Laffer on 999 plan: Those below the poverty line will be better off—period

Art Laffer has written an op-ed in the WSJ this morning that delves into more detail as to why he fully supports the 999 plan. And unlike most of the candidates last night who used state sales tax to unfairly attack it, it seems that Laffer has actually read the proposal and done his research on it.

I know it’s a bit lengthy, but I encourage you to read the entire article below.

WSJ – … Mr. Cain’s 9-9-9 plan was designed to be what economists call “static revenue neutral,” which means that if people didn’t change what they do under his plan, total tax revenues would be the same as they are under our current tax code. I believe his plan would indeed be static revenue neutral, and with the boost it would give to economic growth it would bring in even more revenue than expected.

In the recent past, federal tax revenues from the personal and business income taxes, all payroll taxes, and the capital gains, gift and estate taxes have averaged $2.3 trillion, while gross domestic product has averaged about $14.5 trillion. The total revenue from these taxes as a share of gross domestic product averages around 16%. Sometimes it’s a good deal higher, as in the boom of the late 1990s, and sometimes its lower, as in today’s “Great Recession.” But a number in the 16%-19% range is as good as you’ll get under our current tax code.

By contrast, the three tax bases for Mr. Cain’s 9-9-9 plan add up to about $33 trillion. But the plan exempts from any tax people below the poverty line. Using poverty tables, this exemption reduces each tax base by roughly $2.5 trillion. Thus, Mr. Cain’s 9-9-9 tax base for his business tax is $9.5 trillion, for his income tax $7.7 trillion, and for his sales tax $8.3 trillion. And there you have it! Three federal taxes at 9% that would raise roughly $2.3 trillion and replace the current income tax, corporate tax, payroll tax (employer and employee), capital gains tax and estate tax.

The whole purpose of a flat tax, à la 9-9-9, is to lower marginal tax rates and simplify the tax code. With lower marginal tax rates (and boy will marginal tax rates be lower with the 9-9-9 plan), both the demand for and the supply of labor and capital will increase. Output will soar, as will jobs. Tax revenues will also increase enormously—not because tax rates have increased, but because marginal tax rates have decreased.

By making the tax codes a lot simpler, we’d allow individuals and businesses to spend a lot less on maintaining tax records; filing taxes; hiring lawyers, accountants and tax-deferral experts; and lobbying Congress. As I wrote on this page earlier this year (“The 30-Cent Tax Premium,” April 18), for every dollar of business and personal income taxes paid, some 30 cents in out-of-pocket expenses also were paid to comply with the tax code. Under 9-9-9, these expenses would plummet without a penny being lost to the U.S. Treasury. It’s a win-win.

A static revenue-neutral tax change requires static winners and losers. And this 9-9-9 plan has made certain that even on static terms those below the poverty line will be better off—period. Once the dynamics take hold, many of those below the poverty line will find good jobs and thus will rise above the poverty line and start paying taxes.

In 1986, President Reagan passed a major tax-reform bill that lowered to 28% from 50% the top marginal personal income tax rate. The Tax Reform Act of 1986 also raised the lowest marginal income tax rate to 15% from 11% and closed many loopholes, making for a flatter tax structure. Reagan’s bill passed the Senate in a landslide 97-to-3 vote. Who says a flat tax can’t be a bipartisan proposal?

Still, a number of my fellow economists don’t like the retail sales component of the 9-9-9 plan. They argue that, once in place, the retail rate could be raised to the moon. They are correct, but what they miss is that any tax could be instituted in the future at a higher rate. If I could figure a way to stop future Congresses from ever raising taxes I’d do it every day of the week and twice on Sunday. Until then, let’s not make the perfect the enemy of the good.

>> The full article can be read here.



***

Herman Cain said last night that he will be rolling out a 999 calculator so the American people can directly see how it will affect them.

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70 thoughts on “Laffer on 999 plan: Those below the poverty line will be better off—period

  1. Any candidate who doesn’t buy into the idea that the current tax code needs to be thrown out and replaced is already under the thumb of the politics as usual crowd (read in the pocket of lobbyists and special interests).

    There is no “tweaking” of the current code that will make anything fairer, or flatter.

    Repeal the 16th Amendment? A nice idea, but given the fact that Congress has refused to hold a Constitutional Convention over 250 times makes it unlikely that this is a course of action that has potential.

    Only by taking the Presidency,the Senate and holding the House, will this be able to be accomplished.

    There is only one candidate that appears to have the intestinal fortitude to make this happen, Herman Cain.

    Get on the Cain Train, and put 1,000s of lawyers and IRS workers out of jobs!!!

    It’s the right thing to do, and you know it.

