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?
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Dec '10
Re: 9-9-9 Questions
No, I'm just using my own example of how politically difficult it will be to get something like 999 passed.
May '11
Re: 9-9-9 Questions
If 999 eliminates the payroll tax how will we pay for social security and medicare? Neither link mentioned how he would deal with both programs.
Dec '10
Re: 9-9-9 Questions
999 captures money from the Black Market that pays nothing, federally, that it replaces the SS and Medicare contributions from taxpayers, and it does that with the third 9, the sales tax. Bling and escalades => federal sales taxes.
1] The computer you are using was built and sold by people and corporations, paying taxes. All of those taxes are reflected in the price at the cash register, referred to as the "embedded tax". Those taxes go down to one, to, or three 9s, and the cost at the cash register goes down. Add a single 9 at the cash register and there should not be a net increase in the total and would likely be a reduction in the net price. Even in NH, or other states with no sales tax, they already pay the embedded tax on their purchases.
2] These are very visible and memorable numbers that the public will pay attention to. Congress would change them at their electoral peril.
3] I would set up a website to which any citizen could enter their personal tax variables. At the end, they hit "Calculate" and a number pops out, for them, with and without The Plan. TaDa!
May '10
Re: 9-9-9 Questions
Eliminating mortgage and charitible deductions would be so unpopular, and so demagogued right and left it would be a deal-breaker.
The ability to reward friends and punish enemies inherent in all the jiggery-pokery in our current system is so seductive to the politicians they'll never accede to simplification.
The money to be made by tax accountants, tax attorneys, and government workers is so immense they'll fight simplification with a ferocity that would make Ghengis Khan look like Ghandi.
It will never happen.
May '11
Re: 9-9-9 Questions
So drug dealers and bookies would pay for my social security and medicare. It's about time my bookie starts paying me back. Indirectly at least.
Dec '10
Re: 9-9-9 Questions
Art Laffer, the uber genius behind Reagan's Supply Side Revolution, endorses 9-9-9 as real path back to prosperity and economic growth. Enough said!
Sep '10
Re: 9-9-9 Questions
Paul Ryan has endorsed the 9-9-9 plan as well, saying it's injecting the kind of thinking we need to get us out of the fiscal mess we're in.
Economically, the 9-9-9 plan is a no brainer and increases the fairness and justice of federal taxation. It eliminates subsidies to politically powerful constituencies from others. Like me, for example, a young professional just starting out who is renting because I may need to move and I don't need that much house. Why am I paying to subsidies to workers older than me who earn much more than I do so they can buy more house? And why am I paying 14% FICA (that's what it really is, the employer portion is a joke) for a retirement plan that I'll never see (I'm 27).
For anyone not recieving subsidies right now, this plan will lead to more money in my pocket. And for those that are recieving subsidies, they'll benefit too from the increased economic growth. My extra income will partially go towards increases savings, and that capital accumulation will lead to growth that benefits everyone.
Oct '10
Re: 9-9-9 Questions
In case you missed it, Paul Ryun just said that 999 is an idea worthy of taking seriously as having "unappreciated merit".
And Arthur Laffer has all but endorsed 999.
But, of course, the REAL expert, Ann Althouse, has already spoken.
Re: 9-9-9 Questions
There is a bigger picture here, on which basis Ryan and Laffer endorse the idea of 9-9-9. Standards of living improve by increasing productivity and stimulating innovation. Combined with an increasing regulatory burden and out-of-control debt and spending, the current tax system stifles growth, at a time when demographic trends make enhanced growth increasingly crucial.
9-9-9 is based on pro-growth principles such as, Tax consumption, not investment, and Broaden the base and lower the marginal rates. The principles, not the details are important. Before anything becomes law, it must clear Congress; hold the House, and Paul Ryan will be gatekeeping on details. Note that Ryan calls 9-9-9 a good starting point for debate.
Whatever final form such a tax reform takes, markets will respond. Don't use static scoring (what you make today is what you'll make if this happens) to figure out where such a reform will leave you. Economics only works like that inside the Beltway. Instead, figure out what the economy needs---growth, innovation---and move boldly in that direction.
Cain would be a leader, and one who understands economics. That's a change I support.
