COMMENTARY | Part of the appeal of Herman Cain’s campaign for president is the elegant simplicity of his “9 9 9″ proposal, which would replace the current tax code with a 9 percent tax on personal income, a 9 percent tax on corporate income and a 9 percent sales tax.
The Washington Examiner provides a critique of the plan with two practical objections while ignoring a third more political one.
The first objection is that “9 9 9″ would not raise sufficient income, even allowing for increased economic growth and spending cuts. Cain’s economic adviser, an investment firm owner named Rich Lowrie, begs to differ, claiming that a detail analysis of the plan shows it would raise as much revenue as the old tax system did in 2008. No doubt an outside analysis would either confirm or dispute this assessment. But this objection will be, no doubt, used by the Obama campaign should Cain become the nominee. There is nothing like a tax plan that reduces revenues to rouse the ire of a liberal administration.
The second objection is that while “9 9 9″ would eliminate a number of taxes, such as the Social Security payroll tax, the interest tax, the dividend tax, and the capital gains tax, it would add a pretty big sales tax. Politicians would be tempted to raise the rates, making “9 9 9″ perhaps “15 15 15.”
The response of the Cain people is a little bit weak. They suggest that citizens groups such as the tea party would provide a break on politicians’ desires to boost taxes, either by raising the rates or reintroducing progressivity. There likely needs to be some kind of constitutional impediment for the government to tinker much with the flat taxes on personal and corporate income and sales. Perhaps a super majority should be made necessary to raise tax rates and progressivity, i.e. charging different tax rates according to income, should be forbidden by a new amendment to the Constitution.
There is a third objection that the Washington Examiner does not mention. “9 9 9″ can be easily demonized as falling heaviest on the poor. Without any deductions or credits, everyone would pay the same rate. People of limited income, who under the current system pay no income tax, would now fork over 9 percent. Also, since there are not exceptions in the sales tax for things like clothing, food, and housing, it would fall on the poor as well.
This last objection would test the ability of Cain to explain why the benefits of “9 9 9″ would outweigh its detriments. Clearly Cain’s plan would eliminate the huge cost of complying with the current tax code as well as spur economic growth and job creation. Can Cain make the case against the inevitable charge of “tax increases for the poor” that will be levied against him and his plan? That remains to be seen.
Source: Cain’s 9-9-9 plan sounds good; will it work? Byron York, Washington Examiner, Sept 29, 2011