Why Herman's 9-9-9 Tax Economic Plan Is Good For America!!
HUMAN EVENTS – Famed supply-side economist Art Laffer told HUMAN EVENTS that Cain’s “9-9-9″ plan was a pro-growth plan that would create the proper conditions for America’s economy to grow and thrive again.
“Herman Cain’s 9-9-9 plan would be a vast improvement over the current tax system and a boon to the U.S. economy,” Laffer told HUMAN EVENTS in a statement. “The goal of supply-side tax reform is always a broadening of the tax base and lowering of marginal tax rates.”
Added Laffer: “Mr. Cain’s plan is simple, transparent, neutral with respect to capital and labor, and savings and consumption, and also greatly decreases the hidden costs of tax compliance. There is no doubt that economic growth would surge upon implementation of 9-9-9.”
Laffer also said that “such a system provides the least avenues to avoid paying taxes, yet also maintains the strongest incentives for work effort, production, and investment.”
Paul Ryan Supports Herman Cain's 999 plan
“We need more bold ideas like this because it is specific and credible,” Ryan said. “I’m more of a flat-tax kind of a guy.”
The budget chairman went on to say that ideas like Cain’s plan could help shape the debate over tax reform moving into 2013.
“It’s great to see such bold ideas,” Ryan told TheDC.
WHAT IS 9-9-9?
- A 9 percent business flat tax - Gross income less all investments, all purchases from other businesses. And no double taxation of dividends
- A 9 percent individual income flat tax - Gross income less charitable deductions
- A 9 percent national sales tax - This significantly expands the tax base which helps everybody. Applies only to new items. Used items are not taxed.
- 9/9/9 throws out current tax code, and replaces it with 9% income tax, 9% corporate tax, and 9% sales tax.
- Rates are EASY to understand….no more guessing
- It eliminates the estate tax and payroll taxes.
- Provides simplicity, it allows for deductions to charitable contributions, all businesses are treated the same (C-Corporation, LLC, S-Corporations will all pay 9% on corporate taxes). Eliminates corporate loop holes. No more special favors
- The 9% national sales tax will have no impact on state or local sales taxes. The 9% sales tax does not affect purchases of used equipment. It replaces the entire 15.3% federal payroll tax that is currently levied on your paychecks.
- No limits on supplemental income earned while on Social Security.
- 9-9-9 is a bridge to the Fair Tax and eventual elimination of the IRS. In Phase 1, the IRS exists, but much smaller. Phase 2 of Mr. Cain's economic plan calls for elimination of the IRS and a complete implementation of the Fair Tax.
- Revenue-neutral, we currently spend $430 billion on income tax filing and compliance as a nation. Every dollar you send to the IRS, it costs thirty cents to send it in.
Achieves the broadest possible tax base along with the lowest possible rate of 9%.
Ends the Death Tax.
A LITTLE TAX HISTORY
- In 1913, the Sixteenth Amendment to the United States Constitution made the income tax a permanent fixture in the U.S. tax system.
- In fiscal year 1918, annual internal revenue collections for the first time passed the billion-dollar mark, rising to $5.4 billion by 1920. With the advent of World War II, employment increased, as did tax collections—to $7.3 billion. The withholding tax on wages was introduced in 1943 and was instrumental in increasing the number of taxpayers to 60 million and tax collections to $43 billion by 1945.
- In 1986, the tax code was amended to flatten the tax structure. The
top tax rate was lowered from 50% to 28% while the bottom rate was
raised from 11% to 15%. Many lower level tax brackets were consolidated,
and the upper income level of the bottom rate (married filing jointly)
was increased from $5,720/year to $29,750/year. This package
ultimately consolidated tax brackets from fifteen levels of income to
four levels of income. However, the tax code has been amended and
slowly broadened for various reasons over time. The biggest reason is
an attempt to widen the tax base and increase tax revenues. However,
these changes have also made the code more complex, given special
breaks to certain groups, and made if a lot more difficult to do your
9-9-9 vs. FairTax
Herman has been a long time FairTax supporter. So, why is he proposing 9-9-9 instead of the FairTax. TIME, EDUCATION, and AMENDMENTS!!
9-9-9 is Phase I of Herman's economic vision. We need these changes now so we can jump start the economy.
- AMENDMENTS - Why can’t we go straight to the FairTax - the Sixteenth Amendment to the United States Constitution made the income tax a permanent fixture in the U.S. tax system
- EDUCATION - Public has to understand the FairTax…opponents will say it adds 30% tax on top of everything.
- TIME - The FairTax requires that the 16th amendment be
repealed/replaced. Before an amendment can take effect, it must be
proposed to the states by a two-thirds vote of both houses of Congress
or by a convention called by two-thirds of the states, and ratified by
three-fourths of the states or by three-fourths of conventions thereof,
the method of ratification being determined by Congress at the time of
proposal. Just taken at face value, it will take some time because one
party (namely, Republicans) will have to control the Senate, the House,
and the presidency. NOTE: The average time to amend the US
Constitution was beginning to get so long that a 7 year deadline of was
implemented for the last few amendments!! SEE: Deadline imposed on
ratification process here: http://en.wikipedia.org/wiki/Article_Five_of_the_United_States_Constitution
Bottom line is this...it will take some time to get the FairTax implemented. You cannot implement it with the 16th amendment in place (which makes personal income tax permanent). And, currently, neither party has a super majority (and we won't even discuss 3/4 of the states...though it is more doable at this time). Herman is smart to use existing code to get a national sales tax in place, reduce the other taxes, and then shoot for implementing the broader goal.
