Critical Thinking on 9-9-9 (And why it could become 8-8-8)
Initially, I agreed with all of the conservative criticisms of 9-9-9 plan. Why? At the time, my only knowledge of 9-9-9 came from people who thought it was a bad idea. Then I read more articles by more conservatives and they all were saying the exact same thing. Just as the establishment elites joined hands in unison to declare other undeniable truths like “Sarah Palin is unelectable” so too are theynow joining to dismiss Herman Cain’s plan as “well-intentioned-but-bad.” In fact, what astonished me was how formulaic every column in opposition to 9-9-9 was, like a term paper passed along from one degenerate Harvard know-it-all to the next.
The column would go something like this.
1) Create catchy title like “Think Trice about 9-9-9”
2) Praise Herman Cain for thinking outside of the box.
3) Start by saying “first, what I like about the plan”, point-by-point. And all of these details no matter what column you read, will be exactly the same.
4) Note the horrible consequences of bringing on a new form of taxation in addition to a reconfigured income tax.
5) Publish column and have a beer
6) Lather, Rinse, Repeat by next commentator
So, after reading the same exact near-plagiarized column by 15 different people, I decided to go sit in my thinking chair and, well, think.
First, what I like about 9-9-9 (Hahahaha, get it?) Seriously, I like most of what everyone else says they also like about 9-9-9. It’s fair, transparent, opposes class warfare, and can do a lot to end cronyism. The 9% income tax portion dramatically reduces taxes for actual taxpayers. Figure that Social Security and Medicare taxes alone almost amount to that and you’ve almost wiped out the income tax portion altogether with 9-9-9.
On the corporate side I like that it eliminates loopholes so big government Obama-loving corporate bastards like GE might actually pay more in taxes than I did this year. Theoretically, it ends much of the cronyism problem apparent in the current Obama administration.
Finally, and this is where everyone flips out, is the final “9”: The implementation of a 9% sales tax. The problem, critics say, isn’t the 9% tax itself, but the fact that once liberals get in charge they will turn that into 45 billion %. Will they? First things first.
Personally, I prefer a National Sales Tax over a flat tax (or the current tax system) any day of the week (and the NST is the end-game plan with 9-9-9). And here are my main 2 reasons why:
1) Can cause massive individual debt reduction: Since you are not taxed on production, you have more money at the start of the day. You only get taxed when you spend. People who are desperately trying to get out of debt, a big issue in the times we are in, are hampered by over-burdensome income taxation. People would be much more able to quickly pay down their personal debts and begin to build wealth. So while they might not pay much into sales taxes, they will be financially more stable in years to come, which will lead to much more taxes paid (with economic activity) in the future. And fear not, there are plenty of wealthy people who will still by wealthy things, and plenty of irresponsible people who will still rack up their credit cards. So, the government will go on.
2) Broadens the taxpayer base and reduces out-of-pocket pay by Americans: A consumption tax picks up an astonishing number of new taxpayers. First you nail those who work under the table or those who are in the country illegally and off the books. Next, add in the tens of millions of foreign travelers who are used to paying 30% sales taxes in their own countries anyway, so what is 9% to them? In a country where so few pay into the income tax system, we now have a system that would capture those who avoid taxes by illegal means as well as money of foreign visitors. The tax burden is now shifted from a small number of people to a very large number of people, with hard-working Americans benefiting the most.
So, the kicker and the complaints: “9-9-9 WILL BECOME 25-25-25” or “WHAT HAPPENS WHEN LIBERALS AND BIG GOVERNMENT RINO’S GET IN CHARGE?” and “YOU CAN’T INTRODUCE ANOTHER FORM OF TAXATION FOR GOVERNMENT TO PLAY WITH, IDIOTS”
Valid arguments. In fact, I bought it at first. But here is why those arguments are bogus. First, we act like the government doesn’t have the authority to tax at will anyway. What, they can’t raise taxes now? Of course they can. You can raise taxes on people no matter what the tax code is. It’s just as dumb to say that we can’t have 9-9-9 because politicians can change it to 13-13-13 when we are sitting with a tax code that can also be changed, and just as easily. And NEWSFLASH: No matter what tax program you implement it can always be increased. So, by that thinking any tax plan that anyone introduces will have to be bad by those standards. Some say we should go to a flat tax? What, that can’t be increased? Some like the fairtax? That can be increased too. If you oppose a new taxing system based on the fact that the figures can change, don’t you realize that ANY tax program will have figures that can change?
