Cain’s 9-9-9

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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.

8 Comments

8 Comments

  1. cain12  •  Oct 17, 2011 @11:19 AM

    I respectfully disagree. The 9-9-9 plan will clean up a lot of problems in the system, and the income tax WILL get eliminated in the end if we can hold Congress.

  2. paul12  •  Oct 17, 2011 @12:17 PM

    BUT what if we DON’T hold Congress, or if the “conservatives” there like the additional source of revenue?

  3. zane  •  Oct 17, 2011 @3:12 PM

    The problem I see with Cain’s 9-9-9 plan are Constitutional. In order to make this plan work, the 16th Amendment would have to be abolished and that would take a long time. The 16th was first proposed in 1909 and not passed until 1913. Four years.

    Also, for it to work would require a Constitutional amendment that would limit taxes to the 9-9-9 taxes in Cain’s plan. Congress has used the power of taxation in many times to pay for things like wars (Lincoln, Wilson, FDR, all used this power). A Constitutional amendment limiting the taxation to 9-9-9 would hinder that taxing power during a time of war. In the event Congress would even approve the 9-9-9 plan, without a Constitutional amendment making it permanent, one Congress cannot bind a future Congress and the ability to raise 9-9-9 to 20-20-20 is less than a remote possibility with a Democrat majority, which will happen again sometime in the future.

    Also, I have not heard Cain address hidden taxes like excise taxes that are already built into the cost of a product. Will the hidden gasoline tax, currently at 18+ cents per gallon/gas and 24+ cents per gallon/diesel or will the 9% sale tax be tacked on top of the current excise tax on gas? The excise tax on tires was initiated during WWI, and although tinkered with over the years, still remains.

    There are many more problems, like how to deal with seniors who do not file income taxes, etc. And what if you qualify for an exemption for the 9% sales tax now, due to income, but in the next half of a year, you lose that exemption due to a better job, how would that work? Would you be backbilled by the IRS? Would you have to submit your sales receipts to the IRS to determine how much you owe in a 9% sales tax bill?

    Yes, taxes need to be lowered. But so does spending on the part of a Congress that seems to think they are playing monopoly and not dealing with the theft of what Americans earn. Cain’s program does not address spending.

  4. paul12  •  Oct 18, 2011 @9:09 AM

    what about Ron Paul’s PLAN TO RESTORE AMERICA? go to
    http://www.ronpaul2012.com/the-issues/ron-paul-plan-to-restore-america/

  5. John Parnell  •  Oct 18, 2011 @11:20 AM

    I know there’s a lot of energy out there for both Paul and Cain. I’m trying to focus on policies and not candidates, although it’s difficult at times. I really like Paul’s proposal because it addresses the spending issue as the core problem. I’d like to see a more aggressive approach to taxation as part of it. Nonetheless, Paul’s proposal strikes me as the most “conservative” of them all. Cain, Romney, and Gingrich have some good ideas but seem more focused with HOW government operates, NOT WHETHER government should be operating in certain realms (e.g., education, EPA, etc.) in the first place. Both are important, but the latter issue trumps the former. Paul is the only candidate AGGRESSIVELY attacking the issues of government spending and Constitutionality of encroachment, although I’ve heard some of this from Gingrich lately.

  6. Gary  •  Oct 18, 2011 @11:47 AM

    I know Parnell likes Mike Church. He’s made a mockery of Cain and the 9-9-9.

  7. T  •  Oct 18, 2011 @1:24 PM

    none of the reps are very good, i’ll be holding my nose again when i vote against obama

  8. Arthur W.  •  Oct 27, 2011 @11:24 PM

    9-9-9 is good theatre, but it will never happen. Even a Republican congress will not repeal existing taxes. Some examples. Cigarette taxes of 62 cents per pack were imposed by Obama on April 1, 2009 with almost no opposition. Why? It funds SCHIP (about $50 billion per year) which goes to children’s health care. Gasoline taxes average about 20 cents per gallon. So if the price rises, the tax stays the same. Not with a sales tax. It will rise and rise and rise some more. Payroll taxes are the primary sources (about 85%) of social security and medicare. At least now, we pretend to have a “lock box” for these programs so there is some accountability. Of course, the Treasury borrows all the money (about $3 trillion for social security alone) at ridiculous rates.

    I love Herman Cain but this is not the answer. When you start exempting stuff for the sales tax like real estate, financial transactions, rents, lottery, airline tickets, you name it, it will be just as corrupt as the current tax code. Keep the current system. Make it flatter, simpler and eliminate preferences. And make everyone pay something.