Over
the past few weeks, former Godfather CEO Herman Cain has
surged into a frontrunner position for the Republican nomination
for president. This
surge is nothing new for the political world. Several have
appeared to be what the GOP is looking for, then after peeling
back cover, the truth comes out. Herman Cain’s “9-9-9” tax
plan looked like something the conservative voter could
hold onto. But just as any magician’s trick, if one looks
intensely enough and long enough, the illusion will be unmasked.
An
illusion is a distortion of the senses, revealing how the
brain normally organizes and interprets sensory stimulation.
While illusions distort reality, they are generally shared
by most people. Cain’s 9-9-9 plan stimulated the senses.
It was clear, concise and rolled off the tip of your tongue;
besides, none of the other Republican candidates had a cognitive
plan to fix the economy that they could articulate. All
they could offer is that “Obama messed the economy up.”
It’s obvious that coming with something was preferred to
blaming the other guy.
The
9-9-9 plan would get rid of almost all current taxes and
replace them with a 9% income tax, a 9% corporate tax and
a 9% national sales tax. Sounds pretty simple doesn’t it?
Nothing else - just 9-9-9, right?
What
hasn’t been said yet is that when the dust clears, Cain
wants the country to adopt a Fair Tax. The FairTax, a tax reform proposal for the
federal government, would replace all federal taxes on personal
and corporate income with a single broad national consumption
tax on retail sales. The Fair Tax Act (H.R. 25/S.
13) would apply a tax once at the point of purchase on all
new goods and services for personal consumption. The proposal
also calls for a monthly payment to all family households
of lawful U.S. residents (a side attack on illegal immigration)
as an advance rebate, or “prebate”, of tax on purchases
up to the poverty level. He’s not the first presidential candidate to propose it. In 2008, for instance, Mike Huckabee placed it at
the forefront of his economic plan when he ran for the GOP
nomination.
What
also is not being said by the Cain camp - or the media -
is that other taxes and fees will still exist. Those
include excise taxes on things like gas and alcohol, tobacco
and firearms, airline tickets and phone service. These items
generate a helluva lot of revenue! That’s
equal to nearly half the money now collected in corporate
income taxes.
Another
huge problem for Cain’s plan is that the
average American family - the bottom 99% - would pay roughly
$29,000 more than the richest 1% would pay Uncle Sam, according
to Time magazine.
Economists
and tax policy experts were quick to point out that under
Cain’s plan, most Americans will actually pay more in overall
taxes, even if they pay less in income taxes. The tax bill
for the rich however is likely to drop - overall and on
income. What has to be taken into account is that state
taxes still apply. In states like Tennessee,
the 9% sales tax will be levied along with Cain’s proposed
9% national sales tax - regardless of your income level.
Rich people and poor people alike buy items like televisions,
toys and toilet paper. That tax hurts poor people the most.
Edward
Kleinbard, a USC tax expert studied the plan and did a comparison
between a family making $50,000 and another making just
below $500,000. According to the 9-9-9 plan analysis, the
average family of four making $50,000 under our current
system pays $8,416 a year, after deductions, in both income
and payroll taxes. That equals an effective tax rate of
about 17%. Now take the top 1%. To meet that mark that family
would have to earn $530,000. Under current tax law, taking
into affect deductions like charitable giving and mortgage
write-off, the top 1% pay an average of 29% of their income
to Uncle Sam in payroll and income taxes. So, under current
law the family making $530,000 will pay $153,700 a year
in taxes.
The
Cain plan lowers the income tax rate to 9%, and does away
with the payroll tax. Nice. How does Cain pay for that?
Well, he adds on the other two 9s - a 9% sales tax, and
replaces corporate income taxes with a 9% business transaction
tax, meaning instead of paying taxes on just earnings, businesses
will now have to pay a 9% fee to the government for their
net purchases every year. Most company’s biggest purchase
or expense is their workers, so it basically works out as
a 9% payroll tax..
What
would the $50,000 family and the top 1% have to pay? Well,
under Cain’s plan, the family earning $50,000 would see
their income tax bill fall to $4,500. But they would also
have to pay a 9% tax on everything they buy each year. Since
most families of four on a $50,000 income spend nearly all
of their income, that works out to another $4,500 in taxes.
What’s more, Kleinbard figures that most companies have
a fixed budget to pay for wages. So if the government adds
on a 9% payroll tax, companies will simply pay 9% less in
salaries to their workers. So, for the family making $50,000,
they pay another $4,500 in lower wages. Total 9-9-9 tax
bill: $13,500, or $5,084 more than what they pay under the
current tax system.
Cutting
to the chase: Cain’s 9-9-9 works out well for rich folks…but
the mainstream, working class American is getting the screw
again. That’s pretty much par for the course with all Republican
policies. This inequality, that appears equal on the surface,
is the basis for the current Occupy Wall Street protests
cropping up across the country.
There’s
every reason to be suspicious of any elixir that rolls off
the tip of your tongue. Slick marketing is the aim of corporate
heads, like Herman Cain. You can make it look like a cake,
but sprinkling sugar on doo-doo, doesn’t make it anything
other than doo-doo. The
illusion of 9-9-9 may excite the senses, but not only hurts
the working class American, it makes no guarantee that corporations
will hire because of this proposed change. This “trickle
down” approach is actually a “piss-on” approach.
Herman
Cain has placed the tax before you and is sliding the facts
of its impact under the table. I’m truly hoping you don’t
go for the tax and slide of 9-9-9.
BlackCommentator.com
Columnist, Perry
Redd, is the former Executive Director of
the workers rights advocacy, Sincere Seven, and author of
the on-line commentary, “The
Other Side of the Tracks.” He is the host of the internet-based
talk radio show, Socially Speaking in
Washington,
DC.
Click
here to contact Mr.
Redd.
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