Besides, I think 9-9-9 has a better chance of NOT changing than most other tax plans. I argue that 9-9-9 will stay close to 9-9-9, or even go lower! Why?
1) It’s only popular to raise taxes on “the evil rich” and “private jetowners.” If you raise the 9% tax on income or sales, you RAISE IT ON EVERYONE. There is never the political will to raise taxes on the “poor” and “middle-class”. Hell, with 60 members in the Senate, control of the House, and Obama in the White House they still renewed the Bush era tax cuts when they could have done whatever they wanted. With 9-9-9 there is no separating out the rich, the middle class, and the poor. It’s a fair system. If you raise taxes on one person, you raise it on all. If you lower taxes for one person, you lower them for all. What politician would raise the taxes on everyone to 25% and live to see another victory?
2) People will see how much even 9% is and it will piss them off: The reason politicians can get away with their tax schemes now is because nobody knows what they get paid. When you ask someone what they make a week, they tell you what they make after taxes. But they don’t have a hands on dealing with their taxation. How pissed off would middle class Americans be if they had to write a check to the government for $450 every month? If anything, a national sales tax would make the appetite for lower taxes (and thus smaller government) grow because they personally would see the money coming out of their wallets and into the government coffers every time they made a purchase.
My point? If 9-9-9 were to be implemented (and we live in a society where I doubt we are bold enough to do such) you would have a system in place where candidates running for office would be fighting to make it 8-8-8 or 7-7-7, not 20-20-20. No politician would survive trying to raise taxes on those they want votes from. Today, it’s easy for politicians to pander to 95% of the population by threatening to raise taxes on just 5%. But when you have to raise taxes on all? Who would do that and who would win? If anything, it would strengthen the hand of conservatives who believe in lower taxation.
All I’m saying is: Sit in your thinking chairs and get back to me…
Poll Insider 
Actually, one of the bigger criticisms being raised now is that of the 9 percent corporate tax and its potential to act as a VAT (Value Added Tax) resulting in higher prices and lower salaries. That’s the one big thing you don’t address.
However, as many have pointed out, all of this deliberation is likely for naught. Cain is unelectable, and if Hell did freeze over, it could not do so to allow the passage of such a divergent tax plan.
So a 35% corporate tax rate is better than a 9% one? ANY taxes that a corporation pays is passed onto the consumer. So by that logic, any taxes on a corporation can act like a VAT.
From Bruce Barlett’s NYT analysis of the plan:
The business tax in the Cain plan bears no resemblance to the present corporate income tax. The tax would apply to gross sales less dividends paid and all purchases from other companies, including investment goods. Thus, there would be no deduction for wages.
These taxes can’t be deducted, so corporations will find other places to make up the money- especially if the rate is ever increased. And those other places? Wages and Prices.
Where are you people getting this “unelectable” crap? Did you know that when Reagan announced his candidacy in November 1979 for the 1980 election, most all the pundits, media and political “experts” labeled him “unelectable.”? We are allowing the Republican establishment to tell us, a year before the election, who our nominee must be. A bunch of people, including the RNC leadership, kept spreading the lie that Palin was “unelectable.” I hate she chose not to enter the race, if for no other reason than to proved “everyone” wrong. If the RNC leadership and the liberal media can convince you who your candidate should be, we are indeed in deep doo doo.
Put another way, the new 9% sales tax rate is booby-trapped, as any hikes would make it regressive; and as you rightly point out, no politician dare do that, as they will get slammed by the Left.
However, there is one area for mischief down the road that Leftists can tap into: Adopt a New Jersey-style sales tax schedule and raise the rate to, say, 18%, by exempting food, clothing and drugs, while preserving a “tax once” exemption on used goods.
Dan Schwartz
Cherry Hill, NJ
I don’t disagree, but that’s one point of the argument anyway: taxes can be lowered or raised by whoever is in charge anyway. It doesn’t matter what plan you implement, there is no tax plan that is safeguarded from tax hikes and manipulation. Since that is going to be the case, I say go for the plan that has the greatest likelihood of being politically difficult (unpopular) to raise and politically popular to lower.
My “Double-Nickel Fix” to the Herman Cain “9-9-9” tax plan: As many of you can guess, I’m a big Herman Cain supporter, in part due to 9-9-9. However, one legitimate criticism is that for those at the very bottom, the 9% national sales tax will be regressive. This is partially offset by the tax being only on new goods; and by the end of the employee half of the 15.3% payroll tax, which is a 7.65% offset.
