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I'm trying to wrap my head around Cain's 999 tax plan. I know that decisions shouldn't be made based on proposed plans, let alone proposed plans for potential candidates, but I want to understand the basic premise.

From what I read, there would be a 9% income tax (gross less charity), 9% sales tax (I don't see anything about exemptions) and a 9% business tax.


By my calculations, a married couple making $50,000 would pay $8,595 ($50,000 X .09) + ($44,500 X .09). This is compared to 2010 taxes (income plus payroll) of $9,775. So by the numbers, the 999 plan is better off, for them. This doesn't take into consideration any change in their wages or the price of goods due to the 9% tax on businesses.

Cain's plan has been critised, stating that individuals would end up paying the full 27% (9+9+9). The basic math is off as they wouldn't pay a full 9% of their income in sales tax, since part of their income goes to the income tax, making the first 2 nines together be 17.2%). I'm more confused about how this critic is adding in the third 9 (business tax). They seem to be simply adding it on to the other two taxes. To me, this doesn't make sense. Sure, wages and prices are affected by prices, but this isn't a new tax - its a reduction of taxes already in place. Am I missing something?


http://thinkprogress.org/economy/2011/10/13/343181/cain-999-...


That’s because middle and low-income Americans get all, or nearly all, of their income from ordinary wages — all of which would be subject to Cain’s 9 percent wage tax — and then they spend all of their income, which means it would be taxed again by the 9 percent sales tax. Finally, the burden of the 9 percent business income tax would be passed on to them as well, either in the form of lower wages — since wages are not deductible — or in the form of higher prices for goods and services.

The bottom line is that most Americans will pay all three of Cain’s taxes, making their real federal tax rate 27 percent. Compare that to the current tax code, under which someone in the bottom quintile pays two percent of their income in federal taxes and someone in the middle quintile pays 15 percent.


It seems that this critic is saying "under Cain's plan, lower earners will pay 27% vs the current 2% to 15%". However, the 27% is their interpretation of a total federal tax bill, but they are comparing it only to federal income taxes. Shouldn't they be comparing it to (15% personal income + 7.65% payroll + 35% business) of 57%?

Of course, given the few details released about this plan, its hard to form any opinions.

Will
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Finally, the burden of the 9 percent business income tax would be passed on to them as well....

This is largely true--business taxes are a cost that gets, at least somewhat, passed on the the consumer. The problem I see with the critic's logic is that this is also true under the current tax regime--where the business is passing on its current 35% tax rate. Thus, even if all of the 9% (or 35%) business tax were passed on to the consumer, 9-9-9 represents a significant tax rate reduction to the consumer.

The problem I have with 9-9-9 is that 9% sales tax. I think this hits the poor and non-working disproportionately relative to their income. Stipulate arguendo that Cain's tax plan will result in an economic stimulus that ends in full employment and further that his plan will result in a net reduction of market prices. Full employment historically has meant unemployment in the 4%-4.5% range--all these folks want jobs but can't find them. These non-working still must pay the sales tax on the necessities they must buy, even though they have no income. Full employment also does not account for the voluntarily non-working--those scofflaws who were rude enough actually to retire. These folks have a fixed retirement income, and they also must still pay the sales tax on the necessities they must buy. Also, with everyone paying the same sales tax on those reduced prices, the poor and non-working still are paying sales tax disproportionately. Finally, Rep Bachmann has one thing right: the sales tax is just one more pathway along which the government can raise our taxes.

Eric Hines
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By my calculations, a married couple making $50,000 would pay $8,595 ($50,000 X .09) + ($44,500 X .09). This is compared to 2010 taxes (income plus payroll) of $9,775. So by the numbers, the 999 plan is better off, for them. This doesn't take into consideration any change in their wages or the price of goods due to the 9% tax on businesses.

Where are you getting the numbers for the current tax? What deductions does that couple making $50,000 have currently?

Where are you getting the 999 tax amount? You really think a couple making $50,000 pays 44,500 on stuff subject to sales tax?

Cain's plan has been critised, stating that individuals would end up paying the full 27% (9+9+9). The basic math is off as they wouldn't pay a full 9% of their income in sales tax, since part of their income goes to the income tax, making the first 2 nines together be 17.2%). I'm more confused about how this critic is adding in the third 9 (business tax). They seem to be simply adding it on to the other two taxes. To me, this doesn't make sense. Sure, wages and prices are affected by prices, but this isn't a new tax - its a reduction of taxes already in place. Am I missing something?
=============================================

Of course with the elimination of Payroll tax (Social Security and Medicare) those programs would no longer exist.

What, if anything, does he plan to have replace SS & Medicare?

What do you plan to do to replace SS and Medicare?

What are we as a society going to do with those folks that don't/can't plan for the future?

If I make my living buying and selling stock. With Cain's plan I would have to pay ZERO income tax.

Jean
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Full employment also does not account for the voluntarily non-working--those scofflaws who were rude enough actually to retire. These folks have a fixed retirement income, and they also must still pay the sales tax on the necessities they must buy.

