I didn't think it would take this long for the keepers of the faith to decide that Herman Cain must be evil because his tax plan is nothing but a well-disguised way to help those filthy rich people:
Herman Cain has a plan to radically reform the nation's tax system and make things a lot simpler for taxpayers.
Problem is, it could end up adding to the deficit and shifting the tax burden away from the wealthy and onto the poor, according to some leading tax experts.
Cain, who's recently moved up in the polls to become one of the leading Republican presidential candidates, is basing much of his campaign on what he calls the 9-9-9 plan, which would get rid of almost all current taxes and replace them with a 9% flat tax on income, a 9% flat corporate tax and a 9% national sales tax.
Cain claims his system would raise as much tax revenue as the current complex system of federal income tax, corporate taxes and payroll taxes. And he believes his plan could bring in additional revenue by boosting economic growth.
Cain's plan would shift the burden "away from the wealthy and onto the poor"? You mean the wealthy aren't already getting a free ride on the backs of the poor? Quick, somebody alert the Occupy Space movement.
I like the simplicity of Cain's plan. But it's scary, too, because it doesn't do away with the income tax. Taxes grow -- that's what politicians do. A tax might start out at 9 percent, but it won't stay there very long. As to whether his plan would be revenue neutral, bring in more money or add to the deficit, I'd say that's anybody's guess, and reading some of the experts' conclusions reinforces the uncertainty. Even if it did result in smaller revenues, that would add to the deficit only if we kept spending at current levels, and we shouldn't do that in any case.
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It doesn't matter. Cain can't be elected, and Congress would never pass it. I have not heard a single economist endorse it. What bothers me is that, at this rate, no real change in taxes and spending can be encacted. Anything Obama or Democrats offer will die in the House. Anything the Tea Party might manage to pass (good luck in the Senate) will be vetoed by Obama.
Obama will win re-election, not because people are happy with him, but because the Republicans are split into two groups: the Christian theocrats who can't get independent votes and Mitt Romney, who, being Mormon cannot get votes from traditional Southern Christian voters.
So this will go one for five more years.
Another data point that confirms politicians just do not understand math. 9-9-9. A back of the envelope calculation would clearly show why this does not work.
9% sales tax. The IRS reports about $7.5 Trillion in income from all sources (SS, SSI, Interest, Dividends, Capital Gains, Wages, farm, fishing, etc). Assume no one saves a dime. 9% times 7.5 Trillion = $675 Billion.
9% flat corporate tax. Corporate profits are about $1.500 Trillion
9% times $1.5 Trillion = $135 Billion.
9% times $7.5 Trillion income = $675 Billion.
A national sales tax will end up taxing all savings twice. What about FICA taxes, does the 9-9-9 replace the FICA tax? Medicare spent $522.8 Billion in 2010 while it collected $486 Billion from payroll taxes. SS-OASI spent $577.393 Billion while it collected $544.773.9 billion, SS-DI spent $124.216 Billion while it collected $92.511. The general budget had a $1.6 Trillion Deficit in 2010.
If you cannot perform simple math, you are definitely not qualified to be president.
Mr. Larsen, you're doing your calculations incorrectly.
The business flat tax is 9% of gross income less dividends and amounts paid other businesses. That's a lot higher figure than their profits, because wages are not deductible, nor are monies paid to governments.
The individual tax is a 9% tax on all income less charitable contributions, and minus enterprise zone allowances.
The sales tax is the Fair Tax.
You're not taxing savings AT ALL. The tithe did. It wasn't a tax on income, it was a tax on assets, so if you had saved $1000, you'd pay $100 in taxes (and since there were two, and sometimes three, tithes a year, that added up.)
But what's the problem with taxing income twice? When you buy tires for your car, you pay tax on the income you earned to pay for them, pay a federal excise tax on the tires, and then pay a state sales tax on the whole purchase price. That's three taxes on top of each other.
Because wages are not deductible to business, you effectively have a flat 27% tax on earned income (a 9% tax on the business that cannot deduct your wages, a 9% tax when you earn it, and a 9% tax when you spend it) and an 18% tax on unearned income (9% tax on business, plus 9% sales tax.) That's a bigger share of the national income than we currently collect.
My objection to the 9-9-9 plan is that it's unnecessarily complex. I'd replace all payroll taxes, all income taxes, all excise taxes, with a single tax on corporations, partnerships, and foreign individuals/organizations. We need to finance government somehow, which means burdening the economy somehow. Taxing corporate and foreign receipts seems to involve fewer calculations for fewer entities than anything else we can name.
Total corporate gross income seems to be about 25 trillion. That means a tax rate of about 16%. We'd probably need to see the tax rate rise a point or two as small family businesses convert to unincorporated sole proprietorships, but that's hardly possible for bigger companies.
Grain merchants like Central Soya don't make anywhere near 15% on their sales. They'd obviously have to adjust their prices to reflect that, but it's no big deal, since it just amounts to collecting a sales tax on a carload of corn. You'd also pay a sales tax when you deposit money in the bank. That's not the end of the world, either. A century ago, most mortgages came from individuals, not from huge companies. Hitch to Kitch!
This would have the benefit of permanently giving an edge to small businesses - and small businesses are where innovation occurs, and jobs are born. That's not a bad thing. It'd tax the businesses that exported jobs, to the benefit of businesses that didn't, which rewards loyalty. That's not a bad thing, either.
And for most people, it means no tax returns.
I haven't seen a tax plan that sounds especially "fair". I've not even heard a good definition of what constitutes "fairness" in taxes. We therefore might as well go for efficiency in collecting taxes.
