Image by Gage Skidmore via FlickrI just got home from work, and am waiting for dinner to be ready and then to watch the GOP Presidential debate tonight on CNN. I have mentioned here before how much I like Herman Cain and want to know more about him. I still have not made up my mind which of the current Republican candidates I will vote for in the primaries, though I am currently leaning towards Cain but that could change.
About a month ago, Herman Cain first brought up his 999 tax plan. My initial thoughts were that I found it intriguing, but was concerned about how the 9% national sales tax aspect would impact me. Under Cain's plan there would no longer be a payroll tax, so my combined FICA and income tax would be lower. I expect tonight that during the debate Cain will be questioned heavily on the plan, especially the sales tax portion.
As Cain has risen in the ranks, his 999 plan has been getting a lot of attention. So naturally, I have been thinking about the 999 plan a lot more in the past few days. If you look at Cain's website, Cain states that the goal of the 999 plan is a transitional plan to implementing the FairTax. The FairTax is strictly a consumption tax and eliminates payroll and income taxes and repeals the 16th amendment, abolishing the IRS.
One of the things that Cain has talked about during the debates is the 15.3% payroll tax that everybody faces that would be eliminated under the 999 plan. The problem with that is that individuals only pay half of that (assuming the normal payroll tax rate when the current 2% tax break ends at the end of the year) while the employer pays the other half. One of the assumptions made under the FairTax is that the portion paid by the employer would end up in the paycheck of the employees.
I can only assume that Cain is using some of the FairTax assumptions on the payroll tax going towards salaries in his 999 plan. If those assumptions were to be true, then I can see it being of benefit to most folks, with the exception of the lower income groups. Unfortunately, you know the old saying about when you assume you make an ass out of you and me.
If those assumptions do not hold true, then you can pretty much be assured that a lot of folks would be paying more in taxes. I have used info from the Tax Policy Center in the past when I have made posts regarding tax issues. They have done one of the first extensive examinations of the 999 plan. Their analysis says that 84% of the country would end up paying more in taxes. About the only group that would benefit would be the higher income brackets. To quote Cain from one of the debates, "That dog won't hunt."
I fully expect to hear a lot about the 999 plan during tonight's debate. There are a lot of questions that need to be answered about the details of the plan. Now, I am not one of those who believe that the rich are not paying their fair share of taxes. However, a plan that would impact lower income citizens negatively, while benefiting higher income citizens just won't fly. In that respect, Rick Santorum was correct in the last debate when he said the 999 plan had no chance of passing.