======================================

What fixed income? Everyone has a retirement plan? I'm pretty sure under Cain's plan Social Security and Medicare don't exist.

Jean
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Where are you getting the numbers for the current tax? What deductions does that couple making $50,000 have currently?

I ran a married couple making $50,000 through turbotax tax estimator. No children, standard deduction.


Where are you getting the 999 tax amount? You really think a couple making $50,000 pays 44,500 on stuff subject to sales tax?


There has been no discussion of any exemptions from the 9% sales tax under Cain's plan. While I would expect any national sales tax to have SOME exemptions, given the lack of details, I assumed none. However, loan repayments would not have sales tax (although the original purchase would have; thus, the 9% would be on a number less than $44,500 for a family with loan repayments.

Of course with the elimination of Payroll tax (Social Security and Medicare) those programs would no longer exist.

What, if anything, does he plan to have replace SS & Medicare?

What do you plan to do to replace SS and Medicare?

What are we as a society going to do with those folks that don't/can't plan for the future?


I have not seen anything from Cain where he wants to abolish those programs. Google searches find plenty of people indicating that his plan does, but I can't find anything that Cain has said about it. Why do those programs no longer exist without a payroll tax? There is not "national defense tax", yet the army still gets money. They will be funded through the federal budget, which is how they are going to be funded in the future if nothing changes, since they are paying out more than they take in.


If I make my living buying and selling stock. With Cain's plan I would have to pay ZERO income tax.


You would pay 9% on your investment gains, unless you only lose money. The 9% is on gross income, less charitable deductions.

wrj
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I ran a married couple making $50,000 through turbotax tax estimator. No children, standard deduction.

No standard deduction, no personal exemption. The tax is on gross less charitable deductions.

There has been no discussion of any exemptions from the 9% sales tax under Cain's plan. While I would expect any national sales tax to have SOME exemptions, given the lack of details, I assumed none. However, loan repayments would not have sales tax (although the original purchase would have; thus, the 9% would be on a number less than $44,500 for a family with loan repayments.

Rent?
Power?
Telephone?
Water, sewer, garbage?
Professional Services?

I have not seen anything from Cain where he wants to abolish those programs. Google searches find plenty of people indicating that his plan does, but I can't find anything that Cain has said about it. Why do those programs no longer exist without a payroll tax? There is not "national defense tax", yet the army still gets money. They will be funded through the federal budget, which is how they are going to be funded in the future if nothing changes, since they are paying out more than they take in.

http://en.wikipedia.org/wiki/Political_positions_of_Herman_C...

"Cain has strongly criticized the current implementation of Social Security, describing it as a "scam."[7] He favors reforming the current system "through free market solutions."[8]

Several times, Cain has referenced the Chilean model of redoing social security. He supports the Chilean model for younger citizens while retaining the current system for current beneficiaries."

So elimating the payroll tax 7.65*2 and replacing it with nothing will enable us to make SS/Medicare solvent?

You would pay 9% on your investment gains, unless you only lose money. The 9% is on gross income, less charitable deductions.

No tax on capital gains or dividends in the 999 plan.

"Cain's "9-9-9" plan has been called the "centerpiece" of his presidential campaign.[14][15] His initial plan proposes replacing all current taxes with 9% tax on corporate income; 9% personal tax rate, and a 9% federal sales tax. Taxes such as the payroll tax, capital gains tax, and the estate tax would be eliminated under his system. According to Cain, corporations would be able to deduct costs of goods sold (provided the inputs were made in America) and capital expenditures. Deductions, except charitable giving, would be eliminated. The federal sales tax would not apply to used goods."

Businesses are going to love no deductions for wages, rent, travel, R & D, interest expense, etc.

Jean
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Businesses are going to love no deductions for wages, rent,



?? wouldn't that pretty much kill every small business?

what about deductions for Cost-of-Goods?



.... some days i think there's good reason the Tax Code is to d*** complex
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Deductions, except charitable giving, would be eliminated.


This would really hit the elderly, who have a lot of medical expenses, very hard. (Or anyone with unusually high medical expenses - and people cannot help getting sick.)

AM
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Deductions, except charitable giving, would be eliminated.


This would really hit the elderly, who have a lot of medical expenses, very hard. (Or anyone with unusually high medical expenses - and people cannot help getting sick.)


won't really matter for the elderly ... without Medicare, they'll just be broke next week, and dead the month after.


NTTAWWT
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what about deductions for Cost-of-Goods?

============================

Only for good bought from USA companies.

http://www.hermancain.com/999plan

"•9% Business Flat Tax
?Gross income less all purchases from other U.S. located businesses, all capital investment, and net exports.
?Empowerment Zones will offer deductions for the payroll of those employed in the zone"

I had to look up Empowerment zone. As far as I can tell it's an economically depressed area.

Jean
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9% sales tax (I don't see anything about exemptions)

There will always be exemptions. I got this info from several wiki articles.

In France the VAT is 19.6% in general and 5.5% on food.

The VAT in Sweden is 25% on most stuff but a mere 12% on food.

French income tax (in 2009) takes 30% of taxable income over €26,000 and 40% over €70,000.

