Herman Cain's 9-9-9 Plan

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Cain's argument in the linked article is that the income tax by itself would be less, but I agree for an apples-to-apples comparison we should look at payroll taxes as well. It's hard to know exactly what the payroll taxes would be, because it's on taxable income. If they have money taken out for a health care plan, or a 401k, those are pre-tax dollars, but even if we take worst case scenario, and say they don't have any pre-tax money taken out, it's $3,725, which makes it nearly identical to the $4,500 of Cain's plan, but then we haven't taken into account the 9% sales tax on everything they buy, so it's still way more.

I don't know if capital gains would be considered income, but if it was, you're still getting a break - 9% as opposed to 15%.

I didn't understand the part about the car either - to me whether you financed the car or paid cash, it would be 9% sales tax, which would suck a lot.

 

Maybe loan payments aren't taxable under Cain's plan.

 

This is awesome:

9-9-9 From SimCity?

If it's true ... wow ... talk about destroying credibility....

 

Well, that would explain why he keeps calling his wife "Viconia"

 

I've heard 2 criticisms of this plan.

1. (as has been said already) the poor would pay more taxes and the rich would pay less

2. It would encourage the formation of a black market. I don't understand the details but the European "value-added" sales tax requires good record keeping that makes it hard to cheat. While federal, state, and local sales taxes recorded in a simplistic manner may simply encourage people not to report in order to gain advantage.

I don't totally understand the detail yet of the 2nd criticism but what do you think? One more avenue for organized crime?

 

I'm not sure. Most states already have state sales taxes, so if this caused an outlet to organized crime, I'd imagine that they would already be able to take advantage of it without needing a federal sales tax in addition to it.

 

The US sales tax is only added at the end by the shops when selling to the final customers. This money is then sent back to the government. The European sales tax is also charged between companies at each stage. Trees, timber, door, customer for example. Companies send back the tax they charge but get a deduction for the tax they pay. It's harder to fiddle as if you want to not declare sales you made to customers then you can't feasibly claim your own tax back that you paid as the input / output comparison will be all wrong.

In the US case it'd be easier to buy and sell goods off the books. In Europe your supplier will be charging the VAT properly and submitting the returns. If you don't declare goods you've bought you can't claim the tax back that you paid on them and your returns won't match that of your suppliers.

 

Cripes - then you guys are effectively paying double whatever the sales tax is, because if the stuff you buy at stores was already taxed, that cost is being passed on to you.

 

No, the businesses can claim back the tax they pay. So the end result is just the same. It is a cash flow issue for them though and there's more bookkeeping.

 

The European system sounds much like the Canadian system. The idea is that only end users bear the tax, but to avoid forcing sellers to determine whether they are selling to an end user or not, they charge the tax to everyone, and the purchasers can claim the tax back if they aren't an end user (non-end users have to pre-qualify with the goverment by registeriing). This is a bit of an over-simplification of the system, but it gives the general idea.