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Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul.
With recent polls showing increased support for Herman Cain as the G.O.P. presidential nominee, attention is being drawn to his platform, especially what he calls the 9-9-9 tax plan. News reports describe it as a 9 percent tax rate on business and personal income, combined with a 9 percent national sales tax.
Little detail has been released by the Cain campaign, so it’s impossible to do a thorough analysis. But using what is available on Mr. Cain’s Web site, I’m taking a stab at estimating its effects.
First, the 9-9-9 plan is actually an intermediate step in Mr. Cain’s plan to overhaul the tax system and jump-start growth. Phase 1 would reduce individual and business taxes to a maximum of 25 percent, which I assume means reducing the top statutory tax rate to 25 percent from 35 percent.
No mention is made on the site of a tax cut for those now in the 10 percent, 15 percent or 25 percent brackets. This means that the only people who would get a tax rate cut are those now in the 28 percent, 33 percent or 35 percent brackets. According to the Joint Committee on Taxation, only 4 percent of taxpayers pay any taxes at those rates.
As for corporations, Mr. Cain’s proposal is primarily going to benefit those with revenues of more than $1 million a year, because they account for 98.7 percent of all receipts by C corporations. (A C corporation is a legal entity separate and distinct from its owners that is taxed as a corporation; its shareholders pay taxes individually on their gains.) Those companies with receipts over $50 million account for 88.8 percent of total receipts.
Other business entities — sole proprietorships, S corporations (which have between 1 and 100 shareholders and pass through net income or losses to shareholders) and partnerships — would not benefit because they are not taxed on the corporate schedule. But they represent 92 percent of all businesses.
Second, Mr. Cain would eliminate all taxes on profits earned by multinational corporations outside the United States. It’s hard to know the impact of this provision, but according to Martin Sullivan, an economist with Tax Analysts, the 50 largest corporations in the United States generated half of their profits in other countries.
The actual benefit of Mr. Cain’s proposal would be much greater to many of them, because, according to Mr. Sullivan, while some of these 50 companies have no foreign operations, others derive 100 percent of their gross profits in foreign countries. In 2010 these included Philip Morris, Pfizer and Abbott Laboratories.
Third, Mr. Cain would abolish all taxes on capital gains. Such taxes typically generate more than $100 billion in federal revenue annually, according to the Tax Policy Center. According to the Joint Committee on Taxation, two-thirds of all capital gains are reported by those with incomes over $1 million.
Mr. Cain says these three proposals, which he would put into effect immediately without offsetting the lost revenue, will jump-start economic growth. He offers no evidence for this assertion; it is simply put forward as self-evident. But the experience of the George W. Bush administration was that cuts in tax rates on the wealthy and on capital gains had no effect whatsoever on growth, according to the Congressional Research Service.
And this is only Phase 1 of the Cain plan. In Phase 2, the payroll tax would be eliminated, causing more than $800 billion in revenue to evaporate. The estate and gift tax would be abolished, further reducing taxes on the wealthy. And the 9-9-9 plan would be implemented.
It’s important to understand that the 9 percent rates on personal and business income would apply to very different tax bases than now exist. For individuals, the tax would apply to gross income less only the deduction for charitable contributions. No mention is made of a personal exemption.
This means that the 47 percent of tax filers who now pay no federal income taxes will pay 9 percent on their total income. And elimination of the payroll tax won’t even help half of them because the earned income tax credit, which Mr. Cain would abolish, offsets both their income tax liability and their payroll tax payment as well.
Additionally, everyone would now pay a 9 percent sales tax on all purchases. No mention is made of any exemptions from this tax, so we may assume that it will apply to food, medical care, rent, home and auto purchases and a wide variety of other expenditures now exempt from state sales taxes. This would increase their cost of living by 9 percent while, at the same time, the poor would pay income taxes.
The business tax in the Cain plan bears no resemblance to the present corporate income tax. The tax would apply to gross sales less dividends paid and all purchases from other companies, including investment goods. Thus, there would be no deduction for wages.
How benefits would be treated is unclear, because purchases of things like health insurance might constitute a purchase from another company and remain deductible. If so, what is to stop a company from paying its employees by leasing their cars and homes for them and even buying their food and clothing? That would reduce their taxable revenue.
