How Herman Cain's 9-9-9 will raise your taxes, in real-world numbers

[RonPaulCult]

What really annoys me about Herman Cain is that he is either a huge liar or extremely ignorant. He seems like a nice enough guy and I don't want to believe that he's a liar. He certainly was ignorant about the housing bubble back in 2005 and even 2008 when he said everything was fine and housing prices would never come down. Could it be that he's ignorant about his own 9-9-9 plan? Yes!

In an interview with MSNBC earlier this week he was asked about a family earning 50k a year and he said:

“Today under the current system, they will pay over $10,000 in taxes assuming standard deductions and standard exemptions,” Cain claimed. “I’ve gone through the math -- $10,000.”

It turns out that isn't true AT ALL. A family making $50,000 a year with two children would only pay about $776 in income taxes when standard deductions are factored in.

Here’s the actual math:

- Gross Income: $50,000
- Subtract the 2010 standard deduction: $11,400 (2011 is $11,600)
- Subtract the personal exemption (essentially the number of people in the house): $14,600 ($3,650 x 4)
- That brings us to a taxable income of $24,000
- The tax on a married couple filing jointly at $24,000: $2,766
- Then, deduct an additional $2,000 ($1,000 child tax credit x 2)

The income taxes end up being 766 dollars. Now, if you include payroll taxes, as Cain always does, the above tax payer still only pays 3,600 dollars in taxes. It's a tax rate of about 7%. And there's no national sales tax, so he or she is free to spend that money without any further federal taxation!

Now let's imagine that Cain's 9-9-9 plan were law.

Right away, there would be a 9% tax on the 50k income. That would come out to $4,500 going to the government, whereas before only $3,600 was taken out of the pay checks.

But wait - there's more! It's reasonable to believe that a single wage earner with a family of four is going to spend damn near every penny of that salary. Under Cain's plan, all new purchases would be taxed at 9% - no exemptions for even things like food or clothing. That would equal additional taxes of up to $4,095.

In essence, Cain's 9-9-9 plan would raise this middle class worker's taxes from $3,600 a year to $8595 a year. In other words, the tax rate would go from 7% to 18%!

As I've said time and time again, Cain's tax plan would raise taxes on 80% of Americans. It would do nothing to shrink the size of the federal government. It would be a knock out punch to the economy which is close to complete collapse as it is.

http://www.msnbc.msn.com/id/21134540...73565#44873565

[Zippyjuan]

Link to Cain's plan. http://www.hermancain.com/999plan
Let us consider the average US citizen. Nearly half of all earners end up not owing income taxes at the end of the year. http://finance.yahoo.com/news/Nearly...105567323.html This is done via examptions and deductions. Cain's plan would get rid of those so instead of zero percent you are now paying nine percent. As mentioned in the previous post, there would also be a nine percent national sales tax (on top of state and local sales taxes so you could be paying 18% in sales taxes in some places- this will encourage consumption and demand for goods which will cause businesses to hire more people?). This national sales tax was zero and now would be nine percent also.

SO taxes on the average person go up while taxes on capital gains and corporations would go down. His goal is to get rid of corporate and income taxes and replace them with the "fair tax". What would that cost? For the sake of keeping things simple, let us assume that the government continues to spend exactly what it does today- no increases in spending and no cuts. That gives us a budget of $3.55 trillion. http://en.wikipedia.org/wiki/2010_Un...federal_budget Let us also assume we want to have it balanced so revenues are the same as expenditures and all revenues come from this "fair tax".

Phase 2 – The Fair Tax
•Amidst a backdrop of the economic boom created by the Phase 1 Enhanced Plan, I will begin the process of educating the American people on the benefits of continuing the next step to the Fair Tax.
•The Fair Tax would ultimately replace individual and corporate income taxes.
•It would make it possible to end the IRS as we know it.
•The Fair Tax makes our exported goods and services the most competitively internationally than any other tax system.

SO what base do we have to apply this national sales tax to? In July 2010, retail sales totaled $362.7 billion. http://money.cnn.com/2010/08/13/news...ales/index.htm Let's use that number and annualize it- holiday sales are usually higher so maybe we will add in a bonus for that. Twelve times 362 billion is $4.35 trillion- let us call it $4.5 trillion. Wow. I did not realize the numbers would be that close- achieving a balanced budget at current spending level funded only via a "fair tax" on retail sales would require a 78% sales tax! That would cause sales to crash and would require an even higher rate (assuming as I said no budget cuts).