  2. Herman Cain”s 999 plan is the short route to the FAIR TAX which according to the Tax Foundation will eliminate 6 1/2 BILLION hours of unnecessary paper work.Romney,Santorum,Bachman please, please there is zero,zero,zero paper work when paying a Federal sales tax during a purchase at a cash register.Do You get it?

  3. In the end, it does not matter to most people how many economists come out in support of Cain’s 9/9/9 plan. The national sales tax will prove to be its largest impediment. As there are two forgotten factors in this, those that are already paying a State sales tax, and those who have continually fought against and voted them down. That is just a plain simple truth and both sides will argue themselves “blue in the face” over it and it will die in committee. To quote an old TV cop, “And you can take that to the bank.”

    1. How…

      How will the national sales tax prove to be the 9-9-9’s “largest impediment?”

      What have Cain or his economic advisors written or said about the national sales tax that confirm that they are wrong and you are correct?

      Art

      1. If I have to explain it further than I already have, you are still not going to understand my point. It was neither an endorsement nor is it a statement of opposition, just a statement of the “realities” on the ground. Something Cain, his experts or ardent supporters (shout’em downers) of the plan have not reckoned with. The only way to prove or disprove my observation (that is what my comment was, an observation) would be for Cain to win the Presidency and then send his plan up to the career politicians on the hill.

        1. Ok…

          I was simply asking about the “impediment” point, not a long explanation again.

          Your response to Gary Zink above deals with amending the constitution to implement Cain’s 9-9-9- plan… as would the Flat Tax, or any new tax plan that would put on the dung heap of history the idiotic “progressive” tax plan of the 16th Amendment… the more you make the more they take.

          That is dumb, dumb, dumb, and sometimes discourages making more to avoid the tax consequences.

          The 9-9-9 plan would at least encourage making more… because they would NOT take more by increasing your percentage just because you made more.

          Art

          1. I was trying to keep it brief. Ideally, I support the idea that the Federal government should have to come to the people “hat in hand” with a detailed budget when they need more money. While it would certainly limit their spending there are some foreseeable downsides to that idea as well.

            1. Hmm, “limit their spending”…

              Like the checks and balances between the executive and legislative branches that limit THEIR spending.

              Historically, that impediment has been considered a benefit to protect the interests of “we the people” vs. the special interests… except when corruption reigns, as in Dodd/Frank to cover their political butts.

              If limiting spending is a downside impediment , maybe that will be to our historical benefit also.

              Art

              1. One of those “foreseeable downsides” would be in getting a budget authorized at all much less with any measure of reasonable expediency. As in, Conservative voters cannot even “respectfully” disagree on a candidate, what do you suppose it would be like getting the entire voting populace of the nation to agree to a budget?

  4. After 9-9-9 or a Flat Tax or something is implemented…

    More work needs to be done to save “we the people” –

    Below the Bloomberg link are a few words of commentary by Ann Barnhardt at her Barnhardt Capital Management blog.
    >> Read more here – http://barnhardt.biz/

    Ann references this Bloomberg article –

    “BofA Said to Split Regulators Over Moving Merrill Derivatives to Bank Unit”
    >> Read it here – http://www.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit.html

    “It is known that Merrill Lynch had OTC exposure of $22 Trillion.

    “So, in shifting these contracts from Merrill to Bank of America, they are making YOU, THE AMERICAN TAXPAYER the de facto guarantor of these contracts.

    “YOU ARE NOW THE “EXCHANGE”.

    “If the counterparties on these OTC contracts default, Bank of America will have recourse to turn to the FDIC to “bail them out”.

    “Where does the FDIC get its money? From the United States Treasury.

    “Bank of America just illegally dumped tens of TRILLIONS of dollars of OTC contracts on YOU.”

    – – – – – – –

    Palin’s commentary on Greta’s program yesterday after the Nevada debate mentioned the serious issues that are not part of the bickering.

    Which Republican POTUS hopeful is best qualified by temper, experience, wisdom and bulldog tenacity to go after the BIG $$$ issues?

    Art

    1. I love Ann Barnhardt. There is a video further down on that page. Did you watch it, with Yuri Bezmenov? Perfectly describing the exact situation we find ourselves in today. TODAY PEOPLE. Watch it, both parts.
      Then go to: Commieblaster.com

      1. Dittos DebbyX…

        Yes, Ann is definitely an original, unique and Joan of Arc kind of lady.

        She is a thought leader who knows her own mind, and she is very, very, very bright, in I.Q., perception and wisdom.

        And she is a Christian woman who is not shy about bringing her Roman Catholic perceptions into the conversation when it is necessary.

        Also, I have seen the Yuri Bezmenov video before.

        I just finished watching the complete 1hr 21min. version without the pictures of the new “usual” suspects as shown on the version on Ann’s site.