The abolition of any deduction for wages is likely to raise the cost of employing workers, even with abolition of the employers’ share of the payroll tax. And since the dividend deduction doesn’t appear to be related to profitability, companies could borrow to pay dividends and still get the deduction. Even a novice tax lawyer could easily make a tax shelter out of that.
And here’s the kicker in the Cain plan. Phase 2 is merely a transition to yet another fundamental tax reform. In Phase 3, the United States would adopt the so-called Fair Tax, which would replace all federal taxes with a 30 percent sales tax on all goods and services. In a previous post, I explained why the Fair Tax is a bad idea. I went into more detail in testimony before the House Ways and Means Committee on July 26.
Whatever one thinks of the Fair Tax, it makes not the slightest bit of sense to have a plan that requires fundamental changes to the federal tax system twice to achieve its objective.
Veterans of tax reform attempts in the United States know reform is very difficult and time-consuming even once. If the Fair Tax is a good idea, Mr. Cain ought to just do it, without confusing the issue with his unnecessary and highly complicated 9-9-9 plan. After all, one of the prime selling points of the Fair Tax is its simplicity, and the 9-9-9 plan is far from that.
Because so little detail exists, it’s hard to do either a proper revenue estimate or distributional analysis of the Cain plan. It’s obvious, however, that Phase 1 would represent a huge tax cut for the wealthy at a time when federal revenues are at a historical low as a share of the gross domestic product and the economy’s fundamental problem is a lack of aggregate demand.
Thus the Cain plan would increase the budget deficit without doing anything to stimulate demand, because rich people can already spend as much as they want and are unlikely to spend more even if their taxes are abolished.
The poor and the middle class might increase their spending if they could keep more of their earnings, but they will unquestionably pay more under Phase 2 of the Cain plan. With no tax on capital gains, the rich would pay almost nothing, while elimination of all deductions and credits, as well as imposition of a national sales tax, must necessarily raise taxes on everyone else, especially those not now paying income taxes.
At a minimum, the Cain plan is a distributional monstrosity. The poor would pay more while the rich would have their taxes cut, with no guarantee that economic growth will increase and good reason to believe that the budget deficit will increase.
Even allowing for the poorly thought through promises routinely made on the campaign trail, Mr. Cain’s tax plan stands out as exceptionally ill conceived.
Your opinions on this, and the plan in general?
This message was edited 1 time. Last update was at 2011/10/12 15:15:21
The people in the past who convinced themselves to do unspeakable things were no less human than you or I. They made their decisions; the only thing that prevents history from repeating itself is making different ones.
-- Adam Serwer
My blog
-"Wait a minute.....who is that Frazz is talking to in the gallery? Hmmm something is going on here.....Oh.... it seems there is some dispute over video taping of some sort......Frazz is really upset now..........wait a minute......whats he go there.......is it? Can it be?....Frazz has just unleashed his hidden weiner dog from his mini bag, while quoting shakespeares "Let slip the dogs the war!!" GG
-"Don't mind Frazzled. He's just Dakka's crazy old dude locked in the attic. He's harmless. Mostly."
-TBone the Magnificent 1999-2014, Long Live the King!
My opinion? The linked article is a poorly written political hack piece.
The author bemoans the fact that the rich get a tax cut but completely ignores (I'm being generous and assuming he's not being deliberately deceptive, which is probably not a fair assumption) the fact that repealing the payroll tax disproportionately affects the poor.
I'm not sure what happened to Mr. Bartlett, it appears he's simply turned into a hired gun and is simply trading on his reputation as a "Republican Economic Advisor" to make money.*
* I have no problem with him making money, but I do have a problem with him not disclosing his biases, or the biases of the people who commission his work.
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Monster Rain wrote:The names of the "Well-Known Economists" are not to be revealed!
"This is what independent economists have said. Not just politicians. Not just people in my administration. Independent experts who do this for a living have said that this jobs bill will have a significant effect for our economy and middle-class families all across America"
This message was edited 2 times. Last update was at 2011/10/12 17:23:24
biccat wrote:My opinion? The linked article is a poorly written political hack piece.
Amusing considering I came across this article on a strongly right wing (albeit not socially conservative) paper, the Economist...
