Cain's flat tax

[Czarina]

So..is he really saying that if someone makes 50,000 he wants them to pay a flat 9%, or 4500 in federal taxes PLUS 9% federal sales tax on top of that? In addition to whatever state sales tax there may be? I assume by saying 'flat tax' that he's doing away with deduction and the like? And we're supposed to buy the notion that because the payroll tax is less than 15% we're saving money? He's nuts. Lower income people would be sunk.

[SEC=UGA]

So..is he really saying that if someone makes 50,000 he wants them to pay a flat 9%, or 4500 in federal taxes PLUS 9% federal sales tax on top of that? In addition to whatever state sales tax there may be? I assume by saying 'flat tax' that he's doing away with deduction and the like? And we're supposed to buy the notion that because the payroll tax is less than 15% we're saving money? He's nuts. Lower income people would be sunk.

 

In another thread, I have stated that there are some issues with his 9-9-9 plan... The biggest issue is that the literature does not address any offsets/prebates for people at or below poverty.

 

His 9-9-9 plan, apparently is only a short lived plan however and is meant to be a jumping off point to transition to the Fairtax. The Fairtax does take into consideration lower income people by issuing prebates for goods that they buy.

 

Payroll taxes are eliminated under the 9-9-9 plan.

 

The only deductions under his plan are charitable contributions for individuals.

 

Here is what is on his web page:

Phase 1 - 9-9-9

•Current circumstances call for bolder action.

•The Phase 1 Enhanced Plan incorporates the features of Phase One and gets us a step closer to Phase two.

•I call on the Super Committee to pass the Phase 1 Enhanced Plan along with their spending cut package.

•The Phase 1 Enhanced Plan unites Flat Tax supporters with Fair tax supporters.

•Achieves the broadest possible tax base along with the lowest possible rate of 9%.

•It ends the Payroll Tax completely – a permanent holiday!

•Zero capital gains tax

•Ends the Death Tax.

•Eliminates double taxation of dividends

•Business Flat Tax – 9%

◦Gross income less all investments, all purchases from other businesses and all dividends paid to shareholders.

◦Empowerment Zones will offer additional deductions for payroll employed in the zone.

•Individual Flat Tax – 9%.

◦Gross income less charitable deductions.

◦Empowerment Zones will offer additional deductions for those living and/or working in the zone.

•National Sales Tax – 9%.

◦This gets the Fair Tax off the sidelines and into the game.

Phase 2 – The Fair Tax

•Amidst a backdrop of the economic boom created by the Phase 1 Enhanced Plan, I will begin the process of educating the American people on the benefits of continuing the next step to the Fair Tax.

•The Fair Tax would ultimately replace individual and corporate income taxes.

•It would make it possible to end the IRS as we know it.

•The Fair Tax makes our exported goods and services the most competitively internationally than any other tax system.

Phase 1 Enhanced Plan – Summary

•Unites all tax payers so we all pay income taxes and no one pays payroll taxes

•Provides the least incentive to evade taxes and the fewest opportunities to do so

•Lifts a $430 billion dead-weight burden on the economy due to compliance, enforcement, collection, etc.

•Is fair, neutral, transparent, and efficient

•Ends nearly all deductions and special interest favors

•Ends all payroll taxes

•Ends the Death Tax

•Features zero tax on capital gains and repatriated profits

•Lowest marginal rates on production

•Allows immediate expensing of business investments

•Eliminates double taxation of dividends

•Increases capital formation. Capital per worker drives productivity and wage growth

•Capital formation will aid capital availability for small businesses

•Features a platform to launch properly structured Empowerment Zones to revitalize our inner cities

•We all know the Fed has tripled the money supply since 2008. They have been printing money out of thin air to finance the Obama spending machine. While true Fed reform that restores sound money may have to wait for my election, the best thing we can do now is to pursue policies that increase the DEMAND for dollars to help mitigate the risks associated with the increase in the supply.

•Pro-growth economic policies equal a strong dollar policy

[i_am_the_swammi]

Just so I am clear....there will be a new 9% Federal Sales tax, in addition to the 6% PA State sales tax I currently pay, in addition to the 1-2% sales tax that currently exist in major metro areas....for a whopping total of 15-17% tax on all purchases?

 

I'd have to do some hard number crunching to see if this 999 plan actually benefits me in any way, but my immediate reaction is "no".

[Square]

I don't know if it's "the answer" or if any of us will actually agree on something being "the answer". What I do now is that there is almost no way to make a system more fooked up than the current one we have. I'll vote for anything that makes a little more sense and keep the country afloat (yes Ursa, even if it makes me pay a bit more).

[Ursa Majoris]

He's nuts. Lower income people would be sunk.

Been saying exactly that for weeks. It's a simple tax burden transfer from rich to poor.

[SayItAintSoJoe]

Just so I am clear....there will be a new 9% Federal Sales tax, in addition to the 6% PA State sales tax I currently pay, in addition to the 1-2% sales tax that currently exist in major metro areas....for a whopping total of 15-17% tax on all purchases?

 

I'd have to do some hard number crunching to see if this 999 plan actually benefits me in any way, but my immediate reaction is "no".

 

I don't know enough about this plan but if it's like the Fair Tax plan than the theory would be that it would reduce some of the embedded tax in goods thus lowering prices. So if you end up paying a 17% tax on something that is now 10% cheaper than it was before it may not be too bad considering that your income tax rate has been lowered.