Cain addresses this by saying that since the employer is also not paying his half of the tax, that the employee should ask for that half to be included in his paycheck, too… And here is where my Double-Nickel Fix comes into play: Currently, the Federal minimum wage is $7.25/hour, which means both the employee and employer are paying 55 cents apiece, which will go away under 9-9-9. However, the new 9% income tax amounts to 65 cents, or a 10 cent drop in pay.
My compromise solution to make 9-9-9 fly, and more importantly neutralize the regressive argument, is that the 55 cents the employer would be saving be passed back to the employee, as a hike in the minimum wage from $7.25/hour to $7.80/hour — But this hike is revenue-neutral to the employer. This is what Cain says should happen; but if it’s forced to happen, this will corral the support needed to make 9-9-9 pass.
Intelligent comments are welcome…
I agree with you about 9-9-9 compared to the current system. Their best arguments are that 9-9-9 gives liberals another tax to play with and that it raises taxes on the poor. The first is a red herring as you pointed out and the second, simply doesn’t accept the reality of the massive debt that we have because of redistribution policies like all the tax credits and tax deductions we have to take low income individuals off the tax rolls. This is bankrupting us because at the low end, you have government consumers exclusively, when you think of the various government programs they benefit from like HeadStart, Medicaid, etc.
But, I will beg to differ with you about how easily these politicians can monkey around with Cain’s structure. You are right; they will never raise taxes on the poor, but the sales does make it easier to raise taxes from the upper middle class and rich. You can always omit sales taxes on items of necessity such as food and certain apparels and then you can significantly raise taxes on so-called luxury items. This off course will create black markets and then the tax system doesn’t raise the revenue, then there will be a push to hide the sales tax by implementing a VAT tax. So that would be the end game for liberals with the additional sales tax, as opposed to Cain’s intended end game of a Fair Tax.
So which endgame wins out after a President Cain will form the basis of politics for potentially the rest of the century, much as the New Deal did last century. Don’t want to get too ahead of myself, but adding this new sales tax can have a major long-term effect on the type of country we have this century. A Fair Tax will mean more freedom and smaller government. A VAT tax will mean bigger government and less freedom.
Here is Dick Morris in a six minute commentary from Thursday, 13 October:
Why I don’t like the 999 plan: Three revenue streams equals three ways to increase/decrease taxes. One revenue stream (fairtax) equals only one way to increase/decrease taxes. Politicians are expert at disguising taxes, let’s limit them as much as possible.
The 999 is a terrible plan unless you are middle or upper middle class or above. Imagine being one of the working poor… You pay 7.5% FICA, and some income tax is withheld, but at the end of the year, between your tax refund and the EITC (earned income tax credit) and the CTC (child tax credit), you get almost all of it back.
If the 999 passes, you will have a 9% income tax deduction which you will not get back, PLUS an additional 9% tax on what you spend. Since you are poor, you spend everything each cycle. So, someone who had little or no Federal tax burden will suddenly lose 18% of their monetary resources. How would you do with 18% less than you get now? I’m all for everyone having some “skin in the game”, but this is ridiculous.
Conversely, if you make a bazillion dollars, you will be taxed 9% on that, but it is unlikely that you will spend all of your income, so your tax rate will be significantly LESS than 18%. The 999 plan does exactly what the Left has been accusing the right of all along. It gives the wealthy a nice break, while crushing the poor.
The FairTax, which Cain says 999 will be a bridge to, solves this problem by use of it’s rebate. The rebate can be compared to a “standard deduction” in the current system. When you consider all aspects of the FairTax, it turns out that almost every income/wealth level will owe a lower lifetime tax liability. People at or below the poverty level end up paying nothing, but because of the stimulation of the economy (MUCH greater than 999…jobs, jobs, jobs!) it is more likely that those in poverty could climb out. As their income and, consequently, consumption increases, they will start paying taxes above the poverty threshold. First, one percent, then two as their consumption increases, on up to just shy of the full 23% that the tax represents. A slope rather than a bracket. No huge jumps just for making an extra thousand dollars.
People in the country illegally will not get the rebate, so they will pay the full 23% on the first and last dollar.
Also, because the FairTax has 0% corporate tax and 0% income tax (including FICA, Estate and Gift taxes), it will be a magnet for business to relocate here in the US.
All the good things that Cain claims for the 999 plan would be supercharged under the FairTax. Because there is no need for businesses that do not actually collect the FairTax to file tax returns anymore, and because you don’t either, half a Trillion dollars that fund tax preparers, tax lawyers, IRS agents, the IRS itself, and all the tax lobbyists will be used for purposes that actually accomplish something.