        >> Here is the url of the complete video – http://www.youtube.com/watch?v=y3qkf3bajd4&feature=related

        Also, Commieblaster.com is AWESOME and has been a great go-to site for a long time, and it is constantly being updated.

        Another favorite is ThePeoplesCube.com – At the top of the page it says, “America through the eyes of a former Soviet agitprop artist” – and Oleg Atbashian also posts at PajamasMedia.com

        Art

  5. Mr Laffer did not reveal his part in developing the 9-9-9 plan until he was outed by someone else. Mr Cain never mentioned it either. Seems a little dishonest. It may not matter… but still.

  6. I tried the 9-9-9 calculator. One size does not fit all. If you receive a paycheck, you can calculate the difference. However, it doesn’t allow for small business owners who file Schedule C for business income/expense calculation. Small business owners who file as LLC or sole proprieters get hit the hardest with 9-9-9.

  7. I like Art, but he’s wrong.

    “They argue that, once in place, the retail rate could be raised to the moon. They are correct, but what they miss is that any tax could be instituted in the future at a higher rate.”

    So, let’s get this straight. We’re willing to risk higher sales taxes — which undoubtedly will be blamed on the retailer from the government — on virtually everyone, instead of merely a risk of a higher income tax. Not only that but from what I’ve read on multiple sites, this is a VAT tax because it would charge at every level of production. I don’t think a sales tax/ fair tax/ or anything else is the way to go. A flat, certain income tax is the way to go.

    I know some may say I am wrong, but I know that in the heart of every conservative lies a special place for the poor. And I also know that replacing a potential tax raise for just the rich with a potential tax raise for everyone won’t fly with them.

    Also, on that point of raising.. of course we’re not so sure he’d even get the 16th amendment removed.. so.

  8. First, I am glad to see a plan out there to discuss and I do respect Mr. Laffer. However, given that he and Steve Moore are two of the architects of the plan, I would expect him to support and defend it. Steve Moore has suggested (to Larry Kudlow) that, since so many are opposed to the idea of a national sales tax, that he will suggest to Cain that “9” could be replaced with a payroll tax. It will be interesting to see if such a change is presented and if so, how that will sit with small businesses.

  9. The flaw is “static revenue neutral”. People and businesses do change their behavior. All the estimates are done based on current activitiy. But what future activity might be under a different tax scenario is simply not measurable.

    We have learned from history that one of the more favorite political football items, is the capital gains rate and holding period. Changes on capital gains impact the amount of taxes paid inversly to the rate and holding period change. When capital gains tax rates and holding periods are increased, the amount of taxes on capital gains decreases. People simply re-arrange their affairs and don’t sell as much when rates are higher. Conversly, when the holding periods and rates are reduced taxes collected on capital gains increases. It is because the lower rates and shorter holding periods encourages capital investment, which in turn creates jobs.

    Another example of how behavior changes goes back to the 1986 tax law under Pres Reagan. One of the many things that happened almost immediately after the law was passed was that many closely held corporations elected Scorp status. It was because the tax laws negatively effectively Ccorp status for these closely held corporations. Oh, and by the way this wholesale change from Ccorp to Scorp status throws that “static revenue neutral” argument right out the window.

    1. True, which is why a simple tax code will be a boon to efficient capital allocation. You don’t want the tax code to influence capital allocation decisions. Today, the tax code influences capital allocation decisions. There is a different tax rate for individuals, corporations, dividends, interest, capital gains. There are different depreciation schedules for different types of purchases or expenditures. There are tax holidays, tax credits, tax rebates, etc. It is a tool for politicians to hand out political favors and it leads to unproductive results. Keep it simple.

  10. Remember in the movie, “Back to the Future 2,” lawyers were outlawed by 2015? With the 9-9-9 plan, we can start with all the tax lawyers!

    Even the OWS crowd should go for that!

  11. The inherent problem with the Cain 999 Plan is its messenger, Herman Cain, and his vacillating facts.

    First he said it would apply to all goods and services sold. Then he said food was exempt and then retracted that exemption.

    He later added that it would only apply to “new” goods and those “used” cars, houses etc. would be exempt. Last week I was re-reading Cain’s 999 plan and the used exemption had not been added to the 999 Plan. The thought of the exemption was offered many times but there was no follow through to finalize his Plans intent put into written form. THIS SHOWS A LACK OF GOOD COMMUNICATION SKILLS!

    Last week he said that the National Sales tax would be assessed on the final product at the point of sale. Last night he left that part of his plan out of his explanation.

    This is Mr. Cain’s freaken flag ship issue. He should be able to consistently explain his “Plan” backwards and forwards without deviations every single time he “sells” his idea to the public. Yet the only consistent thing about his presentation comes when he stumbles or forgets to explain 999 to each and every listener as if they were hearing about it for the first time.

    This tells me that he is not a good communicator.