Sep '10
Re: 9-9-9 Questions
Here here! I completely agree with all of your remarks above, David. Well put.
Apr '11
Re: 9-9-9 Questions
I think people should look at how much it costs to do-it-yourself vs hiring someone. The difference is usually substantial. Much of that cost is to cover the taxes so that a profit can be achieved. Now, if said business only has to pay 9% instead of 30%, I would guess at least half of that savings will be passed on to the consumer so that everybody wins. Take that half and pass it back up the line and the end result will likely be huge price reductions across the board.
I realize that people don't like double taxation, but we're already being double, triple, quadruple, etc taxed. The taxes are simple hidden in the system and given titles such as "fees" and "convenience charges" and the like.
Feb '11
Re: 9-9-9 Questions
Frozen Chosen: 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... · Oct 13 at 10:08am
Whoever said that firing up the new-housing market should be a goal of government? Are you saying we should reinflate the bubble?
Also, an amendment would be required to abolish the income tax, but no amendment is required merely to repeal it. The Constitution doesn't require an income tax, it only allows it.
Dec '10
Re: 9-9-9 Questions
David Kreps: ... Ryan and Laffer endorse the idea of 9-9-9. Standards of living improve by increasing productivity and stimulating innovation. Combined with an increasing regulatory burden and out-of-control debt and spending, the current tax system stifles growth, at a time when demographic trends make enhanced growth increasingly crucial.
9-9-9 is based on pro-growth principles such as, Tax consumption, not investment, and Broaden the base and lower the marginal rates. The principles, not the details are important. Before anything becomes law, it must clear Congress; hold the House, and Paul Ryan will be gatekeeping on details. Note that Ryan calls 9-9-9 a good starting point for debate.
Whatever final form such a tax reform takes, markets will respond. Don't use static scoring (what you make today is what you'll make if this happens) to figure out where such a reform will leave you. Economics only works like that inside the Beltway. Instead, figure out what the economy needs---growth, innovation---and move boldly in that direction.
Cain would be a leader, and one who understands economics. That's a change I support.
+1 David, thanks for your expert input!
Feb '11
Re: 9-9-9 Questions
Nick Stuart: .....
The money to be made by tax accountants, tax attorneys, and government workers is so immense they'll fight simplification with a ferocity that would make Ghengis Khan look like Ghandi.
It will never happen. · Oct 13 at 1:24pm
I'm not so sure about that, Nick. Ok, maybe the attorneys and government workers will fight simplification, but don't be so sure about the accountants. Complexity helps business, sure, but it also increases the risk of errors and penalties. Many people are intimidated by any tax form, and they'll continue to employ professional even if things are simplified. Besides, simplification can only go so far; aside from outright loopholes for cronies, many tax laws deal with real life scenarios that arise at the edges of terms like income, cost, expense, profit, loss, etc. The drive and ingenuity employed in trying to avoid paying taxes is great, and no law can address the myriad ways people will come up with. We'll always need to define what is deductible and what isn't, what income is includible and what isn't, what amount of losses should be considered, etc.
May '10
Re: 9-9-9 Questions
As a small business owner, I'd find 999 a total headache. Already I have to charge sales tax (varying by county) to 60 or so customers every month and then reimburse the state gov't, making sure to keep solid records in case I'm ever audited. Not a huge hassle, but a hassle. 999 would make me a federal tax collector, too, with, I'd imagine, even more onerous record keeping. Fun, fun.
Also, in case anybody thinks this would reduce the need for IRS-type enforcement efforts and personnel, you couldn't be more wrong. Look at my face. Would you trust me to properly, honestly reimburse the Feds after I've charged you the tax? Neither would the Feds, and so there'd be paperwork and agents and audits and all that stuff that businesses hate. Again -- fun, fun. (Actually, you could trust me, but there'd be cheating like you wouldn't believe. That's too much money to be running through small, sometimes shady, businesses.)
Finally, combine Cain's 9% sales tax with our state and county 7.75% sales tax and you've got the mother of all temptations for hidden cash transactions.
Dec '10
Re: 9-9-9 Questions
Your situation sounds similar to mine. However, I've never voted based on personal interest. If I did, in all honesty, I'd be a Democrat, trying to get my hands on as much of other people's money as I could.