Help debunk 999 Calculator

[garyallen59]

I saw this posted a few times on Herman Cain's facebook page. http://999calculator.net/

Someone explain how this would really work it looks like to me, that they are leaving out essential information to get the correct number I'm just not good enough at math to figure it out, so i may be completely wrong on that assumption. Maybe if someone figures it out they can program one that shows the price increase. Though there may be too many variables to make an accurate calculator.

[braane]

I haven't ever bought a house before... but isn't this "invisible imbedded tax" a corporate tax that they speak of. Which wouldn't apply to the purchase of a house. Also, doesn't their "price of new good" assume that the price will be lowered by the corporation because they aren't taxed as much? It seems like a very biased calculation to me.

[garyallen59]

I haven't ever bought a house before... but isn't this "invisible imbedded tax" a corporate tax that they speak of. Which wouldn't apply to the purchase of a house. Also, doesn't their "price of new good" assume that the price will be lowered by the corporation because they aren't taxed as much? It seems like a very biased calculation to me.

Agree it seems very deceiving (very much like Mr. Cain), and those checking it out will see the price drop and it will make them feel good and not question it.

[zHorns]

From the site :


* On average, 22% of the price of most consumer products is incorporated into the price to cover the average corporate tax rate of 35%. If that corporate tax rate is lowered to 9%, that 22% is reduced about 6%. (using the ratio of 35% : 22%, 9% : ~6%)

They are assuming a lot.

[cpike]

Do people actually believe that if the corporate tax rate is cut to 9% that they'll slash prices by 22%? Businesses will just pocket the difference.

[Orwell]

Do people actually believe that if the corporate tax rate is cut to 9% that they'll slash prices by 22%? Businesses will just pocket the difference.

What they're also failing to take into account, if what they claim really does happen, the lost revenue in states sales tax will have to be made up in higher state taxes or a federal bailout.

[JamesButabi]

It debunks itself within the first line loop Prices will drop 17.35% under a revenue neutral plan? What a joke!

[carmaphob]

Do people actually believe that if the corporate tax rate is cut to 9% that they'll slash prices by 22%? Businesses will just pocket the difference.
maybe, but they might just lower prices to compete.

[Orwell]

maybe, but they might just lower prices to compete.

Maybe for highly competitive markets. Most markets these days are, unfortunately, not that competitive.

[lucent]

So does it account for the fact that there is 9% payroll tax?

[RonPaulCult]

So does it account for the fact that there is 9% payroll tax?

I'm assuming it not only includes the 9% payroll tax you pay but also the 9% the employer pays as well....which is WRONG to say that it is a tax break for you. In most cases it would be a tax break for the employer. (I know some on here disagree with me but oh well). He uses that to make his 9-9-9 plan SEEM like your taxes won't go up by that much, when in reality they will go up a TON unless you are rich in which case you will get a huge tax break.

edit: I'm talking about his overall plan, and I'm not sure what payroll taxes has to do with the above link.

[FreeMind&Market]

In free markets, lowering of the corporate tax will generally result in lower prices due to competition between businesses. An exception might be in smaller businesses that are not c-corps and therefore pay income passes-thru to the owners and is taxed at the personal income tax rate. However, many small businesses are still c-corps and pay the corporate tax.

The biggest problem with Cain's TAX-TAX-TAX plan is he gives the Fed Govt another avenue to tax - a sales tax. Even if it was passed with a 9% rate, in time it would end up being much higher - maybe 35,35,10 for example. Cain stole some of his idea from the FairTax, but the FairTax requires the repeal of 16th amendment before the FairTax would go into affect. Cain's plan just adds another tax. Not too long ago, I remember the Democrats were promoting the idea of a national sales or value-added tax in addition to existing taxes.

TAX-TAX-TAX is a pandora's box!

[RonPaulCult]

Question: Why does he use a 6% corporate tax? I thought it was supposed to be 9%?

Also, this doesn't take into account that you will have 9% less of your income if you currently don't pay income tax.

[wgadget]

You guys REALLY need to go to the Opposing Candidates forum and see what's going on with Herman's pilfered plan.

[freakout9903]

thats just one end of the 9-9-9 plan, im about to work on one that explains the tax difference for lower/middle/upper class citizens and who really benefits...

[TexMac]

Too late anyway, he changed his plan today:

http://firstread.msnbc.msn.com/_news/2011/10/21/8431269-cain-tweaks-plan-to-9-0-9-for-poor-americans

At least if you're "poor."