During the Bloomberg debate tonight, Michele Bachmann reminded us for the 999th time that she used to be a federal tax lawyer and that the 9% sales tax could lead to a VAT tax. Sales tax in her mind is an additional income stream that would never go away, but the Fair Tax is but one consumption tax that is being pursued by the politicians.
The liberals of course, would prefer the complex VAT tax which is also consumption-based. Harl's excellent summary above doesn't emphasize that Payroll Taxes go bye-bye with the 999 tax.
Bachmann on the other hand, tells us that if you turn the numbers upside down, we are reminded that the "devil is in the details." But she also said Gardisil causes brain-damage after she spent just one night at a Holiday Inn Express. Maybe she should ask some of her 23 foster kids.
The flat tax number I have seen does not work. There is a huge difference between expenses and revenues. I also disagree with combing FICA into a sales tax. Keeping FICA separate and as a dedicated source of funding Social Security and Medicare makes the cost of these programs stand out and easily identifiable. These dedicated taxes also limit these programs total expenditures so that they cannot consume general revenues. Combining FICA into a flat tax, fair tax or 9-9-9 will eliminate the clear distinction and nothing will ever be done with these to programs that I refer to as a con, scam or mutant ponzi scheme.
"The business flat tax is 9% of gross income less dividends and amounts paid other businesses. That
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Your annual reports aren't discussing what taxes would be if Herman Cain's 9-9-9 plan were enacted. http://www.hermancain.com/images/economicgrowth.pdf
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Fine with me, as long as we use a 6% excise tax on hardwired telephone and telegraph service as the sole means of funding the Department of Defense and the Veteran's Administration, so that war doesn't consume the general revenue.
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You found that figure in the Brothers Grimm Tax Manual? In 2007, US schedule C corporations had $2.236,453,876,318 in profit, and they paid $225,482,000,000 in taxes. That's 9.57%.
If corporations are people, shouldn't they pay at least as much as the 15% tax rate of a minimum wage worker?
Social Security by law cannot borrow money. It has statutory authority to spend only those funds received from the dedicated social security tax on wages, tax on benefits and funds in the trust fund. Federal Law prohibits transferring general revenues to any trust fund. United States Code Title 42, Chapter7, Subchapter VII, Sec. 911 (a),
http://www4.law.cornell.edu/uscode/42/911.html
By law the trust fund cannot be drawn down to zero. The trustees must submit a report promptly to congress detailing benefit cuts or tax increases when in any given year the trust fund is projected to fall below 20% of that given years expenses. Social Security's ability to pay future promised benefits is dependent solely on the ability to raise social security taxes. United States Code Title 42, Chapter7, Subchapter VII, Sec. 910 (a),
http://www4.law.cornell.edu/uscode/42/910.html
"If corporations are people, shouldn
Harl, thanks for the link to Cain's proposal. I took a stab at it even though it provides very little in terms of details and absolutely no values.
Currently the average tax on corporate profits is 22% even though the tax rate is close to 33%. This is due to legislated credits. Cain wants to reduce this to 9%. Employers pay about $416 Billion in payroll taxes that are deductible from profit. This will now be taxed at 9%, adding $37.5 Billion. From what I calculate corporations will pay 28% less in taxes. Cain states that the elimination of payroll taxes may be passed onto the worker or lower prices. Lower prices (instead of higher wages or corporate profits) reduce overall revenues.
Eliminating the payroll tax creates a lot of unanswered questions. Is Social Security being eliminated? Does everyone now qualify for Social Security? Does the initial SS-OASI benefit formula still apply?
The current federal income tax rate on all adjusted gross income in the US reported by the IRS is about 16% before credits, exemptions. Clearly the 9% income tax 7. Gross income less charitable deductions is a lot lower than 16% of AGI prior deducting charitable deductions.
Eliminating the estate and capital gains taxes will reduce revenues further.
Based on Cain's proposal I see the deficit increasing from $1.6 Trillion in TY2010 to $2.5 Trillion if his plan is implemented.
Cain and those who support the Fair Tax need to actually look at the numbers. Total income of all taxpayers (includes capital gains) is about $7.5 Trillion. Assuming no savings, we would tax this at a total of 18% (9% income and 9% sales tax). This would replace the income from the federal income tax side, but does nothing for replacing FICA/payroll taxes. Now if Cain proposes doing away with Medicare and Social Security, I might be supporting this proposal, however, there needs to be a lot of general budget cuts to balance the budget.
Harl, Can you provide the link to $28,589,771,221,000 in gross receipts ($28 Trillion)? I think you added an extra zero. First a single guy (1) has a $3,650 personal exemption, not $9,350. This could be if he has two kids, but I wanted to see what the maximum tax would be.
$15,080 - %5,700 - $9,350 = $30. Tax rate is 10%, the total tax paid by this person is $3. If you are going to add kids, why not include the $1,000 child tax credit which would reduce income taxes to zero and actually produce a refundable tax credit of $1,997.
http://www.irs.gov/pub/irs-soi/08co18ccr.xls
Total receipts of active corporations, 2008, is located in cell C17.
As indicated, the $9350 consists of his exemption of $3650 and his standard deduction of $5700. Hmmm. 3:37 PM. Sounds like you were suffering from the the mid-afternoon blaahs; you're usually a lot sharper than that.
Subtracting the $5700 twice is naughty, because it costs the IRS postage to mail you a letter saying they've fixed your error, and politely calling you an idiot. (grin)
Harl, I missed that one. The link you provided is interesting. I have not been up to looking at numbers lately, but will in a week.