This message was edited 1 time. Last update was at 2011/10/12 17:30:00
The people in the past who convinced themselves to do unspeakable things were no less human than you or I. They made their decisions; the only thing that prevents history from repeating itself is making different ones.
-- Adam Serwer
My blog
Oh, please don't think I'm making a statement about anything other than the subject at hand. I'm well aware that this isn't the first time an appeal to authority has been used in the political arena.
Drink deeply and lustily from the foamy draught of evil.
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Haters gon' hate.
biccat wrote:My opinion? The linked article is a poorly written political hack piece.
Amusing considering I came across this article on a strongly right wing (albeit not socially conservative) paper, the Economist...
It's a NYT blog.
And the Economist is not "right wing," they're relatively diverse. Various editorials have supported the idea of a carbon tax, gun control, and other typically big-government positions. They've also taken some right-wing positions, they supported both Reagan and Thatcher in the '80s.
biccat wrote:
* I have no problem with him making money, but I do have a problem with him not disclosing his biases, or the biases of the people who commission his work.
If he did that, he wouldn't make any money.
Life does not cease to be funny when people die any more than it ceases to be serious when people laugh.
biccat wrote:* I have no problem with him making money, but I do have a problem with him not disclosing his biases, or the biases of the people who commission his work.
If he did that, he wouldn't make any money.
That is, generally, the problem with fraudsters. It's hard for them to make money without resorting to deception.
biccat wrote:And the Economist is not "right wing,"
Right, and FOX isn't conservative (oh wait).
Moving on, if you think that this is truly a lying, deceptive piece, perhaps you could shed some light on the subject with your own sources which aren't themselves lying, deceptive pieces?
This message was edited 1 time. Last update was at 2011/10/12 17:49:17
The people in the past who convinced themselves to do unspeakable things were no less human than you or I. They made their decisions; the only thing that prevents history from repeating itself is making different ones.
-- Adam Serwer
My blog
biccat wrote:And the Economist is not "right wing,"
Right, and FOX isn't conservative (oh wait).
The Economist isn't conservative, its fairly centrist.
Melissia wrote:
Moving on, if you think that this is truly a lying, deceptive piece, perhaps you could shed some light on the subject with your own sources which aren't themselves lying, deceptive pieces?
Biccat is right, it is a political hack-job, but that doesn't mean there isn't insight to it. I mean, let's be honest, Cain's plan is also nothing more than political hackery.
Life does not cease to be funny when people die any more than it ceases to be serious when people laugh.
dogma wrote:Deception is a valuable skill, at least according to this wonderful capitalist system in which we live.
No, it's really not.
Melissia wrote:Right, and FOX isn't conservative (oh wait).
Well, for the most part, they're not. Unless you're talking about their opinion shows.
Melissia wrote:Moving on, if you think that this is truly a lying, deceptive piece, perhaps you could shed some light on the subject with your own sources which aren't themselves lying, deceptive pieces?
Why should I? You're the one who posted a deceitful story, your choice is either to retract what you implicitly approved or support it with an unbiased source.
Then why do lobbyists, marketers, and political consultants get paid so much?
This is a non-sequitur.
Not really.
Lobbyists, marketers, and political consultants all exist to deceive, and they are all paid well. This indicates that they are valued, and therefore valuable.
Life does not cease to be funny when people die any more than it ceases to be serious when people laugh.
If you're unwilling to defend your position, then I'll just assume you don't actually believe what you're saying and move on.
For my part, I never gave my approval to anything, I merely read this article, posted it, then asked for opinions. My very low opinions of the ironically named "fair tax" aside, I've only heard of the 9-9-9 plan-- I haven't actually seen Cain sit down and describe it himself, amongst other things. This was the first article I've read that's described it in detail.
Geeze, it's like a person isn't allowed read a piece on a subject which they don't know much about and then be curious to find out more... I must be a monster.
As an aside, the article you linked didn't really contradict the one in the OP of this therad.
This message was edited 4 times. Last update was at 2011/10/12 18:30:19
The people in the past who convinced themselves to do unspeakable things were no less human than you or I. They made their decisions; the only thing that prevents history from repeating itself is making different ones.
