The first wonky study is in that show’s that Cain’s plan raises taxes. Isn’t the always the case with tax reform that doesn’t simply lower taxes? If these guys wanted lower taxes, they would lower taxes. All the rest is smoke and mirrors. Search national sales tax on Mises.org and you get the idea.
Source link: http://archive.mises.org/18769/9-9-9-means-higher-taxes/
9-9-9 means higher taxes
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As long as we have an income tax as a part of our Constitution, adding a national sales tax will merely add to the number of taxes we have to pay. A legitimate president candidate (Ron Paul) would promote the repeal of the federal income tax before even considering the idea of an alternative tax. As history has shown, aside from Prohibition, once an law is passed, it becomes very difficult to remove. The only legitimate idea of tax reform is getting rid of the tax entirely. Our nation got along fine before there was an income tax. And, lastly, in this economy, the last thing presidential candidates should be discussing is a new way for the government to take away more of a citizen’s money, rich or poor.
Did they work as much as the tax we paid?Take a look at the bad condition.
Peter Schiff thinks it’s a good idea
http://www.economicpolicyjournal.com/2011/10/peter-schiff-endorses-herman-cains-9-9.html
With many, many caveats as Schiff details in his original post. I think a lot of people have misread what he wrote as he does see the faults in the plan: he calls out the hidden 9% income tax AND says this scheme could only work with significant reductions in government spending.
Don’t get me wrong; Cain’s completely economically clueless. But, Schiff’s not stupid and I’d like to think that his ideal scenario would be a 0-0-0 plan as Wenzel points out at the end of his post. However, you can’t do that in the same way that you can’t get off opiates without a weaning process.
I find it interesting that some people have criticized Schiff on this yet Ron Paul’s plan of maintaining Social Security and Medicare if he was elected – restructuring them as block grants and providing means to opt out, weaning people off them – instead of completely eliminating these programs, hasn’t drawn similar ire.
If you went to the first hand account, you would see that Schiff wrote:
That said, I don’t like the 999 plan because it adds the sales tax to an existing income tax structure.
From http://www.economicpolicyjournal.com/2011/10/why-peter-schiff-and-arthur-laffer-are.html
… sure sounds like an endorsement to me.
In his analysis of the Cain proposal, Schiff writes:
Cain would replace the current system of income and payroll taxes with a 9% flat-rate personal income tax, a 9% corporate tax, and a 9% national sales tax. Great idea.
and Schiff concludes by emphasising the hidden ninth tax and writes (My emphasis):
In the final analysis, if Cain really wants a 9-9-9 plan that doesn’t raise taxes he needs to remove the hidden 9% payroll tax. However, the only way this could be done, without blowing an even bigger hole in the federal deficit, is to combine his plan with significant spending cuts. If he can pull that off, three nines may be a winning hand after all.
No. Bob Wenzel pretended Schiff thinks it’s a good idea. Just like he pretended Michelle Bachmann “destroyed” Cain in the Bloomberg debate on the same subject. It’s what he does.
If you want to hear Schiff, he spoke about it live on his radio show, and made a video specifically about the 9-9-9 plan.
Isn’t 9-9-9 just German for No-No-No?
“If these guys wanted lower taxes, they would lower taxes.” exactly–just as in the Social Network movie, Zuckerberg says “if you had invented Facebook, you would have invented Facebook.” (from your great review http://mises.org/daily/4806 )
On the national sales tax issue, see Lew Rockwell, The Myth of the Replacement Tax; Anthony Gregory, The National Sales Tax Disaster; Ron Paul, Tax Reform Is a Shell Game; Bruce Bartlett, Fair Tax, Flawed Tax; Harry Browne, National Sales Tax; Laurence Vance, The Tax That’s Anything But Fair.
Let’s look at the “non-partisan” affiliation of the Tax Policy Center. It is a child of the Brookings Institute and it is closely aligned with the Urban Institute created by Lyndon Johnson. Boy, that sure looks “non-partisan” to me, if you are a left-wing Keynesian zombie.
Stephan, you were doing pretty good until you asked us to look at Bruce Bartlett. Once a great analyst he is no so confused about economics he doesn’t know from day to day what opinions he holds.