Now even if we taxed the entire economy and not just retail sales, we are looking at a base of $14.22 trillion. To balance the budget by taxing the entire economy would require a 25% tax rate. You would pay no income taxes (half the country doesn't now anyways) but would end up paying 25% (again, many are not paying anything now). Would that make you better off and give you more money to spend and stimulate the economy?

[Zippyjuan]

Link to Cain's plan. http://www.hermancain.com/999plan
Let us consider the average US citizen. Nearly half of all earners end up not owing income taxes at the end of the year. http://finance.yahoo.com/news/Nearly...105567323.html This is done via examptions and deductions. Cain's plan would get rid of those so instead of zero percent you are now paying nine percent. As mentioned in the previous post, there would also be a nine percent national sales tax (on top of state and local sales taxes so you could be paying 18% in sales taxes in some places- this will encourage consumption and demand for goods which will cause businesses to hire more people?). This national sales tax was zero and now would be nine percent also.

SO taxes on the average person go up while taxes on capital gains and corporations would go down. His goal is to get rid of corporate and income taxes and replace them with the "fair tax". What would that cost? For the sake of keeping things simple, let us assume that the government continues to spend exactly what it does today- no increases in spending and no cuts. That gives us a budget of $3.55 trillion. http://en.wikipedia.org/wiki/2010_Un...federal_budget Let us also assume we want to have it balanced so revenues are the same as expenditures and all revenues come from this "fair tax".



SO what base do we have to apply this national sales tax to? In July 2010, retail sales totaled $362.7 billion. http://money.cnn.com/2010/08/13/news...ales/index.htm Let's use that number and annualize it- holiday sales are usually higher so maybe we will add in a bonus for that. Twelve times 362 billion is $4.35 trillion- let us call it $4.5 trillion. Wow. I did not realize the numbers would be that close- achieving a balanced budget at current spending level funded only via a "fair tax" on retail sales would require a 78% sales tax! That would cause sales to crash and would require an even higher rate (assuming as I said no budget cuts).

Now even if we taxed the entire economy and not just retail sales, we are looking at a base of $14.22 trillion. To balance the budget by taxing the entire economy would require a 25% tax rate. You would pay no income taxes (half the country doesn't now anyways) but would end up paying 25% (again, many are not paying anything now). Would that make you better off and give you more money to spend and stimulate the economy?

Capital gains and corporate taxes would be cut but the average citizen would be paying more.

[CaptUSA]

I don't think anyone really believes that Cain came up with this plan. It was handed to him. And yes, he is ignorant of the specifics but he understands how easy it is to sell. Remember, it's not the highest quality pizza that sells the most, but the one with the best marketing.

Now, as to the plan, it definitely "broadens the base". Of course, that's code for raising taxes on lower incomes and lowering taxes on higher incomes.

The other question is who handed this to him and why. The folks that created this knew it would fail and they knew the candidate that proposed it would also fail. Could it be Romney's way of getting his folks to ensure that Perry would have competition?


(I also think it's funny how he exempts used products from the sales taxes - think of the incentive that provides businesses to create new products with a refurbished part so they can call it used. You can forget about getting much out of THAT part of the tax. And you better believe that once they figure out this part, they'll raise them somewhere else!)

[RonPaulCult]

The other question is who handed this to him and why.

‎"According to Lowrie's LinkedIn profile, his education tops out with a Bachelor of Science in accountancy from Case Western University. He has no formal training in economics, and there is no indication that he has ever worked on public policy. According to that same profile, Lowrie's political experience includes working on the board of advisers for Americans For Prosperity, a hardline conservative outfit founded by the Koch Brothers, until 2008."

http://www.huffingtonpost.com/2011/1...n_1006201.html

[LauraB]

it's all over the webs now that his 999 plan happens to be identical to the tax plan in the video game sin city lol. also that lowrie said that ART LAFFER helped him "develop" the plan LOL.

[RonPaulCult]

it's all over the webs now that his 999 plan happens to be identical to the tax plan in the video game sin city lol. also that lowrie said that ART LAFFER helped him "develop" the plan LOL.

Laffer has come out in support of the plan.