-- Adam Serwer
My blog
I for one have no problem with the 9-9-9 plan or any type fair tax for that matter. After reading the article the writer makes it sound like the worst thing ever. Of course he wrote the article and admitted there were few details that he could rely on because their not out there yet and is 'taking a stab at the estimated effects'.
If Cain really wants to be taken seriously then he needs to put all the info/ideas out there now.
biccat wrote:
While correlation doesn't necessarily indicate causation, it's a pretty good indicator. Particularly when it is at or close to 1:1.
Strangely, the correlation between people who request unbiased sources, and political hackery, is quite close to 1:1.
I wonder what that might mean.
Its a secret. I'd tell you but then you'd have to feed my wiener dogs and throw TBone's ball. Remember, you can stop after the 37th throw. He's more than a bit OCD, and like an incredibly wizzened terminator he will not stop, because its what he does. Its all he does!
-"Wait a minute.....who is that Frazz is talking to in the gallery? Hmmm something is going on here.....Oh.... it seems there is some dispute over video taping of some sort......Frazz is really upset now..........wait a minute......whats he go there.......is it? Can it be?....Frazz has just unleashed his hidden weiner dog from his mini bag, while quoting shakespeares "Let slip the dogs the war!!" GG
-"Don't mind Frazzled. He's just Dakka's crazy old dude locked in the attic. He's harmless. Mostly."
-TBone the Magnificent 1999-2014, Long Live the King!
While correlation doesn't necessarily indicate causation, it's a pretty good indicator. Particularly when it is at or close to 1:1.
I think you're missing the point (probably intentionally, as you are wont to do).
Aside from laziness (which I certainly would understand ), I can't think of a reason why you wouldn't. You know, seeing as just saying "[person] is wrong" by itself doesn't actually prove they're wrong and all that jazz.
The guy's beliefs about fair tax as a scientology plot was amusing though. Almost as bad as obnoxiously common belief that the U.N. is an illuminati plot...
This message was edited 2 times. Last update was at 2011/10/12 22:00:12
The people in the past who convinced themselves to do unspeakable things were no less human than you or I. They made their decisions; the only thing that prevents history from repeating itself is making different ones.
-- Adam Serwer
My blog
Melissia wrote:You know, seeing as just saying "[person] is wrong" by itself doesn't actually prove they're wrong and all that jazz.
I didn't say that he was wrong, I said that he wasn't unbiased. While his points may be technically correct, he also has an incentive (he's writing for a publication that appeals to a certain type of reader) to omit information that would contradict the message that the publication wants him to send.
Therefore, it's unreliable.
Melissia wrote:The guy's beliefs about fair tax as a scientology plot was amusing though.
...and it's the same author that you quoted in your OP. Bartlett has some personal objection to the Fair Tax and it clouds his judgment.
Which doesn't actually mean his judgement is necessarily incorrect. You can claim it was overly harsh, and I can see that, but I don't really see where he was substantially incorrect, which is what you seemed to be trying to say without saying it.
As an aside, the fair tax itself is a laughably stupid idea which is effectively a regressive tax, so his hatred of it is rather understandable
This message was edited 1 time. Last update was at 2011/10/12 22:10:46
The people in the past who convinced themselves to do unspeakable things were no less human than you or I. They made their decisions; the only thing that prevents history from repeating itself is making different ones.
-- Adam Serwer
My blog
biccat wrote:* I have no problem with him making money, but I do have a problem with him not disclosing his biases, or the biases of the people who commission his work.
There is not and never should be any requirement to disclose a bias towards basic economic facts.
Automatically Appended Next Post:
biccat wrote:And the Economist is not "right wing," they're relatively diverse.
No, they're classically small 'c' conservative. Always have been, always will be, and they do a wonderful job arguing for that position.
The more recent instances of them speaking out against Republican policies have everything to do with the Republicans having drifted away from small 'c' conservatism, past the far right and out into the land of the truly, deeply ridiculous.
Various editorials have supported the idea of a carbon tax, gun control, and other typically big-government positions.
Acknowledging the need to tax a market externality is not a big government position, it's a core element of every economic position that isn't completely bug feth insane.