Not high enough for you? How about Sweden, where typical income tax is 48% subject to a few credits where applicable. Paying just about half of your earnings right off the top and then 25% of what you spend may seem like a lot, but at least health care is "free."

--fleg
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what about deductions for Cost-of-Goods?

============================

Only for good bought from USA companies.


thanks. that was in your original post and i somehow missed it.



I had to look up Empowerment zone. As far as I can tell it's an economically depressed area.


iirc, they're "economically depressed" as designated by Congress so there can be a lot of politics involved.
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iirc, they're "economically depressed" as designated by Congress so there can be a lot of politics involved.


There is always a lot of politics involved.
And yes... without Medicare we would be in a world of hurt here. Also with Social Security you could just go ahead and shoot us.

Maybe that's his plan - just get rid of all the elderly.

AM
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EEK - I meant to say WITHOUT Social Security...

Oy.

Fingers are not behaving today.

AM
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I ran a married couple making $50,000 through turbotax tax estimator. No children, standard deduction.

No standard deduction, no personal exemption. The tax is on gross less charitable deductions.

I know that applies under the 999 plan. I was comparing a couples taxes under current law, to their taxes under the 999 plan.

There has been no discussion of any exemptions from the 9% sales tax under Cain's plan. While I would expect any national sales tax to have SOME exemptions, given the lack of details, I assumed none. However, loan repayments would not have sales tax (although the original purchase would have; thus, the 9% would be on a number less than $44,500 for a family with loan repayments.

Rent?
Power?
Telephone?
Water, sewer, garbage?
Professional Services?

I don't understand why you have this list.


I have not seen anything from Cain where he wants to abolish those programs. Google searches find plenty of people indicating that his plan does, but I can't find anything that Cain has said about it. Why do those programs no longer exist without a payroll tax? There is not "national defense tax", yet the army still gets money. They will be funded through the federal budget, which is how they are going to be funded in the future if nothing changes, since they are paying out more than they take in.

http://en.wikipedia.org/wiki/Political_positions_of_Herman_C......

"Cain has strongly criticized the current implementation of Social Security, describing it as a "scam."[7] He favors reforming the current system "through free market solutions."[8]

Several times, Cain has referenced the Chilean model of redoing social security. He supports the Chilean model for younger citizens while retaining the current system for current beneficiaries."


So he's in favor of reforming Social Security by allowing people to opt out of it should they wise; which is much different than abolishing it altogether.


So elimating the payroll tax 7.65*2 and replacing it with nothing will enable us to make SS/Medicare solvent?


Again, just because there is not tax specificly called "social security tax" doesn't mean that it won't get funded. There is no tax called "department of defense tax", yet every year the DoD gets $500 billion. In 2011, Social Security is already paying out more than it takes in. This shortfall is being paid for by money received from income, corporate, estate, etc taxes.


You would pay 9% on your investment gains, unless you only lose money. The 9% is on gross income, less charitable deductions.

No tax on capital gains or dividends in the 999 plan.

"Cain's "9-9-9" plan has been called the "centerpiece" of his presidential campaign.[14][15] His initial plan proposes replacing all current taxes with 9% tax on corporate income; 9% personal tax rate, and a 9% federal sales tax. Taxes such as the payroll tax, capital gains tax, and the estate tax would be eliminated under his system. According to Cain, corporations would be able to deduct costs of goods sold (provided the inputs were made in America) and capital expenditures. Deductions, except charitable giving, would be eliminated. The federal sales tax would not apply to used goods."

Businesses are going to love no deductions for wages, rent, travel, R & D, interest expense, etc.


I read that to mean that there will no longer be separate taxes for payroll, capital gains, and estate. Income is income.

This is where a lack of details is going to cause debate. Under current law, gross income is all income, from wages, interest, dividends, cap gains, rentals, etc. Right now, Cain simply says that individuals will pay 9% on their gross income less charitable deductions. To me, that includes ALL income that a person makes.

Regarding business taxes, "gross income" isn't a term that's used. My guess is that he means "net income". Many large businesses work on very slim margins.

That being said, many businesses would also see their tax bills decrease even if it is applied gross sales, since the rate will be reduced from 35% to 9%.


will
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There will always be exemptions. I got this info from several wiki articles.


I agree - any national sales tax put in place will most likely have exemptions of some sort. But for the sake of this arguement, I wanted to assume the worst, did the math with none.
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I'm pretty sure under Cain's plan Social Security and Medicare don't exist.

Based on what facts, exactly?

Eric Hines
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I meant to say WITHOUT Social Security...

Perhaps you can provide a link to anyone's plan that affects current and near-future retirees....

Eric Hines
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Saw an AP story reporting Cain's long association with the Koch brothers. The Wells Fargo non-economist who he credits with thinking up 9-9-9 is also involved with them. So we can assume no Social Security or Medicare under Cain. Plenty of breaks for the billionaires, including no tax on dividends or cap gains, probably not interest either. 9-9-9 is a nice catch phrase but most Americans will be worse off if it ever becomes law. All that said, don't dismiss Cain. He's got tons of money and powerful people behind him.
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