[LauraB]

heres the link to the article i saw:
http://www.freep.com/article/2011101...9-9-9-tax-plan

"Rich Lowrie of Gates Mills, Ohio, Cain's senior economic adviser, said he developed the plan with Cain, based on core principles and in consultation with economists including Arthur Laffer and Stephen Moore, whom he calls friends."

oops, and i meant "sim" city not sin.

[bunklocoempire]

bump




Bunkloco

[moderate libertarian]

For once I agree with Bachmann.

[Seraphim]

Lmfao

for once i agree with bachmann.

[cindy25]

What really annoys me about Herman Cain is that he is either a huge liar or extremely ignorant. He seems like a nice enough guy and I don't want to believe that he's a liar. He certainly was ignorant about the housing bubble back in 2005 and even 2008 when he said everything was fine and housing prices would never come down. Could it be that he's ignorant about his own 9-9-9 plan? Yes!

In an interview with MSNBC earlier this week he was asked about a family earning 50k a year and he said:

“Today under the current system, they will pay over $10,000 in taxes assuming standard deductions and standard exemptions,” Cain claimed. “I’ve gone through the math -- $10,000.”

It turns out that isn't true AT ALL. A family making $50,000 a year with two children would only pay about $776 in income taxes when standard deductions are factored in.

Here’s the actual math:

- Gross Income: $50,000
- Subtract the 2010 standard deduction: $11,400 (2011 is $11,600)
- Subtract the personal exemption (essentially the number of people in the house): $14,600 ($3,650 x 4)
- That brings us to a taxable income of $24,000
- The tax on a married couple filing jointly at $24,000: $2,766
- Then, deduct an additional $2,000 ($1,000 child tax credit x 2)

The income taxes end up being 766 dollars. Now, if you include payroll taxes, as Cain always does, the above tax payer still only pays 3,600 dollars in taxes. It's a tax rate of about 7%. And there's no national sales tax, so he or she is free to spend that money without any further federal taxation!

Now let's imagine that Cain's 9-9-9 plan were law.

Right away, there would be a 9% tax on the 50k income. That would come out to $4,500 going to the government, whereas before only $3,600 was taken out of the pay checks.

But wait - there's more! It's reasonable to believe that a single wage earner with a family of four is going to spend damn near every penny of that salary. Under Cain's plan, all new purchases would be taxed at 9% - no exemptions for even things like food or clothing. That would equal additional taxes of up to $4,095.

In essence, Cain's 9-9-9 plan would raise this middle class worker's taxes from $3,600 a year to $8595 a year. In other words, the tax rate would go from 7% to 18%!

As I've said time and time again, Cain's tax plan would raise taxes on 80% of Americans. It would do nothing to shrink the size of the federal government. It would be a knock out punch to the economy which is close to complete collapse as it is.

http://www.msnbc.msn.com/id/21134540...73565#44873565

how are you calculating the so-called employers share of the payroll tax?

[RonPaulCult]

how are you calculating the so-called employers share of the payroll tax?

By what is taken from the employee's paycheck. Cain calculates what is taken from your paycheck PLUS what the employer pays. But in my opinion, that's not fair because that is a tax on the employer and NOT the employee.

Some say that the employee would be making that money if the tax weren't there, but well....that's just not true. The employer would make more money if that tax weren't there....and the employer would have more money to HIRE people with.

[bunklocoempire]

Maybe it was posted before, but here is Schiff talking about 999 at around 55:00.

It helped me to better explain it to the Cain-en-ites.




Bunkloco

[erowe1]

It turns out that isn't true AT ALL. A family making $50,000 a year with two children would only pay about $776 in income taxes when standard deductions are factored in.

But isn't payroll taxes another ~$8,000?

Edit: Never mind. I see you already mentioned payroll taxes here:

Now, if you include payroll taxes, as Cain always does, the above tax payer still only pays 3,600 dollars in taxes.

It looks to me like you're only counting the half of payroll taxes that gets counted as coming from the employee, and not the whole amount, including the half they pretend comes from the employer. Or did I miscalculate? It should be 15.3% of 50,000. Right?

[erowe1]

Cain calculates what is taken from your paycheck PLUS what the employer pays. But in my opinion, that's not fair because that is a tax on the employer and NOT the employee.

No. It's still a tax on the employee. It's unfortunate that they're required to pretend otherwise.

[RonPaulCult]

No. It's still a tax on the employee. It's unfortunate that they're required to pretend otherwise.

