Monday, October 17, 2011

Herman Cain 9-9-9

A lot of press has been put out there about Herman Cain's 9-9-9 program. What is it? What does it mean?? Essentially, it is Herman's plan to flatten out and simplify the tax code. It works like this, first you completely throw out the existing tax law. Get rid of all 2,500+ pages of it. It is all gone now, and we start from scratch. The initial plan is to replace the existing tax system with a flat 9% tax on all corporate profits, a 9% tax on all income, and implement a 9% consumption tax on all goods and services sold in the United States. Simple right? Sure is.

Let's start with the pros of this plan. The number one driver of corruption in this country is its asinine tax law. Tax deduction for that, tax credit for this, surtax on that, and a partridge in a pear tree. Congresspeople and Senators get their campaign contributions from people who are primarily looking to work the tax system. A small break here or an increase on a competitor there makes these contributors HUGE money on the back end, so kicking a few thousand dollars in to a campaign that will be friendly to your cause come vote time is very helpful. Cain's plan, initially, gets rid of that by flattening out the tax system so it is equal and fair for everyone.

Next, the U.S.A. has one of the highest corporate tax rates in the world. It drives up the cost of doing business, therefore many business that would love to locate in the U.S.A. locate somewhere else, like Mexico or the Caribbean. With a 10% corporate tax rate, that would put the U.S.A. at the very low end of the world's corporate tax rates. Suddenly the U.S.A. looks like a very attractive place to do business.

One of the very high points for the 9-9-9 plan is the elimination of all secondary income taxes. This is from things like dividends, bank interest, and other investments. Why is this a good thing? Because, under the current system, the Government "double-dips" you by taxing you income from wages, then AGAIN hits you on income that comes from things that you bought with post tax money, like investment dividends and savings account interest income. What this also means is that repatriated money, that is money that is currently held in tax free foreign bank accounts, comes back to the U.S.A. How much are we talking? We really don't know, but the lowest estimates are in the $13 TRILLION range. Serious cash. The last government stimulus was almost a trillion dollars. Just think what a boost $13 trillion would be. The consumption tax broadens the tax base and makes sure that, in the words of President Obama, "...everyone has skin in the game." There are provisions in the 9-9-9 program to make sure that the super poor do not pay income taxes, but the consumption tax ensures that every body is paying something in to the system. It also means that those that are in the country illegally, and currently do not pay taxes, and those visiting our country contribute by paying the consumption tax.

My very favorite part of the 9-9-9 plan is that it would take a 2/3rds majority of both houses of congress, and a presidential signature to raise any of the three taxes, or add new ones. Only a simple majority is needed in both houses, and a presidential signature for a reduction or elimination of the three taxes. This holds Congress directly accountable for tax raises, and makes any type of raise very difficult to get accomplished.

Now the cons. First, and the biggest in my opinion, is that it opens Pandora's box when it gives the government both an income tax and a sales tax with which to screw us with. This is NOT a good thing, and, I believe, that only one type of taxation system should be allowed at any one time. Having both can open the door to some very serious problems.
Herman's thought is that the 9-9-9 will open the door to the FairTax, however I don't believe that he can get two major tax overhauls done in one or two terms as president. My thought is that if you are going to base your campaign on a major overhaul of the tax system, go whole hog and work a repeal of the 16th Amendment, and implement the FairTax. Herman does not think that he can get a repeal of the 16th Amendment done right away, so the 9-9-9 plan is the closest thing to it. I am very worried about it.

Now the BS that the Liberals will use to try an discredit the 9-9-9 program.
First we need to go over the natural enemies of the 9-9-9 program just to filter them out before we can get to their arguments. Tax programs like 9-9-9, flat taxes, and the FairTax takes power from the central Government, and gives it back to the individual. Those that dislike individual liberty will be the natural enemy of the 9-9-9 program. Groups like the left wing of the Democrat party, Socialists, and Communists. Their goal is ultimately state control over the monetary system, therefore any type of transfer of power to the people is against their interests.
The lobbing, accounting, and tax preparing industries will also come out against 9-9-9. These businesses rely on the complexity of the tax system to sell their services, with 9-9-9 they are pretty much unnecessary, and you can be sure that they will fight to keep their hold on what they make their livelihood on.