[lucent]

Too late anyway, he changed his plan today:

http://firstread.msnbc.msn.com/_news/2011/10/21/8431269-cain-tweaks-plan-to-9-0-9-for-poor-americans

At least if you're "poor."

If you're a minority in one of his Marxist zones.

[sanssq]

A couple things here. If there is a 9% sales tax on everything "new" that is produced is business exempted? If not, each time a new component piece of a assembled product it would be taxed under the sales tax. So, lumber, roofing material, for example, would be taxed into going into a house. (Or is it "used" at that point?) Then the house would be taxed as new(?). If a used component is used in production of a "new" product, what is the tax to the consumer or end user?

There are a lot of questions on the "plan". I will continue with more examples below, but look at it this way, Cain claims the plan is revenue neutral. If, as claimed, the top 20% will pay 20% less in taxes how does that effect the bottom 80%?

So, the calculation is: 80%(the percentage paid by the top demographic)X20% (their calculated reduction in taxes) = 16% of the total personal income tax revenues. That's the amount that has to be made up in the bottom 80% demographic.

The bottom demographic now pays 20% of the total personal income tax revenues. Using the above calculation, 16% of the total personal income tax revenue must be added to the bottom demographic. The calculation for that is: 16% /20% = 80%.

Therefore, to make up for the lower tax on the top 20%, the bottom 80% must pay a increase of 80% in their actual overall taxes if it is really revenue neutral. There is no way around this figure. There is no free lunch. There is no magic here, just smoke and mirrors.

I will follow with more on those that will bear the brunt of this plan. Understand, the only way to balance the budget and to reduce taxes, is for the government to spend less. I refer people to Ron Paul's plan.

[sanssq]

More on Cain's 999

HOUSING: raising the cash costs of a purchase and its effects on the new housing market and jobs.


Under Cain's 9-9-9 new houses will be taxed at 9%. That means a house that costs $250,000 will be taxed at $22,500. That raises the price to $272,500. Think on what that will do to the construction business.

BTW, if you go to sell that house, the extra $22,500 becomes a loss. And since that money cannot be secured as a future selling price, you cannot mortgage that additional amount. So, if you are putting say, $50,000 down, instead you will have to come up with $22,500 IN CASH. = $72,500. Plus closing costs.

Cains people argue that the house will cost only $230,000 because of the Corporate savings on taxes. Even if that were true, the same situation is little changed on the mortgage. The sales tax comes in at about $21,000 and, assuming the same 20% down, that's $48.000 down and about $21.000 in the sales tax. That means the purchaser would have to come up with $69,000 down instead of $72,500. About the same.

[sanssq]

RETIREMENT: How Cain's plan will re tax retires on the same earnings again.

Seniors or those nearing retirement: If you are collecting $20,000 in Social Security and supplementing that with say $30,000 of your savings, Cain's plan will raise your taxes big time. Note: Cain's plan has not shown a exemption for SS. So, you will be taxed on that as earnings at 9%. Then you will be taxed on your $30,000 PLUS the SS when you purchase anything with it. Including food, gas, electricity, drugs: ANYTHING. So, you will pay $4,500 on the national sales tax "9" (9 X $50,000= $4,500) Add that to the "9" on SS as income (9X $20,000= $1,800). Total is $6,300.

For all those that think this is fair, please note that savings have ALREADY been taxed as income. At a very high rate. And seniors savings income has dropped to nil thanks to Federal Reserve actions that have depressed interest rates. Their Social Security "contribution was also taxed at the maximum rate they paid also. Cain wants to go back in time and TAX IT AGAIN.

[sanssq]

EMPOWERING SUPER SIZED GOVERNMENT: Is Cain really a conservative or he a shill for big government?

"There is in economics a relatively new concept known as Hauser's Law, named for its creator, economist Kurt Hauser of the Hoover Institution. Hauser's law posits that the federal government cannot take more than about 19.5% of national income through taxation". BUT there is an exception. That's a national sales tax like they have in Europe. It takes the cap off government revenue. And that national sales tax has always evolved into a VAT AND has always gone up. Look up European taxes.