    The “boldness” of Mr. Cain’s Plan is that he is presenting a work-in-progress as a working idea when it clearly is not.

  12. One thing about the 9-9-9 plan that I see no one discussing is simply this: what would happen if employers reduce gross salaries and wages for workers such that their take-home pay is still otherwise the same?

    I’ll use myself as an example. I make a decent living. Now my current gross salary is at its current amount due to deductions, most notably taxes — I want to make sure my take-home pay is enough such that I can cover expenses and save for the future. Currently 15% is withheld for Federal taxes, about 26% overall goes to taxes. So if the Federal tax rate is reduced to 9% flat, my employer could decide, as a cost-cutting measure, to reduce my gross salary such that the amount I take home after deductions is still about the same (give or take a few dollars), but they have now reduced their payroll expenses. That 6% that would otherwise have gone to the government would still not be going into my bank account.

    Personally I could see small businesses and smaller corporations actually doing this as a way to cut cost. And that would, in effect, reduce the amount of tax revenue the Federal government would receive under the new tax plan. All of the current tax calculations appear to assume this won’t happen.

    In other words, unintended consequences. Changes in taxes result in changes in behavior. In this case, a drop in personal income tax rates could result in a reduction in gross salaries and wages. The employees wouldn’t notice it because the calculations could be made such that it is relatively neutral to their paychecks or direct deposits.

    But then what would businesses do with the money they’ve saved? Create jobs? Probably not. Unless there is a sudden increase in demand for their products or services, there won’t be many, if any jobs created either.

    I still don’t see this plan as being thoroughly considered. Never trust what someone says about a revenue plan as the numbers typically end up being quite a bit different from their projections.

    1. You may have a point but for every employer that does this many will be able to raise the salaries of their employees. If you look at employment and average house hold income you will find that during every “recession” the average income drops. Why is this? Because there are 12,000,000 people out there to fill a job. During low unemployment the average income goes up because there are 4,000,000 people with out a job. (2/3 less) Employment is like anything else in a capitalistic environment. The demand of a product (or employee) greatly affects what someone is willing to pay for it. When you have high unemployment wages go down. When you have low unemployment, wages go up.
      I would believe that your employer would more likely lay off or fire employees now so he can replace them with lower paid ones.

      1. You may have a point but for every employer that does this many will be able to raise the salaries of their employees.

        And what is your basis for that statement? That statement requires several other variables to hold true for that statement to hold true.

        The ability for employers to raise salaries is dependent upon the company’s revenue. One employer lowering salaries and wages such that a person’s take-home pay is about the same as before the tax cut does not automatically mean another employer will raise salaries and wages. For that to consistently hold true, the butterfly effect would have to be true.

        The effect of supply and demand on the job market has no bearing on what I was discussing, nor any bearing on what you were discussing, for that matter. Were you just trying to piece together multiple economics concepts into something that sounds coherent without being coherent?

        What I was discussing is the ability for employers to keep the same workers, the same skill sets, but pay less for them while leaving the employees take-home pay unaffected.

        1. You’re thinking about it in reverse. The company doesn’t determine your net pay and then work backwards. The company determines how much it can afford to pay you all in. Supply and demand works in the labor market as well as it does anywhere else when allowed to operate freely.

          Why does a software engineer make $70k while a janitor makes $20k? Supply and demand. Competition and the value the person brings relative to other people determines wages. A company just didn’t arrive at a number out of thin air. They paid what it took to attract the employee to the job and they paid what made financial sense to them (all-in – including medical insurance, payroll taxes, unemployment insurance, etc.).

          In 2009, the government instituted a payroll tax cut that reduced the employees payroll tax bill. Did your company decrease your pay so your net pay didn’t change? I doubt it.

          Hypothetically, let’s say that you win $20,000 in the lottery tomorrow. Will your employer reduce your pay by $20,000 leaving you just as well off? No. Why not? Because you would start looking for another job?

          A drop in corporate income tax rates will likely result in some higher salaries in a few industries but mostly lower consumer prices (depending on the competitive dynamics of the industry). Lower personal income taxes will not impact salaries paid.

  13. I missed the debate yesterday, but I have watched the ambush section of it, courtesy of TRS of course. For some reason, I think Cain has been timid (to say the least) when it comes to defending his tax plan against more rigorous critique. I for one think he’s on to something with the plan. However, the fact that, when challenged, he often resorts to statements like: “I encourage families to do their own research” or “The governor should go on to my campaign website…” or “The congresswoman is making assumptions which are different to ours…” scares me and makes me suspicious of the plan (or, better yet, his possible commitment to it, should he attain office). Segments of the ambush on CNN were ugly, especially Bachman’s bit. With her seeming credibility, having been a tax lawyer and entrepreneur, she seemed to do the most damage to viewers’ perception of the 999 plan. And Cain was too weak in his response to it.

