Herman Cain's 999 Plan Raises Taxes on 84% of Americans

[thehobbydude]

Quoting the article "According to the Tax Policy Center, households with incomes below $30,000 would have, on average, between 16% and 20% less in after-tax income than they do today. By contrast, households making more than $200,000 would see their after-tax income grow by between 5% and 22% on average. But the majority of the highest income households would get a tax cut. For instance, 95% of those with more than $1 million in income would receive an average tax cut of $487,300."

Just curious what our tax experts on the board think about the Tax Policy Center's analysis. I personally have a problem with the 16% to 20% increase on households with incomes below $30,000 while those making over $1 million would see an average tax cut of $487,300.

[CuteOldGuy]

I think it is bullshit.

[waverunner234]

Every Tax System which shifts Income Tax to Sales Tax will always favor the rich and wealthy.

Maybe a better tax system would be:
Get rid of all federal taxes and replace it with a tax on commodities.
Tax Oil, Gas, Coal, Wind and Solar (who gives a shit if gas = $10 per gallon if there is no income tax), Gold, Copper and so on. All Americans own the stuff that is found in the soil and in the air together.
Tax unfavorable products like cigarettes, booze and mariuana (and fat food?).
Tax the tourist industry and other industries that are non necessaries.
Tax imports from low cost countries that manipulate their currency like China. (Why follow trade agreements if the rules are violated by the other party?) And boost our manufactory industry.
Tax companies that outsource jobs.
Get rid of Earned Income Credits, in stead raise minimum wages so that the credit is not necessary.
Use every opportunity to become energy independent.
Lots of other possibilities if you give it some thought.
And make sure that total federal revenue is enough to finance health care for all.
Let other countries pay heavily if they want their students in the US education system and take them back as soon as they have their Ph.D. or college degree.
Let non-violent prisoners work community service and close half of the jails

Oh my god the opportunities are endless

[TexTushHog]

I read somewhere that apparently the break even point between the current system and 9-9-9- is somewhere between $170,000 and $250,000//year depending on your savings rate.

But I do think that the numbers on what it saves those making over $1,000,000 are too high. I know a fair number of folks with incomes in that range and they spend a bigger percentage of their income than one might imagine. But I guess the average number depends on how much over $1,000,000 the average income of $1,000,000 is. But it would be interesting to see if they estimate a flat amount spent by each household or a percentage of income that declines as income rises. I know that using the later methodology would not really change the central point, but I do think it is a more realistic method and would slightly reduce the $487,300 number.

[thehobbydude]

As I stated in another post, fairness depends on where you sit. If you're at the bottom 20% fairness means that you don't want to pay federal taxes because you're already poor. Fairness to the top 20% means that the bottom 20% better pay because you're tired of paying for them. Realistically, the 47% that the top 1% want you to believe that don't pay taxes actually do pay taxes in many ways - sales taxes, fuel taxes, property taxes (even if they rent, part of their rent goes towards property taxes), etc. What they don't pay is federal taxes and that's basically because they're either too poor or have enough money to pay people to find loopholes to avoid paying taxes. I've read that some of the 47% are in the $1 million annual income range. With the US having a median income of $43K, you bet that the vast majority of the 47% are just too poor to pay taxes. In my opinion if you increase taxes on those folks they'll have even less spending power and will cut back on consumption. Can you imagine how much damage to the economy that would make if 1/3 of the population cut back even further because their income is further reduced by 20%? Sometimes the medicine is worst than the disease but unfortunately we find out the hard way if people continue to support Herman Cain without really understanding his proposals.

[CuteOldGuy]

Dude, you're the one who doesn't understand. According to many economists there is a 23% embedded tax in everything we buy. These are compliance costs and taxes paid by companies down the supply chain which have to be included in the price. When the tax code is abolished, those embedded taxes disappear, resulting in a drop of the general price level. Total prices would go down, even with the visible 999 taxes being added. Better for everyone.

[Sensia]

Originally Posted by thehobbydude

Quoting the article "According to the Tax Policy Center, households with incomes below $30,000 would have, on average, between 16% and 20% less in after-tax income than they do today. By contrast, households making more than $200,000 would see their after-tax income grow by between 5% and 22% on average. But the majority of the highest income households would get a tax cut. For instance, 95% of those with more than $1 million in income would receive an average tax cut of $487,300."

Just curious what our tax experts on the board think about the Tax Policy Center's analysis. I personally have a problem with the 16% to 20% increase on households with incomes below $30,000 while those making over $1 million would see an average tax cut of $487,300.

I think these videos sum up some of the problems with a flat tax:

Economist Paul Krugman Flat Tax disaster for Americans

Chart Graphs Flat Tax and Rich get Richer

People hit hardest will be the poor and middle class who are already hit hard financially in addition to major unemployment. Only the rich stand to gain from a flat tax.

