I did some quick math regarding Herman Cain’s 9-9-9 plan. If you’re not familiar with what this is, he advocates a hat-trick tax change on the number 9:
- 9% Corporate Income Tax
- 9% Personal Income Tax
- 9% National Sales Tax
While I initially thought that a 9% personal income tax would result in me paying less in taxes, I had to rethink. As it turns out, my bonuses (when I get them) are taxed at the 25% rate common to bonus income. However, as I don’t make huge piles of money and have a wife and seven children, it turns out that my withholdings amount to a zero-sum game. I don’t pay any income tax other than that collected on my bonuses (again, when I actually get them). Most of that comes back to me when I do my tax returns.
So, the 9-9-9 plan amounts to an immediate reduction of my personal income by 9%. Not cool. If implemented, it would be little consolation that everyone else would also be in the same boat, or that prices would drop with increased competition. My buying power would be immediately reduced by 9%. If I pay $1000 per month in groceries and there’s a 9% sales tax, my grocery buying is further reduced by $90, which is nearly 3 days worth of food. It goes without saying that there is no way I can be in favor of a tax plan which, for all of its potential, causes me immediate duress and potential financial hardship. We run a tight ship, financially, and this could easily break the bank for us.
I do not doubt that the 9-9-9 plan would cause all kinds of market corrections in the long term. It’s the short term that I worry about. Most of the people who oppose Herman Cain’s candidacy have probably done the math I just showed. I cannot believe that voters who might be as affected by this plan as I would choose a sudden increase in taxes (or a substantial decrease in their buying power) when the short term looks so bleak, never mind how the plan might be a net positive in the long term.
Of course, if you’re paying 18% or more now, 9% looks pretty nice. The question is, “Are there enough voters like that to have people choose this candidate?”
Count me out.
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What sort of a plan do you suggest?
I haven’t had time to do much research or reasoning on this. I have read in the past about the so-called “Fair Tax” and different Flat Tax proposals. What seemed nice, in particular, with the “Fair Tax” proposal was that it offset the taxes’ burdens on the poorest segment with what amounted to a cost-of-living allowance to offset the cost of taxes for things like food. If the 9-9-9 plan were to include some such provision, I think it would sound a lot more appetizing. That’s about all I can come up with in 5 minutes of distraction time
Also of note, EVERYONE received that cost-of-living allowance (hence, “Fair”) so that only those spending more would face the tax burden inherent in additional spending.
I’m sure I have no idea how to fix the tax situation; I suspect the particular problem is akin to that class of problems Garett Hardin once described as having “no technical solution.” Someone is going to find a gotcha, seemingly insurmountable, definitely fatal (at least in someone’s opinion) with any solution presented.
It seems almost everyone would agree that anything is better than the spectacular mess we now call “the tax code.” Seemingly-random nines appears to me, orders of magnitude superior to anything the IRS has ever put into print. Only consider this: The complexity of the current tax system has provided an ecosystem for a large (multi-billion dollar?) industry to grow up around the fact that millions of people have to deal with it. Think of all the unfortunate lawyers, accountants, and software developers that would be out of a job if taxes were suddenly somewhat reasonable to understand. Such simplicity might wreck the economy!
Indeed! Just think how the unemployment numbers might look after the loss of so many jobs!