    Now, I was willing to give Cain the benefit of doubt on this as any smart voter should, mainly because I believe the complications and details of the policy (indeed most tax policies) are so great that it would not really endear voters to Cain should he decide to lay them out in word-for-word fashion on live tv with a debate format hardly designed for such things, considering that the viewing electorate has the attention span of a drunken regal tang.

    However, if I am right on this, then Cain should at least have some pithy but more meaningful defenses of his plan ready for on-air assaults such as yesterday’s and only then would any further referral of inquisitors to his website and to their calculators look less like a lightweight contender trying avoid real scrutiny. Ultimately, as Gringrich pointed out, credit to Cain for getting a real debate about monetary policy going and not underestimating the American electorate in the first place. Now he has to go further and defend his innovation more thoroughly. I mean, come on, Art Laffer of the great “Laffer Curve” backs the plan! It must have something! Cain/Gringich for 2012!

  14. A national sales tax per Cain’s plan will require an amendment to the Constitution (similar to the 16th Amendment) that vacates the Article 1, Section 2, Clause 3 and Article 1, Section 9, Clause 4 prohibitions placed on the ability of Congress to lay and collect DIRECT taxes. Or alternatively, Cain’s (or any for that matter) national sales tax will have to be APPORTIONED among the several States; which occasion would absolutely defeat it’s purpose.

    Originally, in 1913, the income tax was sold to the American people as a “tax on the rich”. Originally, the RATES were very low and the tax was NOT owed by Joe and Jane Sixpack. Indeed the income tax NEVER applied to WAGES until 1935. Yet here we are today where the income tax seemingly applies to everybody, yet even that is still not enough.

    Just like rates went UP after the income tax law was fully ensconced in America and the reach of the tax extended to people the lawmakers promised would never be touched, the rates and reach of the national sales tax will likewise increase over time. Except we will also have to contend with two direct federal taxes, not just the bad one we currently have.

    Additionally, we will have to contend with two (2) constitutional amendment “band-aides”, the only wound being protected is the original abomination foist on the public, which was the diminishment of the Art. 1, Sec. 2, Cl. 3 and Art. 1, Sec. 9, Cl. 4 prohibitions placed upon the ability of Congress to lay and collect a direct tax. And the rates for each tax will continue to rise as long as the American people keep begging Congress for the free lunch. People today don’t realize it, but the cry for a “balanced budget amendment” is a reaction to the fact that the original intention of the framers of the Constitution to ENSURE a LIMITED government was destroyed when Congress was issued the power to lay a direct tax on “incomes” without respect to the Art. 1, Sec. 2, Cl. 3 and Art. 1, Sec. 9, Cl. 4 prohibitions.

    President Lincoln advised, “America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves.” I am attempting to show how that fact has become a reality; that the players don’t play by the rules and exactly how that process was absolutely made manifest by virtue of the wholesale misunderstanding and ensuing misapplication of the written words of the Internal Revenue Code.

    The public’s collective IGNORANCE of the constitutional restrictions respecting the power of Congress to levy either a direct tax or an indirect tax will ultimately be our Achilles heal.

    Apologies to those who tire of my drum-beating. Get the facts of the matter here: http://www.federaltaxfacts.com

    1. You are correct in your position that Cain’s plan would require some amending of the Constitution. However there is no prohibition in the US Constitution of the levying of direct taxes, there was only the condition that it had to be “apportioned”, From Art 1 Sec 2

      Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons.

      The 16th Amendment merely did away with the requirement of “apportionment”.

  15. What is the definition of poverty? Oh yea, Xbox and 2 cars…. We could all use a trip to Bangledesh. Politicians just keep changing the definition to fit their agenda. The class warfare is really getting old and we should not be looking out for the interests of a select group of Americans at a time.

    1. exactly.. thank you !!! if anyone has ever been outside the United States and been to places in Central America, you would know what “poverty” truly is..

      1. The one that really boggles my mind is when they talk about the hungry in America. With food stamps, churches, soup kitchens and an obesity crisis, the only way to go without food in this country is to be a complete helpless fool.

  16. Even if HC’s plan needs some corrections at least he had the courage to put a plan out there for all to see…..

    I got this email about the economy and a small businessman. It is lengthy but profound.

    Reference: A letter from the Boss:

    To All My Valued Employees,

    There have been some rumblings around the office about the future of this company, and more specifically, your job. As you know, the economy has changed for the worse and presents many challenges. However, the good news is this: The economy doesn’t pose a threat to your job. What does threaten your job however, is the changing political landscape in this country.

    However, let me tell you some little tidbits of fact which might help you decide what is in your best interests.