Cain had my vote when he supported the pure FairTax as written. Giving our corrupt and self serving Government another avenue to collect taxes without shutting the door on the income and corporate taxes completely is a BAD idea. 999 will be worse for the average citizen than the current code. I think 999 will cause horrible, unnecessary human suffering. And then, when Congress is able to tax us in every way, why in the world will they be willing to give that up?
I would also remind everyone that the 9-9-9 plan is intended to be a transitional system while the FairTax moves through the process of passage an ratification by the states. Many of us would prefer to see the FairTax implemented without the intermediary step, but the FairTax constitutional amendment will likely take 2-3 years to wind through the system and we need a solution Congress can pass today for the 2012 tax year. The FairTax (or 0-0-23 plan) has the prebate to make it even less regressive on the bottom end and the added protection from the tax & spend liberals by including the repeal of the 16th Amendment (authority for congress to tax income) so congress is limited to only the consumption tax revenue stream.
Herman Cain’s goal was to keep the rates the lowest possible and remain revenue neutral. If you add exemptions for food, medicine, etc. like most state sales taxes have, or include the prebate feature of the FairTax, the rate would have to be higher to remain revenue neutral. Unlike the 9% flat income tax and 9% flat corporate tax, the 9% will likely need to be a higher rate with a prebate or some other simple and transparent way to exempt those below the poverty line from paying the sales tax.
The 9-9-9 legislation will also need a simple requirement that all employers give all W-2 employees a 7.65% raise at the time the payroll tax is eliminated (expense neutral to employers) and concurrently raise the minimum wage 7.65% from $7.25 to $7.80.
The unfortunate reality is that despite Paul Ryan endorsing the 9-9-9 plan, the entrenched cronyism in the current Congress and Obama Administration will most likely prevent such a bold change to the tax system from passing before January 2012.
First of all, Herman Cain is not unelectable! I’m tired of hearing that. It is said by Republican establishment people who are brain washing the voters into thinking he is unelectable as well as Bachmann and Gingrich. It is much too early to rule any of them out.
The problem I have with the 999 plan is the final 9. The majority of states have a state sales tax (and some city sales tax) and the Federal sales tax would be added to the state sales tax which, in many cases, doubles the tax. This would cause the public to not buy the product they want or need because of the overburden of the tax. Thus hurt the economy!
Giving the federal government two bites of the apple is too much. When you look at how nebulous the language is regarding the sales tax, more nebulous language could be inserted on page 999 of a bill to actually raise taxes and no one would notice. lJust by making little changes you could create the equivalent of a vat. I think the idea is good, I would rather see a slightly higher rate and one bite of the apple.
I have been a Cain supporter and truly a fan since he opened his mouth at the first debate months ago! Now, the more I learn about 9-9-9, the more I LOVE it.
The American people will have more control over our own money to spend and give away as we see fit. People take care of each other when they don’t live in a Nanny state. And people like? We will put all kinds of folks to work by spending that money on goods and services we’ve not been able to afford: the back deck, the finished basement, the new paint, the garden, the landscaping. We’ll also give give give to our churches and favorite charities and we’ll get out of debt and save for our kids’ college & retirement so we can take care of ourselves! We’ll get the dental work done, and go on that trip and buy that $50 gift instead of that $30 one. Most importantly, we’ll be able to buy all the books we want!!!! 🙂
That middle sentence was inadvertantly snipped.
“And people like?”
Should read: “And what do people I know like to do when they have more of their own money?”
Would someone take a moment and answer my questions so that I may be a more educated voter? If the 9-9-9 were to be put in place… am I understanding correctly, that
1. I wouldn’t have to fill out a 1040 and pay Income Taxes by April since I would’ve already been paying 9% whenever I bought something during the year?
2. There are a lot of states that have State Sales Tax already. So if a state has a sales tax of 5%. If I am in that state and buy something at a store. I would now pay for the item, plus the 5% sales tax plus the 9% National Tax?
3. If I worked for a company and they currently take out Social Security and Federal Income Tax. Are you saying these would no longer be taken from my check?
4. If I am self-employed. Would I no longer have to pay quarterly for estimated income tax and a double portion on social security?
As you can see, I’m new to the 9-9-9 idea and am trying to catch up. Is there someplace that explains it to someone who is not up to date and would like to learn in simple explanation form? Thank you for your time and consideration for helping to make it clear so that we can all be informed voters. 🙂
As Benjamin Franklin said “We should make the poor uncomfortable, to kick them out of poverty”