Dial 9-9-9 for Stupidity!
All last week Mr. Cain had his moment in the sun, and then last night in the Republican debates (which we should probably begin to call elephant fights), the other candidates went after him and he was hammered on the details of the plan during the course of the evening.
Mr. Cain insists that his 9-9-9 plan is simple, but the reality is that it is anything but simple. Even after trying to get a more comprehensive understanding of it by going to his website, I am still convinced that the only ones who will benefit from the plan are the wealthy.
I thought I understood when I wrote last week's blog that the plan proposes a nine percent income, sales and corporate tax rate. The corporate tax however turns out to not be a simple reduction in the corporate tax raterather it is a value added tax on "Gross income less all purchases from other U.S. businesses, all capital investment and net exports."
In any event, Herman Cain's 9-9-9 plan is not what he ultimately has in mind for American tax policy. It is but the first step of a two-step process to replace most federal taxes with a 30% national sales tax, a version of the so-called "Fair Tax." Why not then go directly to the Fair Tax? Why this nine percent transitional step? Candidate Cain's statement does not really say, though it does imply that the Fair Tax is at present too unpopular to implement. "Amidst a backdrop of the economic renewal created by the 9-9-9 plan," Mr. Cain boasts, "I will begin the process of educating the American people on the benefits of continuing the next step to the Fair Tax."
While this whole 9-9-9 scheme of Mr. Can makes for a great slogan, it has little else to be taken seriously. In particular is Mr. Cain's inability to choose between a sales tax and a Value Added Tax (VAT) is confusing. The chief advantage of the sales tax over a VAT is that the latter is considered easier for the government to raise because it is hidden out of scrutiny. The chief advantage of the VAT over the sales tax is that it is easier to enforce without providing an environment in which a black market would thrive while simultaneously reducing the risk of taxing business-to-business purchases. Choosing both as a transitional step would mean creating a VAT with none of its rewards. In the first stage, the government would get a new money machine, and in the second it would supposedly destroy that ATM and choose something more difficult to enforce.