    First, while it is easy to spew rhetoric that casts employers against employees, you have to understand that for every business owner there is a Back Story. This back story is often neglected and overshadowed by what you see and hear. Sure, you see me park my Mercedes outside. You’ve seen my big home at last years Christmas party. I’m sure; all these flashy icons of luxury conjure up some idealized thoughts about my life.

    However, what you don’t see is the BACK STORY :

    I started this company 28 years ago. At that time, I lived in a 300 square foot studio apartment for 3 years. My entire living apartment was converted into an office so I could put forth 100% effort into building a company, which by the way, would eventually employ you.

    My diet consisted of Ramen Pride noodles because every dollar I spent went back into this company. I drove a rusty Toyota Corolla with a defective transmission. I didn’t have time to date. Often times, I stayed home on weekends, while my friends went out drinking and partying. In fact, I was married to my business — hard work, discipline, and sacrifice.

    Meanwhile, my friends got jobs. They worked 40 hours a week and made a modest $50K a year and spent every dime they earned. They drove flashy cars and lived in expensive homes and wore fancy designer clothes. Instead of hitting the Nordstrom’s for the latest hot fashion item, I was trolling through the discount store extracting any clothing item that didn’t look like it was birthed in the 70’s. My friends refinanced their mortgages and lived a life of luxury. I, however, did not. I put my time, my money, and my life into a business with a vision that eventually, someday, I too, will be able to afford these luxuries my friends supposedly had.

    So, while you physically arrive at the office at 9am, mentally check in at about noon, and then leave at 5pm, I don’t. There is no “off” button for me. When you leave the office, you are done and you have a weekend all to yourself. I unfortunately do not have the freedom. I eat, and breathe this company every minute of the day. There is no rest. There is no weekend. There is no happy hour. Every day this business is attached to my hip like a 1 year old special-needs child. You, of course, only see the fruits of that garden — the nice house, the Mercedes, the vacations… you never realize the Back Story and the sacrifices I’ve made.

    Now, the economy is falling apart and I, the guy that made all the right decisions and saved his money, have to bailout all the people who didn’t. The people that overspent their paychecks suddenly feel entitled to the same luxuries that I earned and sacrificed a decade of my life for.

    Yes, business ownership has is benefits but the price I’ve paid is steep and not without wounds.

    Unfortunately, the cost of running this business, and employing you, is starting to eclipse the threshold of marginal benefit and let me tell you why:

    I am being taxed to death and the government thinks I don’t pay enough. I have state taxes. Federal taxes. Property taxes. Sales and use taxes. Payroll taxes. Workers compensation taxes. Unemployment taxes. Taxes on taxes. I have to hire a tax man to manage all these taxes and then guess what? I have to pay taxes for employing him. Government mandates and regulations and all the accounting that goes with it, now occupy most of my time. On Oct 15th, I wrote a check to the US Treasury for $288,000 for quarterly taxes. You know what my “stimulus” check was? Zero. Nada. Zilch.

    The question I have is this: Who is stimulating the economy? Me, the guy who has provided 14 people good paying jobs and serves over 2,200,000 people per year with a flourishing business? Or, the single mother sitting at home pregnant with her fourth child waiting for her next welfare check? Obviously, government feels the latter is the economic stimulus of this country.

    The fact is, if I deducted (Read: Stole) 50% of your paycheck you’d quit and you wouldn’t work here. I mean, why should you? That’s nuts. Who wants to get rewarded only 50% of their hard work? Well, I agree which is why your job is in jeopardy.

    Here is what many of you don’t understand … to stimulate the economy you need to stimulate what runs the economy. Had suddenly government mandated to me that I didn’t need to pay taxes, guess what? Instead of depositing that $288,000 into the Washington black-hole, I would have spent it, hired more employees, and generated substantial economic growth. My employees would have enjoyed the wealth of that tax cut in the form of promotions and better salaries. But you can forget it now.

    When you have a comatose man on the verge of death, you don’t defibrillate and shock his thumb thinking that will bring him back to life, do you? Or, do you defibrillate his heart? Business is at the heart of America and always has been. To restart it, you must stimulate it, not kill it. Suddenly, the power brokers in Washington believe the poor of America are the essential drivers of the American economic engine. Nothing could be further from the truth and this is the type of change you can keep.

    So where am I going with all this?

    It’s quite simple.

    If any new taxes are levied on me, or my company, my reaction will be swift and simple. I’ll fire you and your coworkers. You can then plead with the government to pay for your mortgage, your SUV, and your child’s future. Frankly, it isn’t my problem any more.

    Then, I will close this company down, move to another country, and retire. You see, I’m done. I’m done with a country that penalizes the productive and gives to the unproductive. My motivation to work and to provide jobs will be destroyed, and with it, will be my citizenship.

