COMMENTARY | Shortly after everyone began taking presidential hopeful Herman Cain seriously (just after the Florida Straw Poll) as a viable Republican Party nominee for 2012, his 9-9-9 tax plan became headline news as questions were raised about what it proposed as opposed to what the candidate said it was designed to do.
According to the Tax Policy Center, a nonpartisan Washington think tank that had initially noted the tax plan looked like a regressive tax system, it does not lower taxes for most Americans. In fact, under the Cain 9-9-9 tax plan, which would eliminate the current tax code, taxes would increase for 84 percent of Americans.
As incongruous as it might seem, Rep. Michele Bachmann had been correct in her assessment that the "devil is in the details" of the 9-9-9 plan. But, then, she was a federal tax lawyer.
"It's very, very regressive compared to the current system, and that's largely because we're exempting capital gains, and we're taxing your spending with the sales tax," Roberton Williams, a senior fellow at the Tax Policy Center, said of Cain's proposal. "People at the top end don't spend all their money and they get a lot of capital gains, so they are doing pretty well here."
And those hit hardest? Those that could least afford it, according to the study. Households making $10,000 to $20,000 (below the poverty level of $22,350 annual income for a household of four) would see their tax burden rise by 950 percent.
"You're talking a $2,700 tax increase for people with incomes between $10,000 and $20,000," Williams told the Associated Press. "That's huge."
And what about the wealthy, the so-called 1 percent? According to the Tax Policy Center, they would receive enormous tax cuts from the 9-9-9 tax plan. Those enjoying $1 million or more in income per year would see their tax burden eased by half.
In fact, overall taxes would begin to go down (on average) at the $50,000 to $70,000 income level, where the average household would pay $4,326 per year, while those making less, from $40,000 to $50,000, would pay $4,400 per year.
Bear in mind a large proportion of these families pay only payroll taxes, nothing in income taxes and even receive an income tax return check from the government. Part of Cain's proposal, the 9 percent consumption tax, would be flat, nonreturnable. Taking away tax deductions would further impact the gross income amount.
For a family of four with a household income of $20,000, where most of its expenditures will be for services and goods, that $2,700 tax burden just dropped their expendable income to $17,300 -- some of which will go toward property taxes, state taxes, federal taxes not eliminated by Cain's plan like the federal gas tax, universal phone taxes and the luxury taxes on alcohol, tobacco and firearms.
The burden on the poor would suddenly get a lot heavier. The plan, which is also a proposal for "economic growth," would actually leave wage earners with less money to spend, less money to expand the economy.
Which is not what Cain has been saying about his plan. He has touted the plan as fairer than the current tax code, where most will pay less than now, including the wealthy. But many have challenged his claims and with the Tax Policy Center's study findings, he will have a more difficult time selling his simple flat tax plan.
Called out by his fellow Republican presidential contenders at the presidential debate on Tuesday, Cain defended by saying, "The reason our plan is being attacked so much is because lobbyists, accountants, politicians, they don't want to throw out the current tax code and put in something that's simple and fair. They want to continue to be able to manipulate the American people with a 10 million-word mess."
Still, the current tax code -- the "10 million-word mess" he was referring to -- is far less onerous on the nonwealthy and relatively more fair in its progressive structure. It is the basis for so many "lobbyists, accountants, politicians" defense of the tax code in comparison to the 9-9-9 plan. Even the leader of conservative Americans for Tax Reform's Grover Norquist, who has called for the elimination of taxes and has had hundreds of congressional legislators sign a pledge promising they will do nothing to raise taxes, told ABC's "Top Line" that Cain's tax plan was "a very dangerous project" due to a fair tax implementation that Norquist believes is too open-ended and would allow for additional taxation.
Ultimately, with so many saying the plan is burdensome on the poor, a windfall for the wealthy, there seems to be little to commend the proposal. When 84 percent of Americans would pay more taxes, it would appear Cain was telling the truth about those demonstrators of Occupy Wall Street that he said he did not understand. For they are the 99 percent of Americans who are on the disproportionate end of the income scale. The Cain plan would ensure at least 84 percent of them remained as part of that 99 percent.
Cain has stated the demonstrators had misplaced their blame. Instead of blaming Wall Street, they should blame themselves for being jobless and poor. Attempting to shift at least some of the blame at the debate, Cain said he would stand by his statement.
Texas Congressman Ron Paul quickly disagreed with Cain. "I think Mr. Cain has blamed the victims," he said. "There's a lot of people that are victims of this business cycle. We can't blame the victims. But we also have to point -- I'd go to Washington as well as Wall Street, but I'd go over to the Federal Reserve. They create the financial bubbles."
But Cain's plan would do more than just blame the victims, regardless of the fault of Wall Street, Washington or the Federal Reserve. At least for 84 percent of those victims of the financial crisis, the current economy, the mortgage meltdown and other recession-caused problems, it would increase their taxes.
And the only "economic growth" the plan would see would be the tax savings incurred by those that have the least to lose.
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