[SEC=UGA]

I don't know enough about this plan but if it's like the Fair Tax plan than the theory would be that it would reduce some of the embedded tax in goods thus lowering prices. So if you end up paying a 17% tax on something that is now 10% cheaper than it was before it may not be too bad considering that your income tax rate has been lowered.

 

Not just that, but you have to remember you're bringing home 100% of your income. So now instead of paying 28% in taxes out of your check, you are paying X% of tax on purchases.

[evil_gop_liars]

So..is he really saying that if someone makes 50,000 he wants them to pay a flat 9%, or 4500 in federal taxes PLUS 9% federal sales tax on top of that? In addition to whatever state sales tax there may be? I assume by saying 'flat tax' that he's doing away with deduction and the like? And we're supposed to buy the notion that because the payroll tax is less than 15% we're saving money? He's nuts. Lower income people would be sunk.

 

Under Cain's proposal the average middle class rates rise from 14% to 18% and the poor who pay about 2% now to 18% as well. But the rich would see their rates fall from about 28% to 11%.

 

Under our current system a family with an income of $60,000 pays $5938 after standard deductions (used the 2010 IRS tax tables). Under Cain's plan that same family would pay $6000 plus 9% tax on all money spent on consumer goods and services.

[SEC=UGA]

Under Cain's proposal the average middle class rates rise from 14% to 18% and the poor who pay about 2% now to 18% as well. But the rich would see their rates fall from about 28% to 11%.

 

Under our current system a family with an income of $60,000 pays $5938 after standard deductions (used the 2010 IRS tax tables). Under Cain's plan that same family would pay $6000 plus 9% tax on all money spent on consumer goods and services.

 

Please explain your work. I've not seen any information from which you could draw these conclusions.

[WaterMan]

Seems pretty simple to close the corporate loopholes. Why completely change the tax system when you could stop the abuses? How do we know a new system won't be abused by the corporations as well?

[SEC=UGA]

Seems pretty simple to close the corporate loopholes. Why completely change the tax system when you could stop the abuses? How do we know a new system won't be abused by the corporations as well?

 

We need to pass it first to see what happens.

[Pope Flick]

Jerry Brown ran on this well before Forbes did. This is an archived article from the time. I remember this well, and Brown eventually amended the percent up from 13 to 17, although the article says 19 would be necessary. I also seem to recall that the fist 17k was tax free as well.

 

 

Wednesday, April 1, 1992 - Page updated at 12:00 AM

Jerry Brown's Flat Tax -- Intriguing In Theory, Failure Lies In Details

 

MENTION a flat income tax and most public-policy analysts turn apoplectic. It's regressive, it's simple-minded, it's a flat-earth idea, they say. In other words, just the sort of response Jerry Brown loves. Little wonder that he has seized on the idea and made it a cornerstone of his presidential campaign.

 

Two months ago, nobody challenged or seriously analyzed Brown's tax proposal. Now his survival in the race for the Democratic nomination forces people to take a hard look at exactly what his ideas mean.

 

The notion of a flat tax is neither as simple nor as dumb as those who would dismiss it out of hand say it is. The problem with Brown's proposal is not in the theory, it's the details - or lack thereof. Brown seems to be making up the tax plan as he goes along, fudging the numbers as it suits him.

 

He would replace the current tax code with a 13 percent income tax for individuals and apply a new 13 percent value-added tax (akin to a national sales tax) on all goods produced in the economy. Deductions would be allowed only for mortgage interest, rent, and charitable contributions. Businesses would also be allowed to deduct all equipment purchases in the first year instead of depreciating those expenses over several years.

 

In return, all other deductions would go, including personal exemptions. And Brown would get rid of the corporate income tax, the Social Security payroll tax, the estate and gift tax, and the gasoline tax.

 

Nobody but Brown believes his plan would raise the same amount of revenue as the current tax structure. Some groups, such as Washington, D.C.-based Citizens for Tax Justice, claim the plan would bring in $200 billion less than the $1 trillion-plus of taxes collected annually now. The exact magnitude of the gap is difficult to predict, but a gap is certain.

 

Aside from basic problems with the math, there's the regressivity issue.

 

A flat tax coupled with a value-added tax would hit low- and middle-income people hardest because they consume a higher share of their income than the wealthy.

 

The lopsided burden could be remedied by building in generous personal exemptions and creating a negative income tax for the poorest families. Brown's sketchy plan contains neither element. If it did, the flat rate would be less spectacularly low, perhaps 19 percent.

 

These flaws are fatal to Brown's plan. But the idea of throwing out the 2,700-page tax code, rife with loopholes, has appeal. Indeed, the 1986 tax-reform act had similar aims: eliminate loopholes and allow lower rates for all taxpayers.

 

President Bush and Congress, however, are fast retreating from the 1986 reforms. Both branches want to reinstate "incentives" - such as passive loss deductions for real estate - that created massive tax-shelter industries in the 1980s.

 

A decade ago, the flat-tax scheme was a favorite of conservatives who believed a broader tax base (fewer deductions) and lower rates would improve the economy's performance. Brown embraces that approach. Compared to the tax changes Bush and Congress have in mind, a clean sweep with a flat tax, at least in theory, isn't so absurd.

[yo mama]

Been saying exactly that for weeks. It's a simple tax burden transfer from rich to poor.

How can you say that when he proposes *eliminating* the capital gains tax, estate tax, and tax on dividends? Think of all the poor people that will suddenly be motivated to be rich - problem solved!