The "9" % national sales tax also turns millions of merchants, contractors and more into Federal tax collectors. With the associated paperwork and reports on a monthly basis. Worse, if you are in the following States, you pay zero sales tax in some areas of those States now: Alaska, Montana, Oregon, Delaware, and New Hampshire. (New Hampshire, and Delaware pay zero statewide) People who sell in some or all areas of those States have no monthly paperwork on sales taxes. Under Cain's plan, they will have to do so. Let's also keep in mind that there will have to be an enforcement arm of the Federal Government involved in this. Probably the IRS with additional agents, and more expense.

[sanssq]

In conclusion, sorry this was so long, but Cain's 999 plan is a disaster. The above figures are my own, and if there is an error, show me. NUT, notice that Cain says that he doesn't want to eliminate any Agencies, Departments or downsize military spending.

He says he wants to "Fix" them........... Every politician says that.

[sanssq]

Further analysis of 9-9-9: More questions and observations.


Cain's people argue on a couple points. They say that prices will be reduced because the costs of corporate taxes go down. I happen to agree with that point. If Corporate taxes really go down. And if the savings are passed on. Also with the caveat that there is no quasi monopoly like there sometimes is.

BUT even given that premise, the decline in prices in high volume, low margin items would be minimal. On the other hand, high ticket high margin items might have a substantial reduction in price. Probably not enough to offset the 9% sales tax imposed on the plan, but...... Regardless, this would be the result of a decrease in corporate taxes, not Cain's plan in general. The 9% sales tax will impact the lowest income groups the most, and given that it benefits those that are buying the high ticket items that are mostly likely to have price declines, the upper end of the income brackets again get the advantage here.


Another question here is wages. Most Americans in the lowest income brackets live hand to mouth, and many are deeply in debt. The impact of this plan would put pressure on wages as this group struggles to make ends meet. They would need more just to keep pace. This creates one of four scenarios:

1. This demographic would decide to live at a lower standard/quality of living which has social consequences.

2. They would pressure their employers for higher wages: this creates an inflationary pressure and reduces American competitiveness in certain sectors.

3. They would decide that working makes no sense and go on assistance. 4. They would enter into the grey market economy and still be on assistance, or some combination of the above.


These last two create a additional burden of government especially the States increasingly limited resources.


Now Cain has said that there might be some kind of poverty threshold involved. And a cash rebate for those that fall under it. Again. this opens up more doors. A new federal government agency to make sure that the people aren't involved in the grey economy? People that will be less likely to get out of that poverty level because of the disincentive to do so?


Cain has also suggested; "opportunity zones" with a 3-3-3 tax. This, in turn, creates even more potential problems. Most obviously is that the numbers he claims to have crunched on government revenue. Putting aside that few economists come up with revenues near what Cain claims. He has crunched these number using the 9-9-9 formula for the entire population. So, in order to match the numbers he claims the tax would already have to be higher than he has claimed. So, a 10-10-10? Or just raising the national sales tax portion which is exactly what the Europeans have done? Several times. (That's a bad door to open!)


The 3-3-3 "empowerment zones" also gives rise to the idea of multi millionaires establishing residences in these zones to get their income taxes down to the "3". Even though they wouldn't actually live there. And then malls and businesses closing down in some areas to move to these zones. Appeals to politicians to become a zone. States arguing about their need. ......In other words, all advantages to Cain's plan are lost or actually make things worse. Except for one advantage.


The lower Corporate tax. And that is the only part of Cain's plan that really makes any sense. In fact, it is the basis of all the growth projections he has made. And all the positive outcomes.

[sanssq]

Let me know if I missed anything.

Peace and Liberty.

[Cabal]

This only adds a 9% sales tax to the finished product/good. It doesn't account for the 9% sales tax on every new sub-component or material used in the making of the good.

[sanssq]

OK.

[sanssq]

Thanks, I kinda figured that, but that leaves the rest. So, critique the rest if you can find any flaws.

[J. Evins]

I doubt corporations would pass the tax savings to the individual. Remember when the FAA was temporarily suspended and the airlines stopped paying taxes? The savings were not passed on to the consumer and then ticket prices remained the same.

[McDermit]

Not only would the savings not be passed along to the consumer, but wouldn't the raw materials be taxed when manufacturer's purchase them? How would that affect pricing?

[dolphin]

This is the biggest problem with the plan that noone dares mention.

Think about all the CPA's and Tax Accounting firms and all the Tax Lawyers that would be out of a job.

Not to mention all the regular people who make a living at it every year filling out returns for people.

When Bachmann made the comment that the devil was in the details that was what she meant.

She is a Tax Attorney.

