Is Herman Cain a Delusional Anti-American Nutbag
“9-9-9 will pass, and it is not the price of pizza because, it has been well-studied and well-developed… The problem with that analysis [that it will not raise enough revenue] is that it is incorrect. The reason it's incorrect is because they start with assumptions that we don't make. Remember, 9- 9-9 plan throws out the current tax code. ... Now, what 9-9-9 does, it expands the base. When you expand the base, we can arrive at the lowest possible rate, which is 9-9-9.” — Herman Cain, Washington Post-Bloomberg debate, October 11, 2011
A family of four making $50,000 a year “are still going to have some money left over.”— Cain, on MSNBC, October 12, 2011
It almost sounds like something out of the movie “Dave,” in which the accidental president enlists his accountant friend, Murray Blum, to help him figure out the federal budget.
During Tuesday’s Washington Post-Bloomberg debate, Herman Cain, the former chief executive of Godfather’s Pizza, named Rich Lowrie of Cleveland as “my lead economist” who helped develop Cain’s signature “9-9-9” plan for overhauling the federal tax system. “He is an economist, and he has worked in the business of wealth creation most of his career,” Cain said.
Actually, according to Lowrie’s Linked-In profile, he has a bachelor’s degree in accountancy from Case Western Reserve University, not economics. Lowrie, in an e-mail, said he did not consider himself an economist, just “senior economic advisor” to the Cain campaign. Donor information maintained by Opensecrets.org shows he has donated $1,500 to Cain in 2010 and 2011, but also contributed $2,300 to Mitt Romney in his first run for the presidency in 2007.
Okay, so Cain may have exaggerated the qualifications of his economic guru. But he has forcefully defended his ‘9-9-9’ plan, both during Tuesday night’s debate and on MSNBC’s “Daily Rundown” on Wednesday. Many readers have asked us to examine the plan and explain it, so let’s take it for a test drive.
The Facts
The “9-9-9” label is actually a bit of misnomer. Cain would toss out much of the current federal tax code and replace it, eventually and only temporarily, with three taxes — a 9 percent income tax, a 9 percent business transactions tax and a 9 percent federal sales tax. On paper, the first two look like cuts, because payroll taxes for Social Security and Medicare (now nearly 15 percent, including corporate contributions) would be repealed. The sales tax would be new, on top of existing state sales taxes.
But note that we said the “9-9-9” would happen eventually — and then only temporarily. That’s because it is only the second step of a planned three-step process. The first step would cut individual and corporate tax rates to a top 25 percent rate (down from a current high of 35 percent). Then the final step would replace all of the taxes — even the 9s — with a national sales tax, known by proponents as a “Fair Tax.”
(As denizens of Washington, we find this three-step process to be highly dubious. It takes years, even decades, to fundamentally overhaul the tax code. Herman Cain is going to do this three times in his presidency? But we digress.)
Much attention has focused on whether Cain’s plan, in its 9-9-9 stage, would raise as much revenue as the current tax system. Bloomberg News had calculated it would collect about $2 trillion, thus falling short by about $200 billion a year. But Lowrie sent Bloomberg an analysis on Wednesday that asserted “9-9-9” would actually collect slightly more — $2.3 trillion.
We think the revenue question is beside the point. Anyone can turn the dials in their computer models to generate the assumptions they want.
Michael Linden of the left-leaning Center for American Progress, for instance, estimates the plan would generate just $1.3 trillion. The biggest difference between the two estimates is that Linden thinks the 9 percent business tax would yield $112 billion a year, and Cain says he would get $862 billion — a gap that simply demonstrates how a few different assumptions can generate extremely different results. (Linden on Thursday updated his analysis, saying he had underestimated how much revenue the business tax would raise.)
Cain’s proposal is so radical that it makes more sense to examine the potential impact on taxpayers. A key part of Cain’s pitch for the plan during the debate was this: “When you expand the base, we can arrive at the lowest possible rate, which is 9-9-9.”
“Expand the base” really means that more taxpayers will pay taxes under his plan.
Right now, nearly half of taxpayers don’t pay income taxes, but they do pay their share of payroll taxes, which amounts to 7.65 percent of wage income (though much of it is capped at $107,000). Cain would also eliminate the earned-income tax credit, which is intended to lift working Americans out of poverty. Many of these workers currently receive tax refunds.
On top of that, Cain would introduce the new sales tax, which would affect lower and moderate-income people who spend most of their income on purchases, not savings and investments. Depending on how you do the math, people now paying zero or negative taxes might be faced with a 27 percent tax on income.
In other words, while on paper Cain is promising a tax cut, in reality tens of millions of lower-income Americans would face tax increases. People in high tax brackets — 28 percent and higher — would likely see big tax cuts. (As part of his plan, Cain would also eliminate estate taxes and capital gains taxes, which, again, mostly affect higher-income people with stock and real estate investments.)
There have been several interesting analyses done on the “9-9-9” plan. Edward D. Kleinbard of the University of Southern California School of Law identifies several unusual quirks, including a “disguised one-time 9 percent tax on existing wealth — no doubt much to the surprise of Mr. Cain and his followers.” Kleinbard, former chief of staff of the nonpartisan Joint Committee on Taxation, says that “contrary to casual impressions, the Plan could be expected to raise substantial amounts of revenue, but does so largely by skewing downwards the distribution of tax burdens when compared to current law.”
Bruce Bartlett, a former Reagan administration official who now calls himself an independent, also offered a critical examination this week on the New York Times Economix blog. He (as did Kleinbard) noted that the business tax allows for no deduction for wages, which he said “is likely to raise the cost of employing workers, even with abolition of the employers’ share of the payroll tax.”
In other words the working poor - generally people making under $9 an hour would have a huge increase in their federal tax rate. People making over $100k a year would get a huge tax break on their investment income - thus yet another tax break for the well off. Though those people would also lose individual deductions which may have ultimately made their federal taxes lower. Cain will not and cannot give many details because he has never had the plan submitted to a team of independent tax experts to see the effects. Almost 51% of Americans would pay more in federal taxes - those living just below the median, while the wealthy would get even wealthier. As we have all seen the past twenty years wealthy people do not take their extra wealth and create jobs they just bank the money or get more free money from their capital gains. Cain is just bamboozling America with a slightly newer version of voodoo trickle down economics. The kind of economics that are partly responsible for our current economic problems. Herman Cain is just another crazy conservative nutbar who likes to hear the sound of his own delusional and arrogation voice. His supporters are just rubes who want to get through life not paying their fair share for the cost of infrastructure that makes a healthy economy possible.
