Herman Cain's 999 Plan Revisited

Image by Gage Skidmore via FlickrI just got home from work, and am waiting for dinner to be ready and then to watch the GOP Presidential debate tonight on CNN.  I have mentioned here before how much I like Herman Cain and want to know more about him.  I still have not made up my mind which of the current Republican candidates I will vote for in the primaries, though I am currently leaning towards Cain but that could change.

About a month ago, Herman Cain first brought up his 999 tax plan.  My initial thoughts were that I found it intriguing, but was concerned about how the 9% national sales tax aspect would impact me.  Under Cain's plan there would no longer be a payroll tax, so my combined FICA and income tax would be lower.  I expect tonight that during the debate Cain will be questioned heavily on the plan, especially the sales tax portion.

As Cain has risen in the ranks, his 999 plan has been getting a lot of attention.  So naturally, I have been thinking about the 999 plan a lot more in the past few days.  If you look at Cain's website, Cain states that the goal of the 999 plan is a transitional plan to implementing the FairTax.  The FairTax is strictly a consumption tax and eliminates payroll and income taxes and repeals the 16th amendment, abolishing the IRS.

One of the things that Cain has talked about during the debates is the 15.3% payroll tax that everybody faces that would be eliminated under the 999 plan.  The problem with that is that individuals only pay half of that (assuming the normal payroll tax rate when the current 2% tax break ends at the end of the year) while the employer pays the other half. One of the assumptions made under the FairTax is that the portion paid by the employer would end up in the paycheck of the employees. 

I can only assume that Cain is using some of the FairTax assumptions on the payroll tax going towards salaries in his 999 plan.  If those assumptions were to be true, then I can see it being of benefit to most folks, with the exception of the lower income groups.  Unfortunately, you know the old saying about when you assume you make an ass out of you and me.

If those assumptions do not hold true, then you can pretty much be assured that a lot of folks would be paying more in taxes.  I have used info from the Tax Policy Center in the past when I have made posts regarding tax issues.  They have done one of the first extensive examinations of the 999 plan.  Their analysis says that 84% of the country would end up paying more in taxes. About the only group that would benefit would be the higher income brackets.  To quote Cain from one of the debates, "That dog won't hunt."

I fully expect to hear a lot about the 999 plan during tonight's debate.  There are a lot of questions that need to be answered about the details of the plan.  Now, I am not one of those who believe that the rich are not paying their fair share of taxes.  However, a plan that would impact lower income citizens negatively, while benefiting higher income citizens just won't fly.  In that respect, Rick Santorum was correct in the last debate when he said the 999 plan had no chance of passing.

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Herman Cain's 999 Plan

Image by Gage Skidmore via FlickrI first heard of Herman Cain in 2007 when Neal Boortz's book "Somebody's Gotta Say It" came out.  I read Boort's book and started listening to his radio show on the internet in my office.  Cain was a frequent guest and substitute host on Boortz's show.

Herman Cain has been a big proponent of the FairTax as advocated by Boortz.  In the past, I have generally been a supporter of the FairTax plan, though I do have some questions regarding some of the assumptions and the transition to the FairTax.  Cain's support of the FairTax is one of the reasons he intrigues me as a potential Presidential candidate.

Under the FairTax, all payroll (FICA) and federal income tax withholding is eliminated, along with eliminating the IRS.  You get to keep your entire paycheck.  You also get a prebate each month based on the size of your household.  Taxes are collected through a national consumption tax of 23% embedded in the cost of all goods.  It is designed to be revenue neutral.

During the recent GOP Presidential debates, Herman Cain has introduced his 999 plan to help the economy.  The plan imposes a 9% income tax on everybody, a 9% tax on business, and a 9% national sales tax.  It eliminates  the payroll tax for everybody.  Cain's 999 plan is designed to be a transition to the FairTax by, as he put it, bringing the supporters of the FairTax together with the supporters of the Flat Tax.

I heard Cain yesterday on the Sean Hannity radio program discussing the meat of his plan.  On the surface, I liked the general premise, however, the more I think about it, the more questions that I have.  I would like to see some sort of calculator similar to the FairTax calculator to ascertain whether or not the plan would negatively impact me financially.  I always do a little better under the FairTax than under the current system.

With the elimination of the payroll tax and the flat 9% rate on income, I would lower my combined tax burden considerably.  The remaining question would be whether or not the new 9% sales tax would in the end cause my total tax burden to increase or not.  It could be close.  Still, Cain is one of the few people out there with specific plans and proposals as opposed to making general statements of "we need to reform the tax code." 

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The Taxman Commeth

Image by jeku arce via Flickr

Tomorrow is tax day.  Wouldn't it be great if:

1. April 15th was just another spring day
2. You could keep your entire paycheck with no taxes withheld
3. Taxes would be simple and fair
4. Taxes were based on how much you spend, not how much you earn
5. You didn't have to worry about an IRS audit
6. All tax loopholes were eliminated
7. Businesses wouldn't have to pass on taxes by hiding it in the price you pay
8. People that do not report income pay their fair share
9. You receive a prebate to help pay for necessities up to the poverty level

All of these things could be a reality if we would only pass the FairTax.  You can check out what the FairTax could do for you by visiting their FairTax calculator.  This country was founded in part because of a tax revolt, it is time for a new revolution.

