Campaign 2012: Winners and losers in Cain's '9-9-9' plan
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Here's a question that Herman Cain should be asked at Tuesday night's debate among Republican presidential candidates: Who will be the biggest winners and losers from your "9-9-9" plan?
The nonpartisan Tax Policy Center offered this answer Tuesday: The plan would be a windfall for the top 10% but a tax increase for most of the bottom 90%.
Granted, Cain hasn't settled on all the details of his plan, so the center's projections should be taken with a grain of salt. And its analysis is only as good as the model it used to predict the effects of changes in the tax code. That model was developed by tax experts at the left-leaning Urban Institute and the centrist Brookings Institute, the think tanks behind the Tax Policy Center.
Nevertheless, the results aren't a complete surprise. Cain's plan would replace the graduated income tax and the flat payroll tax with a 9% flat tax on personal and corporate income and a 9% national sales tax. That suggests a significant cut for households in the higher tax brackets, although those taxpayers would be disproportionately affected by the elimination of many exemptions, deductions and credits.
The center projects that Cain's proposal would result in tax hikes for the vast majority of people in the bottom 80% of household incomes. More than three-quarters of the households in the top 5%, on the other hand, would see a tax cut of 6.5% of more.
The result, the center projected, would be a shift in the federal tax burden from the 10% to everybody else. The further down the income ladder you go, the bigger the tax increase and the larger the reduction in after-tax income (in percentage terms, not dollars).
Ouch. Does this mean that voting for Cain's proposal would violate the pledge so many Republicans have taken not to raise taxes?
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I'll believe corporations are persons when Texas executes one.: LBJ's Ghost
NEW YORK (CNNMoney) -- Under Herman Cain's 9-9-9 tax reform plan, 84% of U.S. households would pay more than they do under current tax policies, according to a report released Tuesday by a nonpartisan research group.
And the impact would be felt most heavily by the lowest income groups.
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Those are some of the estimates from the Tax Policy Center's analysis of Cain's proposal, which has helped make him a leading contender for the Republican 2012 presidential nomination.
While some key questions about the 9-9-9 plan remain unanswered, the Tax Policy Center's analysis is one of the first to take a comprehensive look at its potential impact.
Cain's 9-9-9 plan would replace much of the current tax code with a flat-rate system: a 9% individual income tax; a 9% corporate income tax and a 9% national sales tax. Estate and gift taxes would be eliminated, as would the payroll tax, and most tax credits, deductions and exemptions.
In terms of investment taxes, capital gains would be tax-free, while dividends would be deductible to businesses paying them out but taxable at 9% for investors who receive them.
Cain's tax plan: More than 9-9-9
According to the Tax Policy Center, households with incomes below $30,000 would have, on average, between 16% and 20% less in after-tax income than they do today.
By contrast, households making more than $200,000 would see their after-tax income grow by between 5% and 22% on average.
There are two reasons for that discrepancy between the poor and the rich.
First, while the Cain campaign has said it is working on ways to lessen the tax burden on low-income households, the Tax Policy Center said it didn't have enough detail to assume what that change would be. One way to address regressivity is to offer a rebate to low-income households.
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But the majority of the highest income households would get a tax cut. For instance, 95% of those with more than $1 million in income would receive an average tax cut of $487,300.
Under Cain, capital gains -- a notable source of income for the wealthiest Americans -- would be tax-free. He would also preserve the charitable deduction. And taxing all non-capital gains income at 9% would amount to a considerable break from today's top rate of 35%.
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I'll believe corporations are persons when Texas executes one.: LBJ's Ghost
One good point is that it will tax drug money when it is used by pushers to purchase legitimate goods and services. I haven't seen a good analysis of it yet as Cain hasn't fleshed it out totally.
One good point is that it will tax drug money when it is used by pushers to purchase legitimate goods and services. I haven't seen a good analysis of it yet as Cain hasn't fleshed it out totally.
This is one of the biggest myths of a sales tax. It is COMPLETELY FALSE. Moving income tax to sales tax does add a tax on "drug money" relative to an income tax.
The legitimate money used to purchase the drugs was already subject to taxation as income tax levied against the person purchasing the drugs. That already-taxed money is then used to purchase the drugs. The money the drug dealer uses to purchase legitimate products is subject to taxation as income tax levied against the retailer selling the legitimate product.
What would happen is that the cost of illegal drugs would drop relative to the cost of legal drugs. Someone selling cocaine, for example, would not charge sales tax, while someone selling alcohol would be forced to charge sales tax.
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We work together every damn day. --Jon Stewart
The money the drug dealer uses to purchase legitimate products is subject to taxation as income tax levied against the retailer selling the legitimate product.
The retailer would pay income tax only on his profit after the cost of doing business in the current scenario whereas the drug dealer would pay the full 9% on all legitimate purchases as would the rest of us in the 9% scenario.
The retailer would pay income tax only on his profit after the cost of doing business in the current scenario whereas the drug dealer would pay the full 9% on all legitimate purchases as would the rest of us in the 9% scenario.
You only looked at the retailer; you ignored the fact that the money used to buy the drugs was already taxed before it was used in the purchase. And you completely ignored the fact that it would lower the relative cost of illegal drugs to legal drugs, making them comparatively more economical.
The point is that the sales tax does NOT collect any additional revenue compared to the income tax. It does NOT add a tax to criminal behavior. That is a myth. That is a fallacy. That is a lie. You damage your credibility in repeating it.
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We work together every damn day. --Jon Stewart
You only looked at the retailer; you ignored the fact that the money used to buy the drugs was already taxed before it was used in the purchase. And you completely ignored the fact that it would lower the relative cost of illegal drugs to legal drugs, making them comparatively more economical.
The point is that the sales tax does NOT collect any additional revenue compared to the income tax. It does NOT add a tax to criminal behavior. That is a myth. That is a fallacy. That is a lie. You damage your credibility in repeating it.
Drug dealers pay no income tax however they would pay the sales tax on all legitimate purchases. Also, if those buying illegal drugs are in the 47% they have not already paid income tax. Worry about your own credibility.
Drug dealers pay no income tax however they would pay the sales tax on all legitimate purchases. Also, if those buying illegal drugs are in the 47% they have not already paid income tax. Worry about your own credibility.
I smell a lot of "If" coming off this plan...
Regardless of whether income tax has been paid, social security and medicare taxes were paid. Drug dealers don't collect sales tax either, so I'm not sure why you brought up that they don't pay income tax.
Furthermore, you STILL haven't addressed the fact that untaxed, illegal drugs will be proportionally cheaper than taxed, legal drugs under any sort of sales tax plan than they are under an income tax plan. You will have the same problem with stolen goods compared to legitimately acquired goods. A sales tax does NOT increase the tax burden on criminal behavior. It REDUCES it. It makes criminal behavior MORE profitable, not less.
Going back to Cain's plan, it represents a tax increase on 95% to 99% of Americans, and a massive tax cut above that. If we're trying to fix our economic problems, what is needed is exactly the opposite - An increase in taxes until the richest pay their fair share proportionate to their wealth, and tax breaks for the consumer class. Personally, I don't think tax policy alone can solve the problem. I think a ban on exploitative businesses is in order. Prohibit businesses from increasing the poverty rate through their hiring practices. Put the money back into the consumer class that drives the entire economy.
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We work together every damn day. --Jon Stewart
Drug dealers don't pay income tax but if they purchase any legal consumer goods or materials they will pay the sales tax. I think we must be talking about apples and oranges here as the drugs I am speaking of are never sold in a drug store.
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