The Herman Cain Tax Plan

The Republican Primaries are in full swing and, no big surprise here, the state of the economy is the focus of their campaigning. So, just what do these candidates think we should do about the state of our tax system? Every week, I will cover a candidate’s tax plan. This week, I will discuss the Republican frontrunner, Herman Cain.

Just What Is 9-9-9?
Herman Cain definitely has the most straight forward tax plan out of all the candidates. A small paragraph can completely sum up the 9-9-9 tax plan. It’s a 9% business flat tax, 9% personal flat tax, and 9% national sales tax. Most people hear that single digit percentage and think it will save them a great deal of money and complications. Unfortunately, that’s not true.

Currently, the corporate tax rate is close to 40%, and Cain intends to drop it down to 9%. He also will completely eliminate employee payroll taxes with this tax plan. So, just how will he make up for this huge drop? With your personal taxes and a new national sales tax!

Every single American will be expected to pay 9%. Currently, the rather small percent of our country considered the wealthiest citizens are paying somewhere around 35% of their income in taxes. So, this would be a greatly appreciated tax cut for them.

However, 49.5% of our country pays absolutely no taxes at all. Also, 84% of taxpayers pay less in personal taxes than they would with this plan. And, the only two deductions that would be allowable would be charitable donations and living in the inner city (what he refers to as the “empowerment zone”). You can see how suddenly getting 9% of the income that half the country wasn’t giving before would make up for the dramatic business tax cut.

The brand spanking new 9% national sales tax may not sound that bad. However, take into account that this does not wipe out your local and state sales taxes. That’s right! That’s an extra 9% added onto everything else. On top of that, experts say that this will actually hit the lower and middle classes hardest. Not all that surprisingly, the wealthy spend a much smaller percentage of their money than those with a smaller income.

Will It Work?
If the 9-9-9 tax plan works, it should actually generate $2.16 trillion. On paper it looks like it could greatly lower the national debt. However, it has not been taken seriously at all by most tax experts. Many of them refer to it as a pizza special, referring to Cain’s background as a pizza chain businessman. Others have pointed out that the 9-9-9 tax plan is remarkably similar to the video game Sim City 4 Default Tax Plan.

Also, there is the fact that Herman Cain was hit with a tax lien himself in 2008 for a two year old Georgia state tax debt. Even if he had a valid excuse for not paying that year (he was treating stage 4 cancer), it does seem unlikely that he is a tax expert. He does have consultants, but his chief financial advisor is an investment banker with a Bachelor’s in accountancy. There is a big difference between that and an economist. There is an even bigger difference between that and a nationally acknowledged economist. And, the leading economic experts all seem to agree that Cain’s plan simply won’t work.

Cain doesn’t even see his 9-9-9 tax plan as a permanent solution either. He only plans on using it for a year or two. After that, he feels that the country should revert to the FairTax plan proposed by Leo Linbeck Jr. in 1996. The FairTax plan has been renamed by many as the Flat Tax plan, because many economists also believe that this plan will hit the poor and middle class the hardest.

As you can see, Cain’s 9-9-9 tax plan does have its benefits. However, it seems that it would hurt more taxpayers than those it helped. However, it is pretty rare that a candidate actually employs the tax plans he touts after he has become president.