You're going to have to explain that one to me. The employer pays it. If the government gets rid of it, the employer would have no obligation to give it to the employee (unless the bill was written that way I guess). Do you think if the government got rid of it tomorrow every employee in the nation would get a raise? I think very few of them would.

Let's keep it real - it's taking money away from employers, not the employees.

Even if we take your point and add in that tax....under Cain's plan your taxes are going up if you make 50k a year.

[erowe1]

You're going to have to explain that one to me.

Compare two payroll tax plans, Plan A which directly taxes employees at a rate of 15.3%, and Plan B which directly taxes employees 7.65% and indirectly taxes them by levying an additional tax of 7.65% of their salary to their employers.

For a given job for which the total cost an employer must pay for an employee is $50,000, under Plan A, that employee would take home $42,350 (i.e. 50,000 - 13.5%). Under Plan B, that employee would also take home $42,350 (i.e. their salary after removing their employer's payroll tax of 50,000 - 7.65%, and then minus another 7.65% for their own payroll tax).

Herman Cain's plan wouldn't just get rid of the half that comes directly from the employee, it would get rid of the whole amount, including the half that they make us pretend comes from the employer.

The current system of pretending that only half of the amount comes from the employee isn't "keeping it real," it's utterly deceptive. It's designed to make people believe they're paying less than they are.

Yes, if the government got rid of it, every employee would get a raise.

[erowe1]

Actually, you know what would be a good bill to support? Some kind of "tax honesty act," where employers show their employees on their paychecks what the total cost of employing them is, and subtract all the amounts that the government makes them take out of that to get to the employee's take home pay, including the full payroll tax, instead of just half of it, and including the cost of their benefits, so that the employees can see how much they'd be able to take home if not for all those things.

[robert68]

From Ron Paul's article "Tax Reform Is a Shell Game,"
March 8, 2005:

Lew Rockwell of the Ludwig von Mises Institute offers a very simple test for any tax reform proposal: Does it reduce or eliminate an existing tax? If not, then it amounts to nothing more than a political shell game that pits taxpayers against each other in a lobbying scramble to make sure the other guy pays. True tax reform is as simple as cutting or eliminating taxes. No studies, panels, committees, or hearings are needed. When reform proposals seem complicated, they almost certainly don't cut taxes.

[amy31416]

State sales taxes here are 6%, so with Cain's 999 "plan," we'd have an effective tax rate of 15% on almost everything (no state tax on food & clothing).

I think this would effectively increase the black market on just about everything, it would increase private party sales of a lot of things (like cars, where almost every private party exchange is dishonest about the amount paid when sitting in front of a notary), it would decrease Canadian tourism here massively (they come to PA for the tax-free clothes & other attractions)--sales of everything except necessities would plummet. Theft may well increase.

If, by some weird chance, Herman Cain wins--I'd buy a warehouse full of non-perishable goods to avoid the tax for as long as possible.

Paying 15c on top of a $1 purchase doesn't seem like much--but buy a new car, house or boat...that's some serious cash. I really think that our manufacturing sector would suffer even more.

Unless I've misunderstood this national sales tax that he proposes.

[RonPaulCult]

Compare two payroll tax plans, Plan A which directly taxes employees at a rate of 15.3%, and Plan B which directly taxes employees 7.65% and indirectly taxes them by levying an additional tax of 7.65% of their salary to their employers.

For a given job for which the total cost an employer must pay for an employee is $50,000, under Plan A, that employee would take home $42,350 (i.e. 50,000 - 13.5%). Under Plan B, that employee would also take home $42,350 (i.e. their salary after removing their employer's payroll tax of 50,000 - 7.65%, and then minus another 7.65% for their own payroll tax).

Herman Cain's plan wouldn't just get rid of the half that comes directly from the employee, it would get rid of the whole amount, including the half that they make us pretend comes from the employer.

The current system of pretending that only half of the amount comes from the employee isn't "keeping it real," it's utterly deceptive. It's designed to make people believe they're paying less than they are.

Yes, if the government got rid of it, every employee would get a raise.

I'm sorry but you didn't offer me a satisfactory explanation. The payroll tax that the employer pays is an expense OF the employer. While it's reasonable to believe that SOME employers would give their employees more money if they didn't have to pay it, it's completely absurd to believe that ALL of them would give ALL of that money to the employee. You might as well say that if you own a pizza parlor and the cost of flour goes down, that you would pay your employees all of the money that you are saving from that lower cost of doing business.

