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November 10, 2011

Can We Get Back To Criticizing Herman Cain On The Issues Now?

Remember how we had to pass Obamacare to find out what was in it? What about how the reason for its lack of popular support was that Obama himself just hadn't done a good enough job of selling it? Well Herman Cain has a message for you about 999:

Herman Cain at Big Sky Diner on his 999 plan: "When you understand it, you will demand it."

See, the problem isn't the plan; it's you. You object to giving the federal government a sales tax to go along with the income tax? Sheer idiocy. You think moving from taxing businesses on their net income to taxing them on value added opens a great big Pandora's box? Shut up and read the plan.

Honestly, I think maybe the biggest problem with 999 is that Cain doesn't understand it all that well. Here's one example drawn from the transcript of last night's debate:

MR. CAIN: My proposal is the only one that solves the problem by throwing out the current tax code, which has been a mess for decades -- (applause) -- and we need to put in something different that I've proposed: 9-9-9. It satisfies five simple criteria.

It is simple. The complexity costs us $430 billion a year.

It is transparent. People know what it is. There are thousands of hidden "sneak attaxes" in the current tax code. That's why I want to throw it out.

It is fair. The reason it's fair is because of the definition in Webster, which says everybody gets treated the same, all businesses get treated the same, not having Washington, D.C., pick winners and losers. This is why I have proposed a bold plan of 9-9-9: 9 percent business flat tax, 9 percent tax on personal income, a 9-percent national sales tax. It treats everybody the same. And it will boost this economy.

MS. BARTIROMO: How do you ensure that when the government needs more revenue, that the sales tax doesn't go up and that plan doesn't turn into 19-19-19?

MR. CAIN: Tax codes do not raise taxes, politicians do. (Cheers, applause.) And as long as it's visible, the people will hold the politicians' feet to the fire. It's not the code that raises taxes, it's the politicians. Because the code -- because the approach 9-9-9 will be very visible, the American people are going to hold the rates at 9. (emphasis added)

The bolded parts give the impression that every business would be taxed identically, but that's simply not true. As a reminder, the 9 percent business flat tax is calculated as follows (with apologies in advance for introducing math at the HQ):

  • Gross income less all purchases from other U.S. located businesses, all capital investment, and net exports.
  • Empowerment Zones will offer deductions for the payroll of those employed in the zone

Obvious winners under 999 totally not picked by Washington D.C.: Capital intensive business, businesses that purchase goods based on location of supplier, net exporters, and businesses that employ people in empowerment zones.

Obvious losers under 999 totally not picked by Washington D.C.: Labor intensive business, businesses that purchase goods based on factors other than location of supplier, net importers, and businesses that employ people outside of empowerment zones.

Somewhere in between falls a range of effective business tax rates, some in excess of 100% of net accounting income yet all totally transparent according to Cain.

Yeah, I can see people just lining up to demand this once they understand it.

Bartiromo's follow-up question about 19-19-19 was a good one (oddly enough). Cain's answer was naive beyond belief.

I'd point out to Cain that the current tax code, which has been a mess for decades, didn't get this way overnight. It started off simple but over time politicians put in provisions to favor things like, say, trade protectionism and inner-city revitalization. But what do I know?

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posted by Andy at 01:32 PM

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