[Good one]

Well I'm middle class (90k) and right now I'm in a 25% tax bracket. The sales tax here is already 8.5%. I still pay into the IRS every year, then there is the state tax, social security tax, child support,ect. So basically what I'm saying is that I lose a little more than half of my pay before I ever even get to pay my bills. I think the 9-9-9 tax plan would be a big help to me and others in my situation. Just my opinion.

[pbaddison]

The goal should never be to make any tax code "fair". The goal should be to make it effective - to allow the government to pay for the public services and works that it needs to provide while impeding as little as possible on commerce and economic growth. To that end, any tax code increasing the burden on lower incomes works in opposition to effectiveness. Consumerism is what drives the economy, and reducing the after-tax incomes on the class levels that engage in the highest level of consumerism is detrimental to the country as a whole, impedes economic growth, and leads to a fragile economy.

[Jackie S]

I like Herman Cain. He is a no bullshit type of guy who has a knack for success.

But here is what is wrong with this plan. We might start out at 9-9-9, but knowing the Federal Governments never ending quest to bilk the citizenry out of every penny possible, in a few years it will be 12-12-12, then 18-18-18, then 24-24-24, and so on.

I still say that the best way to fix our tax system is to simply take away ALL deductions, you pay what ever bracket you fall into, and treat all income the same. And the best way to fix Social Security is to simply mandate that EVERYBODY contributes, and there would be no cap as there is now.

[WyldemanATX]

Mandate that all Government elected officials contribute and not steal from it. That is one way to fix SS.

I say get rid of the IRS altogether and institute the fair tax. Then everyone pays taxes based on how much they buy including illegals.

[Munchmasterman]

Originally Posted by Wyldeman30

Mandate that all Government elected officials contribute and not steal from it. That is one way to fix SS.

I say get rid of the IRS altogether and institute the fair tax. Then everyone pays taxes based on how much they buy including illegals.

The "fair tax"?

Sales taxes are the most unfair and regressive taxes that exist.

Get rid of the IRS?

Who would collect the taxes?
Who would enforce whatever tax code that is used?
Who would keep records?

Most of all, who would everyone be pissed at?

[Munchmasterman]

Originally Posted by Jackie S

I like Herman Cain. He is a no bullshit type of guy who has a knack for success.

But here is what is wrong with this plan. We might start out at 9-9-9, but knowing the Federal Governments never ending quest to bilk the citizenry out of every penny possible, in a few years it will be 12-12-12, then 18-18-18, then 24-24-24, and so on.

I still say that the best way to fix our tax system is to simply take away ALL deductions, you pay what ever bracket you fall into, and treat all income the same. And the best way to fix Social Security is to simply mandate that EVERYBODY contributes, and there would be no cap as there is now.

This is a better solution than a universal sales tax.

[budman33]

Originally Posted by CuteOldGuy

Dude, you're the one who doesn't understand. According to many economists there is a 23% embedded tax in everything we buy. These are compliance costs and taxes paid by companies down the supply chain which have to be included in the price. When the tax code is abolished, those embedded taxes disappear, resulting in a drop of the general price level. Total prices would go down, even with the visible 999 taxes being added. Better for everyone.

To think that corporations will rapidly cut prices based on this 'embedded tax' in a Cain system is foolish. they will post record profits instead... Kinda like most of them are doing now.

[TexTushHog]

Originally Posted by Good one

Well I'm middle class (90k) and right now I'm in a 25% tax bracket. The sales tax here is already 8.5%. I still pay into the IRS every year, then there is the state tax, social security tax, child support,ect. So basically what I'm saying is that I lose a little more than half of my pay before I ever even get to pay my bills. I think the 9-9-9 tax plan would be a big help to me and others in my situation. Just my opinion.

I haven't run the numbers, but I'd be shocked it your effective tax bracket is 50%. According to the tax estimator that I just found, if you're making $90k, married and have two kids, your Federal income taxes are $8,000 even if you don't itemize. Under the 9% plan, they would be $8,100. Add the additional 9% sales tax (it's not like the States and cities are going to repeal their 8.5% existing sales tax) and you're already behind. And the sales tax is on everything your spend, which is probably about $90,000-$8,100 income tax - $child support -- in other words everything else you make. Finally, you now also no longer get to deduct your State taxes. And your child support doesn't change. Tell me again how this helps you?

And if you think 9% is revenue neutral, you're dreaming, especially now since today Cain finally decided that anybody below the poverty line was not going to pay any income tax. That's tens of million of folks. Where is he going to get the money to replace that? So it's probably no 9-9-9, it's probably more like 12-12-12 or 15-15-15.

Income tax estimator:

http://www.calcxml.com/do/inc02