My parents own a business that employs about 50 workers. I called my mom up to ask her about this a few days ago and she told me that the payroll tax has NOTHING to do with how much she pays her employees. She pays them what they are worth, what the market dictates, and based on their experience, etc. She doesn't consider the tax and then LOWER their salary based on it (I understand that SOME employers might do that).

What you MIGHT be able to argue is that over time salaries as a WHOLE would go up because the cost of hiring would go down if employers didn't have to pay that tax.

[bolidew]

If, by some weird chance, Herman Cain wins--I'd buy a warehouse full of non-perishable goods to avoid the tax for as long as possible.

That's one reason Cain said his plan would "jump start" the economy right away.

[erowe1]

The payroll tax that the employer pays is an expense OF the employer.

So is their employees' salaries, along with the taxes that come out of them.

The difference between what employees cost their employer and the salary they take home is the same, no matter which party you claim is paying that difference.

By the way, the answer your mom gave you proves I'm right. That amount she pays her employees, the amount she determines they're worth, is the amount they cost her before any taxes are taken out, both the taxes that she's required to pay and the taxes that they're required to pay.

Edit: Perhaps Walter Williams can do a better job explaining this than I.
http://townhall.com/columnists/walte...ng_for_nothing

[amy31416]

That's one reason Cain said his plan would "jump start" the economy right away.

You're kidding. Right?

[Feeding the Abscess]

So is their employees' salaries, along with the taxes that come out of them.

The difference between what employees cost their employer and the salary they take home is the same, no matter which party you claim is paying that difference.

By the way, the answer your mom gave you proves I'm right. That amount she pays her employees, the amount she determines they're worth, is the amount they cost her before any taxes are taken out, both the taxes that she's required to pay and the taxes that they're required to pay.

Right, but that's what gets them to the Cain-given 50k mark. The additional 7.65% would have given them wages above and beyond 50k, and is already gone.

[amy31416]

Also, how would anyone start a business when the base costs of **everything** is 9% higher?

[erowe1]

Right, but that's what gets them to the Cain-given 50k mark. The additional 7.65% would have given them wages above and beyond 50k, and is already gone.

I think you're saying the same thing I am.

[RonPaulCult]

The difference between what employees cost their employer and the salary they take home is the same, no matter which party you claim is paying that difference.

Sounds like you are now suggesting that it's a cost to both the employer and the employee.

I want to understand where you are coming from so if I may....consider a job like McDonalds. They generally pay minimum wage because their business depends on keeping wages as low as possible. They have to pay minimum wage, but if we're honest about it they would probably pay even less in many cases if there weren't minimum wage laws. I'm not suggesting there SHOULD BE minimum wage laws - just using that as an example. As it is right now, both the employer and the employee pay payroll taxes.

If those taxes were eliminated, you are suggesting that McDonalds would raise the hourly wage of its workers instead of keeping their pay at the federal minimum wage? I find that VERY VERY hard to believe.

McDonalds has over 600k employees. If they didn't have to pay payroll taxes that would be a savings of 678 million dollars a year! Are you telling me that they would raise the wages across the board? That they wouldn't take any of that 678 million dollars for profit? For expansion? For new hires? Or to lower prices?

My argument is that we don't KNOW what employers would do if they didn't have to pay that tax. What we do know is that the bill is sent from the government to them directly. If the bill didn't show up at their door, they would have more money in their corporate pockets. To say that it would be passed on to the employees as a raise is a poor assumption. And that's why I think it's incredibly unfair for Cain to count that as a tax on the employee, and make it seem like he doesn't want to raise taxes on 80% of Americans when they will be DIRECTLY taxed for those dollars under his plan.

[erowe1]

Sounds like you are now suggesting that it's a cost to both the employer and the employee.

I'm saying it doesn't matter whom you say it's a cost to, the effect it has on the difference between the cost of an employee to an employer and the salary the employee takes home is the same.

You remind me of this time I remember Al Gore arguing that gas stations shouldn't be allowed to show on their receipts how much they paid in gas taxes, since, he said, that amount was really paid by the gas stations and not the consumers.

Edit: Or maybe it was phone companies he said that about. I forget.