitable contributions, and (4) outline a plan for real spending cuts. These changes would represent a massive improvement and could set the stage for replacing the income tax with a sales tax in the near future.
Thank you, Herman Cain, for putting your proposal on the table. It has some merit, and it’s certainly moving the conversation forward. Unfortunately, the more I consider it, the less I can support it.