As for a realistic time frame, one would assume that his first year in office would be getting 9-9-9 in place. That means you are looking at educating the public in year two. And, then trying to get it in place by years three or four. But, that all depends on the which party is in power
CAN THE RATES CHANGE?
What if we do have get a supermajority that wants to raise rates? Simply....We the People dictate lower taxes, and Congress tends to listen very closely when it comes to the pocketbook (very similar to what they did for the Bush Tax Cuts recently). And, Congress is leery of creating a dramatic impact on the US economy. The developed economies seem to agree on the most that can be extracted through taxes is about 23% of Gross Domestic Product. Our combination of property, payroll, corporate, and personal income taxes was averaging at approximately 24% in 2009 (According to the OECD). However, note that the average has been stable with a few percentage points for DECADES.
So, the most likely scenario would be for the tax rates to fluctuate up or down very slightly. But, even that move would require a 2/3 majority Congress (9-9-9 proposes that 2/3 Congress have to approve a rate change) which is tough to accomplish. Given the way Congress likes to give themselves an “out,” you're more likely to see a deadline for the the tax rates to expire and then a renewal process similar to what we saw with the Bush Tax cuts.
DOES IT BURDEN THE POOR?
Here is a plan from a man who rose from the roots of poverty. Does ANYONE actually believe he wants to unfairly burden the poor. In all seriousness, let's break it down this down some.
Used items - not taxed (especially benefits poor who buy from clothes on consignment, Goodwill, Salvation Army,etc.; Used cars would not be taxed! )
Current 2011-2012 Income Tax Brackets; Lowest is 10%; 10% -9% = 1% reduction. Again added savings
Empowerment Zones will offer additional deductions for payroll employed in the zone.
Empowerment Zones will offer additional deductions for those living and/or working in the zone
Importantly, this ends the payroll tax, and thus ends the division between the half of Americans who pay all income taxes and the other half who pays none, but are paying a 15% flat tax from dollar one with no deductions (ie payroll tax).
Last Updated on Monday, 12 September 2011 04:04 Written by Ax D. WhiteMan Saturday, 03 September 2011 00:26
The 999 plan puts all Americans on equal footing and eradicates the root of class warfare.. When Legislative issues arise that will call for more spending and imply the need for higher taxes, it would be a great change of pace to see every productive American evaluate the issue from the standpoint of a taxpayer/stakeholder.
The 999 plan is an outstanding concept, unfortunately; it only addresses one side of our current Federal Fiscal Crisis. Even if 999 initiates a period of extended 9% growth, it still leaves an annual deficit of more than a $Trillion annually. Even if revenues grow at 9% per annum, the current budget baseline of 8% annual growth, when added to the required interest payments to fund the increasing deficits - yield a budget that NEVER balances.
As bold and dramatic as the 999 plan is, it addresses only the revenue side of the Federal Financial issue. As Cain often says, "First you've got to identify the problem." The revenue "problem" is how to most equitably, and efficiently extract about 20% of GDP from the nations producers? 999 is an elegant and effective answer to that question.
The more pressing question remains, "How do we run the Federal Government on less than 20% of GDP?" This will require actual budget "cuts" - not the faux "cuts against the baseline" that are the Washington norm.
The answer is this:
Combined with the 999 Revenue Plan, the Congressional Super Committee must establish a "Prosperity Baseline Budget" of $2.2 Trillion. (That's approximately 2004 level spending) and re-establish the "growth baseline" to be limited to 1% per year. Sparing everyone the laborious calcs after the first year of implementation the resulting outcome would be:
999 Revenue Plan + Prosperity Budget Baseline =
9% annual economic and revenue Growth, and the virtual elimination of all Federal debt - in 9 years.
"Take the tax rate on the repatriation of foreign profits for US companies to zero.
Mitchell: Almost every nation in the world taxes their companies on a territorial basis. The US is one of the few countries to tax on a worldwide basis."
Mitchell: Permanent tax reductions are positive. In 2013, we have a potentially damaging automatic tax increase. It’s a threat to the economy and presents investors with uncertainty.
Mitchell said there are plenty of US companies that have money right now. However, they can’t spend or invest their money profitably in the US because of current tax burdens and the threat of future tax burdens. Meanwhile, many developed countries and US trade partners offer them a better deal.
To rectify this problem and better compete with foreign countries, the US should therefore implement something similar to what Cain proposed.
Mitchell said he knows Cain from serving together in the National Tax Reform Commission in the 1990s. He described Cain as a “bright and dedicated” person “who has a genuine desire to make the country better."
"Mr. Cain’s 9-9-9 plan would encourage growth by further simplifying the tax code with a flat 9 percent corporate tax, applied after deducting the cost of goods, investments and dividends to shareholders. Individuals would pay the same 9 percent rate on their personal income after deducting charitable giving. All other deductions would be eliminated, meaning no more loopholes and special favors for Congress to hand out or take back. Finally, a federal tax of 9 percent would be instituted on all purchases. There would be no death tax, and Mr. Cain would slash the payroll tax in order to help those “on the lower end of the economic spectrum.” The idea is to maintain the same amount of revenue currently generated from the combination of income, corporate payroll, capital gains and estate taxes - except with certainty and simplicity."
Cain told Fox News that economist and former assistant to the director of the Office of Tax Analysis for the U.S. Treasury Gary Robbins analyzed and scored his plan. Cain said the analysis shows that his plan will "initially create 6 million jobs and that it will bring the unemployment rate down initially to about half of what it is today."