Ok, to the arguments. First, Warren Buffet will not pay taxes with 9-9-9. This one is not true. Warren Buffet will pay taxes on his salary at the exact same rate as any of his employees. "Yah, but that isn't where he gets his money!!" Again that is true. Most of Warren's money comes from what he did with his post tax money. He invested smartly and made billions. This money, like that of his employees, will not be taxed. The Warren Buffet argument comes down to what the opposing sides define as "fair" and "equal." Those that support 9-9-9 will say that equal means equal. Everyone pays the same percentage no mater what. Those against will argue that equal means changing the percentages because some have more than others. HA! 9-9-9 has a contingency for that. For most part, Warren Buffet excluded, the rich consume lots of stuff. They also consume more expensive stuff. The poor don't consume as much, and they buy cheaper stuff. The consumption part of the 9-9-9 plan will force the rich to pay more for their excess, and for their expensive luxury. Those frugal, rich or poor, will not pay as much in tax as those who spend.

HA! the opponent of 9-9-9 says, the consumption tax will hurt the poor. Some of the poor that do not pay taxes now will end up paying taxes. No doubt about that. 9-9-9 will make some of the 54% of Americans who don't pay taxes join the taxpayer rolls. However it won't be as painful as it seems. Anyone who gets a pay check knows that there are some taxes that are taken out of everybody's check, regardless of how much you get paid. Social Security tax is one that immediately comes to mind. Most of the time the poor receive their tax money back at the end of the tax year with their tax refund check. The 9-9-9 program will immediately hand them 15% back in their pay checks, as the government will no longer be taking the 25% or more out of their pay check as if they WOULD be paying taxes at the end of the tax year.

But... What about my tax deduction that I get for my house? Only charitable donations cont as deductions in the 9-9-9 plan. Won't this crash the housing market? Name me one person who buys a house for the tax break... Seriously, the investment of a house is not in the tax savings, it is in the appreciated value in the the home when it is sold later on. AND the reduction in the payroll tax more than makes up for the money gained at the end of the tax year by the housing credit.

********Added 10/19/2011 After Debate*******
But Herman, I already pay 8% in sales tax to my state and municipality, if your 9-9-9 plan went through I would pay 17%!
I had hoped this little bit of idiocy would burn itself out under the weight of its own stupidity, BUT if you over estimate the stupidity of the American people you will never be disappointed. This argument is, of course comparing two dissimilar things. It is like saying you don't want to remove a dog's spine, because a worm doesn't have one.
First one is a federal tax, the other is a state tax. The two are separate from one another. That should be your first stopping point, however we will continue using a comparison that everyone knows. You pay federal income tax, and you pay state income tax. If you combine the tax rates of the two separate taxes, surprise surprise, your overall tax rate is higher than both your state and federal maximums. By combining both the state sales tax and the new federal income tax you, surprise surprise, get a higher sales tax than either of them. However, a large part of your federal income tax is gone, thus you pay less in overall tax. If your state does not pay sales tax, like New Hampshire, you STILL won't pay state sales tax. Just as now if your state does not charge income tax, you SITLL have to pay your federal income tax.
The GOOD thing about a consumption tax is that people see it. If taxes are raised a percentage on your income tax, that you get removed from your pay check, you don't really notice it. However, if you raise the sales tax a percentage point, people see it every time they buy something. It holds the government accountable, and reminds people, with every purchase, that it is THEIR money that Washington is spending.
******** END ********* Added 10/19/2011 After Debate*******

All in all, I hate the 9-9-9 plan. I like the FairTax. But because the 9-9-9 plan puts in to place some of the policies of the FairTax, I hate it less than I hate our current system.

Oh, and for those of you who think that Herman can't possibly get elected... The latest Rasmussen poll begs to differ.

Herman CAIN 2012 web site

1 comment:

Daniel said...

Thanks Matt, that helps!

ps. If this doesn't convince you to vote for Cain, nothing will: