9-9-9 Questions
Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute, has this look at Herman Cain's "9-9-9" flat-tax proposal.
Two of her concerns:
1) Would a 9% national sales tax curtail folks' spending habits (especially in a state like California, whose state sales tax approaches the proposed federal add-on)?
2) What would stop Congress from going beyond 9% (keeping in mind that any two-thirds requirement to raise taxes could always be eliminated by a majority vote to eliminate said requirement)?
My questions to you:
1) Would the sales tax discourage you from buying a big-ticket item like an automobile?
2) How do you impose handcuffs on Congress?
3) Donning your best strategist's hat, how do you downplay any politically unpopular details -- i.e., eliminating mortgage deductions?
- Comment (36)
- · Quote
- · UnfollowFollow (1)
- Pages:
- 1
- 2
- Pages:
- 1
- 2
Comments :
May '11
Re: 9-9-9 Questions
I don't buy the argument that the 9-9-9 plan is an invitation for congress to raise taxes again. Since when have they needed an excuse? How is this plan any more susceptible to meddling than what we already have?
Re: 9-9-9 Questions
Bill Whalen
1) Would the sales tax discourage you from buying a big-ticket item like an automobile?
Definitely. I'd buy everything used. But hey, recycling used goods is GREEN, isn't it?!
May '10
Re: 9-9-9 Questions
Question # 1 assumes that the consumer would have to pay more for an automobile because of the sales tax. I'm pretty sure Cain has been arguing that the prices will go down if anything because businesses will be paying less taxes overall
Aug '10
Re: 9-9-9 Questions
I believe Cain made some bizarre remark about the sales tax only applying to "new" items, not "used" items.
If true, that would really fire up the new housing market, wouldn't it! And that used jalopy you drive would become more valueable because who would want to pay an extra $3,000 for a new car?
Manufacturing in general would take a huge hit which would kill jobs but the treehuggers would love it.
If Cain wants to replace income tax with a national sales tax why doesn't he just propose that from the get go without this confusing 9-9-9 dance?
Oh yeah, we would have to amend the constitution to eliminate the income tax...
May '11
Re: 9-9-9 Questions
Of course the first time Congress raised the sales tax, the whole country would scream. If they thought the Tea Party Town Hall meetings were rough...
This is the beauty of the current tax system. It comes out before you see it. You never notice how much you are really losing.
Aug '10
Re: 9-9-9 Questions
Because it's a whole new tax for them to raise!
Nov '10
Re: 9-9-9 Questions
1) No, it would not discourage me from buying a big ticket item, but it may cause some consumers to trade down their planned purchase (e.g. from an Accord to a Civic).
2) Handcuffing Congress - good luck. Admittedly, I'm at a loss to suggest anything they wouldn't eventually reverse.
3) Downplaying unpopular details - here are two:
1. Mortgage deduction - is it really fair for those who can't afford a home to subsidize those who can, especially when some of those are second homes - and - with a 9% income tax and sales tax, most homeowners would likely come out ahead on their total tax bill (would have to run the numbers to confirm or deny this).
2. The regressive nature of a national sales tax: Shouldn't everyone pay at least something to fund government services they use?
Mr. Cain is surging in the polls, but it has the feel of a temporary, almost protest Romney surge.
I am surprised we haven't seen more traffic here on Ricochet about Romney's speech & position paper on foreign policy & the military last weekend. It was very good.
Oct '10
Re: 9-9-9 Questions
Bottom line... Who do you trust to work hard to undo the monster we have created? Has Romney shown any interest in doing it? Has Perry?
Only Cain talks like he means to make major changes, and has the history to prove he can do so. Or, you can talk all you want about changing things, but as long as you are willing to settle for Mr. Electable, nothing will change.
Jun '10
Re: 9-9-9 Questions
I have never believed that the fair tax or any national sales tax would be anything but a disincentive for consumerism. To a certain extent, that may be a good thing. But as a merchant, I am very dubious.However, it is my understanding that the elimination of the 16th amendment or the end, somehow of income tax would precede any 9 9 9 implementation. Let's face it, our current system is so convoluted and divisive that just about anything would be better. The POTUS can bang on his podium, but Congress will be doing this heavy lifting. So...as John Steinbeck might say, "The best- laid plans of mice and men..." At least, however, he has a plan. It's a place to start, not the finish line.
Sep '10
Re: 9-9-9 Questions
Cain is putting forth the 999 plan as a bridge to a repeal of the income tax amendment and a national sales tax. If Congress wanted to remove the 2/3 requirement they would need 60 votes in the Senate and 2/3 vote if the bill was vetoed. Since Cain views the national sales tax proposal as a 3-5 year process this would essentially tie Congress’ hands.
Aug '11
Re: 9-9-9 Questions
Let's run the numbers for a median household, with income of $49,990.
Assuming they take the standard deduction, together with a child tax credit of $1,000, they're currently paying about $3,900 in federal income tax, plus $3,124 in FICA taxes, for a total of $7,024 - 14% of their gross income.
Cain's plan eliminates the FICA tax and imposes a flat 9% income tax, so their combined federal taxes would decline to $4,499.
Their disposable income, net of federal, state and local taxes, would probably be in the area of $40,000. Subtract mortgage payments of, say, $18,000 and they're down to disposable income of $22,000. Assuming they spend every penny of that $22,000, their national sales tax amounts to $1,980. Combined with their flat 9% income tax, this comes to a total of $6,479 - $545 less than under the current scheme.
Of course, the real bang comes as incomes rise - earners above the median would benefit greatly under Cain's plan, while the 9% corporate tax rate would ignite a surge of economic growth.
Dec '10
Re: 9-9-9 Questions
As a non wealthy person I can say from a personal interest point of view that 999 would be horrible. After all is said and done on my income taxes the government keeps about 1%. They keep all of the 7.65% (currently 5.65%) the withhold for SSI and HI. Why on earth would I want to replace that with a flat 9% tax and a 9% sales tax? My state/local sales tax is 8.6%, and I get to deduct about $1100 from my gross income for that. The only way to make this palatable for anyone around the median income would be an enormous deduction (like the flat tax folks have) that puts the real tax burden at or below what it is now. Plus, taxing income and consumption taxes all my money coming and going. Double taxation, even with representation, is a horrible idea.
Sep '10
Re: 9-9-9 Questions
When a person buys an item that was made in this country they are paying for the cost of the salaries of the workers who made it. These salaries include all taxes, SS and income tax since workers are concerned with take home pay not gross pay. In addition the cost of corporate taxes is also included in the items. All of these taxes would be eliminated lowering prices. The sales tax would be more visible and therefore theoretically more difficult to raise. Since it would be applied to both domestic and imported items it would make US goods more competitive and should help to boost manufacturing. It is correct to assume a sales tax would depress consumption. But the US has tilted away form a production oriented country and a mild depression of consumption in favor of savings and investment could be viewed as positive. 999 captures only part of these advantages. There are disadvantages to a sales tax that I did not mention. Revamping the tax system and not cutting the size of government is a futile endeavor.
Dec '10
Re: 9-9-9 Questions
Tom Paine: Let's run the numbers for a median household, with income of $49,990.
Assuming they take the standard deduction, together with a child tax credit of $1,000, they're currently paying about $3,900 in federal income tax, plus $3,124 in FICA taxes, for a total of $7,024 - 14% of their gross income.
Those numbers don't work in the real world. Granted, I have 2 little deductions running around the house, but on my $58K gross last year the government kept less than $600 for income taxes. There's a big difference between what they withhold and what they keep.
Aug '11
Re: 9-9-9 Questions
Are you planning on remaining non-wealthy?
Aug '11
Re: 9-9-9 Questions
The King Prawn
Tom Paine: Let's run the numbers for a median household, with income of $49,990.
Assuming they take the standard deduction, together with a child tax credit of $1,000, they're currently paying about $3,900 in federal income tax, plus $3,124 in FICA taxes, for a total of $7,024 - 14% of their gross income.
Those numbers don't work in the real world. Granted, I have 2 little deductions running around the house, but on my $58K gross last year the government kept less than $600 for income taxes. There's a big difference between what they withhold and what they keep. · Oct 13 at 10:54am
Hey, it's great that you can benefit from the sort of deductions and child tax credits that are phased out for people in the higher income brackets - they get to subsidize your children while you pay far less than your fair share of the cost of government.
$600 on $58,000 of income? That's a sweet deal.
Apr '11
Re: 9-9-9 Questions
With only 9% income tax, I would have a lot of my earned income back in my pocket to offset the new 9% sales tax. My investment income would see a large boost as well. That would overcome loss of my deductions.
The important part, to me, is that the sales tax puts that part under my control. My consumption is my choice, for the most part. It would allow me to choose to invest some of my income in more investments (start-ups and rental property), thereby increasing production and creating local jobs.
Also, as corporate tax rates plummeted, my stocks would soar, giving me even more capital to do things with. Maybe even a few big-ticket items which would create more income for the government.
Frankly, 9-9-9 would be very good for me and all the other people invested in this economy.
Dec '10
Re: 9-9-9 Questions
I work for the government, so probably.
Sad thing is that my mortgage and local tax deductions only knock a couple grand off of my adjusted gross over what I'd get from the standard deduction. It's the credits that really do the trick. Without the child tax credit my tax bill would immediately go to $2600. Put the making work pay back and it's $3400.
I'm not saying the way the system works now is right, I'm just saying how it is. I'd be all for a flat, zero deduction income tax even if my taxes went up. I believe in the older definition of fair.
Dec '10
Re: 9-9-9 Questions
I like that Cain is thinking outside the box, but the 999 plan is a political non-starter, IMHO. I'm already charged over 9% sales tax here in L.A., and about the same for state income tax, and neither of those is going away. It might conceivably lower my overall burden, but I'd have to really digest the numbers. And giving Congress a new VAT to play with for the first time ever, that strikes me as a seriously bad idea.
I really like his bio and qualifications, and obviously his energy and can-do attitude; but I think the nomination is still Romney's to lose, and he's looking pretty Teflon-like at the moment. How about Romney / Cain 2012?
Aug '11
Re: 9-9-9 Questions
The King Prawn
I work for the government, so probably.
Sad thing is that my mortgage and local tax deductions only knock a couple grand off of my adjusted gross over what I'd get from the standard deduction. It's the credits that really do the trick. Without the child tax credit my tax bill would immediately go to $2600. Put the making work pay back and it's $3400.
I'm not saying the way the system works now is right, I'm just saying how it is. I'd be all for a flat, zero deduction income tax even if my taxes went up. I believe in the older definition of fair. · Oct 13 at 11:14am
So, in other words, you're saying you're addicted to the current system of tax deductions and tax credits based upon social engineering, because it works for you.