In addition to all those people losing their career and livlihood the courts with their Tax Judges and the beurocracy to support those courts would no longer have a function. More lost careers.

That is the elephant in the closet and the only reason he took the heat by everyone.

I have gone back and forth on the idea thinking it was good one minute and bad the next.

There are many people living on an $800 per month on a fixed income. You could raise their COLA easy enough in order for them to be able to afford the new tax. Likewise you could raise the minimum wage and piss off WallyMart and McDonalds. That would take the bite out of the worst of it for lower income earners.

[dolphin]

Not only would the savings not be passed along to the consumer, but wouldn't the raw materials be taxed when manufacturer's purchase them? How would that affect pricing?

Same as now. You should not have to pay sales tax when your buying for resale, or manufacturing.

[Diurdi]

* On average, 22% of the price of most consumer products is incorporated into the price to cover the average corporate tax rate of 35%. If that corporate tax rate is lowered to 9%, that 22% is reduced about 6%. (using the ratio of 35% : 22%, 9% : ~6%)

It can't get more disingenious than this. The 22% is the average Effective Corporate Tax Rate. That means that you take the 35%, apply all the loopholes, and on average the corporate tax is around 22%.

There would be no loopholes in the 999, which means that there would be no 9% => 6% drop.

[NeoconTea]

I thought that corporate tax was on the profit rather than on the total price of the thing. This calculator is essentially implying that there is no cost in providing the thing.

Example: If it takes $20k to make a $25k car, you're going to end up paying tax on $5k rather than $25k. This calculator is a pure lie.

[sanssq]

Hey, you're being unfair to Cain. His plan is simple. Everyone pays less: individuals, businesses, regardless of income, age, race, religion or national origin.

Best yet! It raises even more than the present system! It's magic!!!

[sanssq]

BTW, notice that Cain's calculators have a check mark next to employers "FICA" tax? If you check that box, it assumes that it's YOUR tax and you got the entire amount as income. So, since the employers wouldn't be paying that, employees would get that as income? Somehow I don't think the employer would agree.

[robertwerden]

The major glaring problem with this calculator is it assumes the manufacturer will lower the retail price in an effort to pass on tax savings from their end. This is the worst assumption I have ever seen.
As a manufacturer my self, I know my retail price is based on the market value. If my products can sell for $50.00 then that is what I sell them for. I will not lower my retail price just because my costs go down. I simply make more profit, which gives me more capitol which allows me to grow my business.

If I were to lower my retail price to correct for lower cost, then my business would not grow, it would simply stay the same.

[PastaRocket848]

If I owned a big corporation making widgets, and my customers were happiy paying 19.99 for said widgets, why the hell would I pass any corporate tax savings on to consumers instead of my shareholders? It simply doesn't happen in real life. People are going to notice prices changing, but they won't be going down. 9% more year 1 (plus inflation of course), and I'd bet it's 15% inside of a decade.

[rideurlightning]

Too late anyway, he changed his plan today:

http://firstread.msnbc.msn.com/_news/2011/10/21/8431269-cain-tweaks-plan-to-9-0-9-for-poor-americans

At least if you're "poor."

What a joke. Proving more and more how much of a progressive he is.

[Schifference]

Will the final plan fit on 3 pages?

[kazmlsj]

Herman Cain...9-9-9 tax plan, would create a new 9 percent federal sales tax. But consumers would have to pay that sales tax on top of existing state and local sales taxes. Here are figures from the nonpartisan Tax Foundation that look at the total sales taxes in every state, adding up the state sales tax, a statewide average of the various local sales-tax rates, and the 9-9-9 federal sales tax.