    So, if you lose your job, it won’t be at the hands of the economy; it will be at the hands of a political hurricane that swept through this country, steamrolled the constitution, and will have changed its landscape forever. If that happens, you can find me sitting on a beach, retired, and with no employees to worry about….

    Signed, THE BOSS

    “The problem with socialism is that you eventually run out of other people’s money.”Margaret Thatcher

    1. Brilliant stuff – another of your great posts that I’ll be shooting off in an email in the morning 🙂

  17. I don’t want to see the 3rd “9” become the 3rd rail for Cain. I know that a rethink is in the works and I look forward to Cain landing on his feet like a cat when it is fully presented. However, he must attend to the rethink EMMEDIATELY.

  18. While I like the theoretical concept of his plan, it does not work in the real world. I have actually run the numbers. He’s not using real world numbers.

    His claim is that a family making $50,000 currently pays between $9,000-10,000 in total taxes. That’s not true. This year they will pay $2,100 FICA and $2,600 income taxes after deductions and tax credits for a total of $4,700 (I used 2 kids, this would go down with more).

    That’s about what they would pay in income tax on his new plan. BUT, now they would have to pay an ADDITIONAL 9% sales tax on goods. Don’t be fooled by his plan. It WILL raise taxes on a MAJORITY of MIDDLE AMERICA. Do you own numbers. Compare your OWN tax return from last year.

    Cain has a gimmick right now and is working for him in the primary. Obama would slaughter him with it in the general election.

    1. I believe that Mr. Cain is including the amount the family would pay for embedded taxes on items, which we do not even see.

      Even an humble loaf of white bread has embedded taxes.

      GB

        1. Actually, sir, you do pay income taxes on white bread, just not your income taxes.

          Now if you will add in the EMBEDDED taxes we all pay BESIDES OUR INCOME TAXES as Mr. Cain’s model suggests, I am sure you will arrive at the same figures he does.

          GB

          1. As I said in my edit:

            I see what you are saying. In his example it didn’t sound like he was using embedded taxes. He just said that a family making $50,000 currently pays about $9,000-$10,000. Under his new plan they would pay $4,500 income and $4,500 sales tax making it “tax neutral”.

            I do not believe the average family currently pays $4,500 in “embedded taxes”.

  19. I was impressed with Cain in the debates last night and how he stood his ground on his -9-9 plan. I will admit I’m starting to tire of hearing it said ad nauseum in the debates.

  20. This is beginning to get there. I can grasp the claim that this is a tax plan that better matches and encourages a free market system. The other shoe has to drop now. It still seems like pushing air around in the balloon because the same total amount of blood is siphoned from the private sector into an out of control central government.

    Saying “If I could figure a way to stop future Congresses from ever raising taxes I’d do it every day of the week and twice on Sunday.” sounds like a stawman argument. The danger is not so much that 999 rates would be raised (they will be), but that 999 gives the Central Government MORE power to tax us with a sales tax but does nothing to stem the government’s size, power and ability to tax the private sector.

    A national sales tax is a major step to European style tax structures. It has not helped them move from Statism to capitalism even one iota.

    We do not need “static revenue neutral”, we need to shrink the government with “static revenue negative”, which under 999 as stated should leave even more capital in the private sector. Bringing in “even more revenue than expected” will only drive a new spurt in government growth and power.

    We now need to hear the “permanently cut government” part of this or we will find that 999 only serves to give the Central Government a more efficient way to raise even more money, to grow itself even further.

    1. Efficient? No more class warfare card. Taxes go up on EVERYONE, rich and poor alike. Tell me how long they’d survive politically if they tried that.

      1. That may be exactly an example of what I am looking for in Cain’s plan. I just do not hear him saying those things. Until I do, this just looks to me like better tools for a bigger government.

        1. Another example that neither Mr. Cain or other promoters of THE FAIR TAX seem to miss is: If I buy a new boat for $10,000.00 I would pay the 9% on that which is $900.00. (13% less than the current embedded tax of $2200.00). While when my brother buys his off shore fishing boat for $75,000.00 he will pay $6,750.00.

          Since people envy the rich (like I envy my brother) they will enjoy knowing that those folks with “fancy” cars, boats and houses have to pay more when they buy them – just as they do now.

          GB

  21. This is good news.Now Cain will have to prove the 22 % embedded taxes .

    ” By making the tax codes a lot simpler, we’d allow individuals and businesses to spend a lot less on maintaining tax records; filing taxes; hiring lawyers, accountants and tax-deferral experts ”

    Now HR Block can close their 12,500 retail offices and the tax lawyers,accountants, and tax-deferral experts can look for a new job. This will create jobs, in unemployment offices.