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Join the Online Tax Revolt

Image via Wikipedia

In the past, I have expressed my support for the FairTax that would eliminate the Federal Income Tax, payroll taxes, and would give you your full pay check from your employers.  The Federal Income Tax would be replaced with the FairTax which is a consumption tax that is designed to be revenue neutral.

Regardless of whether or not you think the FairTax is the answer to America's woes, I think most people can agree that the tax system as it currently is comprised is broken.  If you are among those who thinks the tax system is broken and a burden on our economy, the folks at Americans For Fair Taxation have launched an Online Tax Revolt.

The Online Tax Revolt is a virtual march on Washington DC.  At the site, you enter your name, location, and select an avatar to represent you.  Your avatar, along with over 50,000 other so far, will appear on a Google map of the country. As each day passes, the avatars will march to Washington where all will meet on April 15th.

In addition to the virtual march, there will be a rally in DC in support of tax reform.  I have signed up and my avatar is on the move.  Take some time to visit the site and if you decide to sign up, leave a comment and let me know.  Be a part of the movement to make April 15th just another day on the calendar.

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An Inconvenient Tax

Let's face it. Nobody likes taxes, except politicians.  Obviously, the Federal Government needs to raise capital for its legitimate purposes. Our tax system is so complex that even the people who write the code have difficulty, just ask Charlie Rangel.  There are a number of different ideas out there for reforming the tax code, but the one I support is the FairTax. 

Later this year, "An Inconvenient Tax," a new document on the history of the income tax will be release.  The film discusses the problems with the current system and explores options for reform.


An Inconvenient Tax - Official Trailer from Life Is My Movie Entertainment on Vimeo.
An Inconvenient Tax sheds light on one of America’s messiest problems — a fundamentally broken tax code that affects every part of people’s lives. With the U.S. Congress making over 16,000 changes to the tax code in the last two decades alone, many Americans want something better, but few know where to start. This feature-length documentary film reveals the many ways Congress uses the tax code to achieve political goals that have nothing to do with raising revenue. It also tackles the controversial issue of tax reform through a non-partisan presentation of U.S. tax history and current proposals to fix the code. In a time when America faces fiscal crisis, An Inconvenient Tax brings a crucial exploration of the tax code to the big screen.

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FairTax-Part 1

Earlier this week, I finally received the last tax form I needed to complete my taxes.  Fortunately, I am getting both a state and federal tax refund.  

While it is nice to get a refund on my taxes, I would rather have all the money I earn in my pocket.  The FairTax accomplishes that.  I first heard about the FairTaxwhen I read Neal Boortz's book "Somebody's Gotta Say It."

I wanted to see if I would really benefit by the FairTax, so I used the FairTax Calculator.  According to the calculator, if the FairTax were implemented, I would have 4.34% more spendable income, $1763 more purchasing power, and $2198 less in Federal Taxes.  

I would encourage you to try out the FairTax Calculator.  If you find like I did that you would benefit from the FairTax, write your Congressman and ask them to support the FairTax.    

A Bailout Plan I Can Support

Congressman Louie Gohmert (R-TX) has a new bailout plan for the economy that I can really support. After seeing that Congress and the Bush administration were committing nearly $7.7 trillion in bailout money to failing companies, and comparing that to the $1.2 trillion that the U.S. Treasury is estimating to receive in the 2008 tax year, Congressman Gohmert proposed a new, less expensive program: NO 2008 TAXES and a refund of any taxes withheld to date. Just imagine what that influx of funds back to all of us regular folk would do for the holiday shopping season, not to mention the ability to help those who have fallen behind in their mortgages.

Realizing that this proposal might be a little too aggressive, Congressman Gohmert came up with another proposal, a two month tax holiday for January and February of 2009. His new proposal calls for no federal income tax or social security taxes to be withheld for the first two months of next year. American Solutions estimates that Americans pay about $167 billion per month in income tax and FICA tax, so the cost of the tax holiday would be $334 billion. Gohmert proposes using the remaining $350 billion that remains in Treasury Secretary Henry Paulsen's original $700 billion bailout.

The first $350 billion has done nothing to help the economy. In fact, a lot of the money has not been used for it's original purpose. Some banks have used the influx in capital not to shore up the credit markets, but to aquire other, smaller competition. Then there is all of the other news about how some of these struggling enterprises are spending their money. If you really want to stimulate the economy, let the people who have earned the money decide where it should go.

If you think this is a better use of the money that has already been committed, then I encourage you to write your Congressman in support of Congressman Gohmert's tax holiday proposal. Of course the Democrats probably won't support such a proposal, because in their twisted mind it gives a bigger tax break to the evil rich, even though everyone gets a 100% tax cut for two months. I would prefer to see the FairTax implemented to replace the current tax structure, but any opportunity to get money back into our hands is better than what we have.