Herman Cain’s Tax on the Poor

Republican presidential hopeful Herman Cain has been getting lots of attention for his bumper-sticker-sized economic policy, the All Meat Combo Original Jumbo  “9-9-9” tax plan. Easy to remember; easy to misunderstand the burden it would place on working people and the poor if the government was wacky enough to implement it.

Here’s where those “9s” in the slogan come from. Throw out the unwieldy U.S. tax code, then replace it with a 9% tax on corporate profits, 9% on personal income, and a 9% tax on consumption.

What’s a “consumption tax?” A 9% federal sales tax or VAT on top of your local sales tax. If you live hand-to-mouth, you would pay 9% on 100% of your income as you earn it, then another 9% on what’s left of those dollars as you spend them to cover your family’s expenses. Result: Americans who earn the least would pay the most in taxes.

All this is in line with Mr. Cain’s brilliant marketing career and his recent “blame the poor” talk. Aside from its un-American and un-Christian unfairness, It has another slight drawback: it wouldn’t raise nearly enough money to keep the country going. The “9-9-9” scheme would end in the same kind of financial disaster as Mr. Cain’s Aquila energy speculation, with working people losing everything.

But the rich would prosper as never before under “9-9-9.” They’d get another jumbo slice, since Mr. Cain’s snappy plan would also completely eliminate their capital gains taxes.

More:

“Inside the Cain Tax Plan,” Bruce Bartlett, New York Times blog

“Herman Cain’s 9-9-9 Tax Plan,” Edward D. Kleinbard, USC Gould School of Law, Tax Notes (Forthcoming). Download the SSRC PDF (17 pages).

Short link: http://wp.me/p6sb6-bhQ

Image by Mike Licht. Download a copy here. Creative Commons license; credit Mike Licht, NotionsCapital.com

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