"The centerpiece of the 9-9-9 Plan is to eliminate the current, complicated income tax system -- with its series of tax credits and deductions and its variety of tax rates based on income -- and to replace it with a flat income tax. "
Well, that's a big piece of stupid from the get go. The progressive tax system in the US can be modeled in excel with about five lines and a single v-lookup function. If this is too complicated for someone, they really shouldn't be allowed on the internet. The system is complicated because exactly what someone's total income is is complicated - not because of how we tax it afterwards.
"taxpayers could claim a deduction for charitable contributions (we haven't heard him discuss a limit) and taxpayers could earn a type of tax credit for living in an "empowerment zone," which Cain has described as inner cities needing revitalization"
Oh and look now, Cain's system has deductions and credit for government desired behaviour. At which point it's only claim to fame disappears.
"The big question, after how much would you pay, is how much money would the plan generate for the federal government? It's hard to say."
If this question can't be answered, then you don't have a tax policy. YOu have a vague wish list that ticks off the various bits of stupid that some voters like to dream about. It is embarressing for everyone involved that this is being seriously talked about.
So, in summary, the article was alright, but in treating the plan like a respectable, genuine tax plan and not the half assed nonsense it actually is, the article chose an appearance of 'both sides' over reality.
This message was edited 2 times. Last update was at 2011/10/13 03:48:36
“We may observe that the government in a civilized country is much more expensive than in a barbarous one; and when we say that one government is more expensive than another, it is the same as if we said that that one country is farther advanced in improvement than another. To say that the government is expensive and the people not oppressed is to say that the people are rich.”
Adam Smith, who must have been some kind of leftie or something.
3 points to make on the 9-9-9 plan: The macroeconomics, the personal accounting, and the simple math.
The great macroeconomics debate over 9-9-9 creating jobs & improving the economy or destroying jobs and wrecking the economy is an endless circle jerk much like the global warming debate. No matter what side of the issue you are on (pro or against) your amateur scientific/professional assessment of the issue will be contradicted by the other side's professional assessment made by experts on the issue. Eventually one side will gain more experts than the other, but all that leads to is the side with the most experts using their greater number of experts to attack the credibility of the other side's experts which is a classic game of kill the messenger. The issue then degenerates to laypersons such as you and I attacking exerts on the issue because they are not producing the expert opinion that way want them to produce. The debate will go nowhere, degenerate into people telling other people how to think, then it leads to personal attacks, and end the thread ends up locked by mods.
The personal accounting can be done by almost all the adults on the forum. Everybody knows how much they pay in taxes, and can figure out if they would pay more or less with a 9% flat tax +9% sales tax than they do now. My own taxes for example = Registered Nurse pay + filing joint with my spouse (who is in school and not working for another year) + Deductions for interest on student loans + earned income credit for our daughter<9% flat tax +9% sales tax. It would be a tax increase for myself. The combined income of my X wife and her new husband is less than my income (before child support, after child support is added inthey actually make a bit more), my X takes the tax credits for our 2 kids, and she and her husband have their own child. They are doing ok right now, but they fall in to that 47% or so that don't pay federal taxes. A 9% tax increase on my X + a 9% sales tax on everything including food would financially ruin her. Most people don't give a damn about their X after a divorce, I however see the big picture which=If my X becomes financially ruined my 2 older kids are the ones that suffer. Voting for the 9 9 9 plan would be voting against my own self interests.
The simple math. Cain needs 60 Senators to break a filibuster. The current tally is 51 Democrats + 2 independents that caucus with the Democrats (and would never go for 9 9 9) versus 47 Republicans. There are 33 senators up for election in 2012: 21 Democrats, the 2 independents, an 10 republicans. The GOP needs to retain all all 10 of their seats, and pick up 13 of the 23 other seats up for election. Seeing as how incumbents win over 90% of the time what are the odds of the GOP picking up 13 senate seats in the 2012 election. The simple math=9 9 9 dies in the senate.
Chaos isn’t a pit. Chaos is a ladder. Many who try to climb it fail, and never get to try again. The fall breaks them. And some are given a chance to climb, but refuse. They cling to the realm, or love, or the gods…illusions. Only the ladder is real. The climb is all there is, but they’ll never know this. Not until it’s too late.
), I can't think of a reason why you wouldn't. You know, seeing as just saying "[person] is wrong" by itself doesn't actually prove they're wrong and all that jazz.