    1. The 22% to 23% embedded taxes were found in the research for the fair tax. Extensive studies by Harvard and other Universities…

      GB

  22. The problem is that nearly half the voters apparently are deadbeats and don’t pay any taxes. So for them, the idea that when they buy a product they’re in essence paying some taxes won’t be popular.

    While the bottom 40% want the evil rich to pay more, they’re fine paying ZERO.

    1. This is a bit skewed. Poor people do pay income taxes, however yes they do receive an earned income tax credit, which can be greater than their tax paid and thus as if they didn’t pay taxes. But let’s just straighten out the facts…. still have to pay taxes elsewhere, such as payroll taxes, sales taxes. The sales tax is not popular amongst the poor because it will hurt them the most. The poor consume a higher percentage of their income daily than those who aren’t poor. So if a national sales tax is enacted, this means a higher percentage of their limited funds is going to have to pay for taxes.

      And it’s not just the bottom 40% who want the rich to pay more taxes. A majority of Americans believe individuals making more than 250k should pay more taxes.

      1. Cain claims that even though the “poor” would have a 9% Fed tax built into their purchases, the total price of the goods will go down. You can argue whether that claim is indeed true or not, but you cannot counter his claim by simply saying that the “poor” will be over burdened with less buying power..

        1. Cain is taking great faith in assuming that corporations will just automatically lower the price of their goods. Corporations are greedy and will just collect the profits. I don’t have as much faith in corporations as he does.

          1. Greed is exactly what will bring prices down-

            Say that I make the same product as you, but our costs just went down. You haven’t dropped your prices yet, and I decide to undercut you so I could take a bigger share of the customer “pie”.

            Competition just brought prices down, and my greed forced my prices down, and your prices down because I wanted to capitalize on the extra margin I had and stole your customers (at least for a while).

            1. Exactly. Unfortunately the drones can’t hear logic and apparently haven’t a clue about even the most basic concepts of economics.

          2. Notice most corporations in a given industry hover around a typical profit margin. (Monopolies not withstanding). The minute a corporation has a chance to lower the price of their goods or services, they will do so,because it will (in most sectors) increase their volumes which will increase their profits. Companies that cannot take advantage of this will have to regroup.

            Lower cost to consumer, higher profit for the company. This is the beauty of a free market system and you cannot find a better example than the computer and digital electronics industry.

            1. sDee, you are correct, certain sectors will, especially the discretionary spending sectors. However, protected sectors like pharmaceuticals, energy, and food will not lower their prices as easily, or as much.

          3. They won’t “automatically” lower their prices just because of the changed tax structure, but a business will realize it suddenly has lower costs, and can lower its prices in order to gain an advantage over its competitors. The competitors will have to do the same in order to remain competitive, or risk losing costumers.

          4. really because one corporation will lower there prices and then all the others will have to because they will go out of businesses and did you forget about Walmart also wanting to lower there prices to make more money did you ever take business class in high school or want? Business could raise prices right now if they wanted to but they dont the only reason there this high is because of taxes with corps and 38 percent taxes. If you take Hong Kong for example they have lots of money because they don’t have the government breathing down there backs every minute. with taxes

      2. The top 2% pay 70% how much works for you? How’s 90% and the bottom 40% can continue sucking on the teat?

  23. I am with Cain! Really there is no one else in the field worth supporting who will genuinely change the game in Washington. Yes, he needs a foreign policy guru like John Bolton and hopefully we see his campaign attract one. But, we need a problem solver in the White House. Cain is willing to put solutions on the table while the other candidates attack him, each other, and spout platitudes. If you all like that in a candidate, then go on and accept Mitt Romney as the nominee. If you want real change and a real focus on the problems this country faces, support Herman Cain.

    He is not perfect, but none of the other candidates are. Whatever faults he has, I could detail 10 times more in the other candidates in the race.

    999 is a bold, visionary plan to address our corrupt, convoluted tax code and it will bring about strong economic growth. Couple that with Cain’s solutions to health care reform, entitlement reform, and immigration reform and I really don’t see where else conservatives should take their vote. Let’s change the game in 2012! Vote Cain!

    1. There’s another advantage of the 9-9-9 tax that nobody has mentioned.

      Critics are attacking 9-9-9 because it taxes even the poor, but that is precisely what makes it so good.

      The fact that the tax effects EVERYONE means that if a future administration tries to raise the rate, you will have the ENTIRE population rising up to oppose it.

      As it stands now, the graduated tax system makes it easy on government to raise the rates in the higher brackets without facing too much opposition from the population.

      Making the tax system flat means that raising the rate will be felt by everyone, and likely be opposed.

      Here’s an example: A few years ago in Canada, Stephen Harper ran his campaign on the promise he would drop the national sales tax by two percents. Two measly percentage points, and it won him the election!

      Imagine a future administration trying to raise the rate by even a few points. They would never do it, because they would know that it would cost them their seat!

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