Very high: more than 18 percent

1. Tennessee: 18.43 percent (7% state / 2.43% average local / 9% federal)

2. Arizona: 18.12% (6.6% / 2.52% / 9%)

High: 17 to 18 percent

3. Louisiana: 17.84 percent (4% state / 4.84% average local / 9% federal)

4. Washington: 17.79% (6.5% / 2.29% / 9%)

5. Oklahoma: 17.66% (4.5% / 4.16% / 9%)

6. Alabama: 17.64% (4% / 4.64% / 9)

7. Arkansas: 17.5% (6% / 2.5% / 9%)

8. New York: 17.48% (4% / 4.48% / 9%)

9. Illinois: 17.27% (6.25% / 2.02% 9%)

10. Kansas: 17.26% (6.3% / 1.96% / 9%)

11. Texas: 17.14% (6.25% / 1.89% / 9%)

12. California: 17.13% (7.25% / 0.88% / 9%)

Moderately high: 16 to 17 percent

13. Nevada: 16.93 percent (6.85% state / 1.08% average local / 9% federal)

14. Missouri: 16.67% (4.225% / 3.45% / 9%)

15. Colorado: 16.48% (2.9% / 4.58% / 9%)

16. New Mexico: 16.23% (5.125% / 2.11% / 9%)

17. Minnesota: 16.18% (6.875% / 0.3% / 9%)

18. South Carolina: 16.14% (6% / 1.14% / 9%)

19. New Jersey: 16.03% (7% / 0.03% / 9%)

20. Mississippi: 16% (7% / 0.003% / 9%)

21. Indiana: 16% (7% / None / 9%)

21. Rhode Island: 16% (7% / None / 9%)

Middle: 15 to 16 percent

23. Georgia: 15.87 percent (4% state / 2.87% average local / 9% federal)

24. North Carolina: 15.85% (4.75% / 2.1% / 9%)

25. Iowa: 15.81% (6% / 0.81% / 9%)

26. Ohio: 15.78% (5.5% / 1.28% / 9%)

27. Nebraska: 15.77% (5.5% / 1.27% / 9%)

28. Utah: 15.68% (5.95% / 0.73% / 9%)

29. Florida: 15.65% (6% / 0.65% / 9%)

30. North Dakota: 15.38% (5% / 1.38% / 9%)

31. Connecticut: 15.35% (6.35% / None / 9%)

32. Pennsylvania: 15.34% (6% / 0.34% / 9%)

33. Massachusetts: 15.25% (6.25% / None / 9%)

34. Vermont: 15.14% (6% / 0.14% / 9%)

35. Idaho: 15.02% (6% / 0.02% / 9%)

36. Kentucky: 15% (6% / None / 9%)

36. Maryland: 15% (6% / None / 9%)

36. Michigan: 15% (6% / None / 9%)

36. West Virginia: 15% (6% / None / 9%)

--. D.C.: 15% (6% / None / 9%)

Low: 13 to 15 percent

40. South Dakota: 14.81 percent (4% state / 1.81% average local / 9% federal)

41. Wisconsin: 14.43% (5% / 0.43% / 9%)

42. Wyoming: 14.34% (4% / 1.34% / 9%)

43. Maine: 14% (5% / None / 9%)

43. Virginia: 14% (5% / None / 9%)

45. Hawaii: 13.35% (4% / 0.35% / 9%)

Very low: less than 11 percent

46. Alaska: 10.74 percent (No state / 1.74% average local / 9% federal)

47. Delaware: 9% (None / None / 9%)

47. Montana: 9% (None / None / 9%)

47. New Hampshire: 9% (None / None / 9%)

47. Oregon: 9% (None / None / 9%)

http://www.csmonitor.com/USA/Elections/President/2011/1016/H...

At Tuesday’s debate in Las Vegas, 9-9-9 came under fierce attack from the other Republicans on stage, with data showing it would raise taxes for most Americans, in particular low-income people and the middle class. Cain’s original plan would eliminate all current taxes, including on capital gains, and replace them with a 9 percent tax on personal income, a 9 percent national sales tax, and a 9 percent business tax.

http://www.csmonitor.com/USA/Elections/President/2011/1021/F...

[xFiFtyOnE]

I'm not very good at this type of stuff, maybe someone can correct me. But it seems to me that the price of things would go up due to a new tax on commodities and materials to the manufacturer. For example if you had a company that made t-shirts. Now they have to pay more taxes on dye and cotton to make that t-shirt and pass that higher production cost on to the consumer. Ofcourse the more complicated and more parts required for the product (computers, cars, etc.) the higher the price increase. Am I completly wrong? Does Mr. Cain have an answer to this?

[Birdlady]

I'm not very good at this type of stuff, maybe someone can correct me. But it seems to me that the price of things would go up due to a new tax on commodities and materials to the manufacturer. For example if you had a company that made t-shirts. Now they have to pay more taxes on dye and cotton to make that t-shirt and pass that higher production cost on to the consumer. Ofcourse the more complicated and more parts required for the product (computers, cars, etc.) the higher the price increase. Am I completly wrong? Does Mr. Cain have an answer to this?

This is how I understand it too. Cain just says our assumptions are wrong and his are right...lol