All the criticism of the sales tax portion of the Cain plan is about what congress might do with it in the future. All of the analysis I have seen on the impact it will have immediately is to broaden the tax base and actually put super-majority restrictions on raising the rates. There is no super-majority today. The truth is that congress can do anything they want, and if you don’t think they will add a VAT to our existing at some point in the future if they are not restricted you are dreaming. Besides Ron Paul’s total elimination of taxes – and that is a pipe dream – Cain is the only one to suggest a workable plan that would overhaul the entire tax system and place restrictions on tax increases. All the other candidates – with the exception of Paul – simply want to keep the same horrible tax scheme only lower the taxes slightly, really no change at all.
Maybe someone can help me understand this better.
9-9-9 would significantly lower corporate taxes for businesses and get rid of payroll taxes. Since business don’t really “pay taxes” it is just included in the final price of the good, wouldn’t a decrease in costs(“income tax and payroll tax”) lead to an ability to lower the price of that businesses goods? If the corporate tax % is lowered by more than the 9% national sales tax, shouldn’t overall prices stay the same or decrease with the 9-9-9 plan? And if the % decrease in payroll taxes is higher then the 9% personal income tax, wouldn’t personal income taxes stay the same or be lower (not factoring in EITC and other federal tax deductions)? I might be over simplifying it, but I don’t get why everyone is looking it this statically and assuming prices and wages will stay the same even though costs to businesses will be reduced.
Logic FAIL! Do you honestly think that if taxes are lowered on businesses they will magically start charging less? I doubt it. ALL taxes are paid by the consumer in the end, whether its a VAT tax, tax on corporate profits, or sales. They are all the same, extraction of wealth from private citizens. Cain’s 9-9-9 plan is akin to playing musical chairs. Everything will basically stay the same, someone will end up getting hung out to dry, and everyone will just be in a slightly different position than they were before. The only solution is to abolish the Income tax (what is “income” anyway?) and force the federal government to return to pre WW1 spending habits.
I would think a business would either lower prices to be more competitive or use the extra savings to invest in their business, whichever offered the best return. Wouldn’t either case lead to a higher standard of living overall and more economic growth, especially with no capital gains tax and no repatriation tax on capital from overseas. I know that less taxes overall is better for freedom and the economy but wouldn’t the 9-9-9 plan be way better in terms of economic growth then what we have now, since it promotes saving and investing?
I’m with you Chris…
While, yes, some business will just absorb the new difference as profit, but ones that want to stay competitive will use their new found profit to lower prices or reinvest in their business…
Maybe I’m understanding it wrong, but Cain has repeatedly stated that this is not an “on top of” tax, but a *REPLACEMENT* of the current tax system.
Ben, even if a business doesn’t lower prices from the savings, it will use the profits for something to better fill demand. Lowering end cost is just one way…there’s expansion of production or more efficient production. In the end they will either mean lower end cost and/or a better product.
But that’s only if the 9-9-9 plan is a net lowering of taxes rather than just a replacement, like you said.
Re: Chris,
The 9% corporate tax rate would certainly be a lower burden on profits but not on taxable expenditures. In fact, a national sales tax would increase the cost of production by (what else?) 9%.
The lowering of the corporate tax rate would result, initially, in a positive towards the bottom line. This would not mean an automatic price improvement, as prices are still whatever the consumer is willing to pay, and if consumers were aleady accostumed t buying item X at price Y, there’s no good reason for a manufacturer to lower the price of X. It would take some time before competition lowers the prices of consumer goods as competitors use the improved profit margins to gain market share, but in the meantime, most people’s (and all manufacturers’) costs WILL increase with the national sales tax.
Again, everything else being equal, there’s no incentive for manufacturers to lower their prices, until competition and the rush for market share snatching begins. Consumers accostumed to buying product X at pruice Y will be willing to keep paying Y until someone else offers product X at a lower price, in a quest to gain a bigger share of the market. Until then, prices will stay the same in the best of cases.
Thanks
Actually, it would not get rid of payroll taxes. The new 9% corporate tax would apply to labor in addition to profits.
Additionally, it should be noted that a profits tax, which is what the current corporate tax amounts to, is not passed on to the consumer. Companies price their goods such as to maximize profit. A profit tax of 35% means they are now trying to maximize (.65 * profit), which is the same as trying to maximize profit.
In contrast, a payroll tax does change the price at which profit is maximized.
A “fair tax,” or sales tax, would hurt marginally profitable buisnesses (ones that can not lower prices) most. I think it is Rothbard that explains it best, but buisnesses do not pass on sales tax incidence to their customers. Those customers which can not pay the additional taxes simply do not buy the goods, hurting the buisness who are selling the goods. Those buisnesses on the margin (probably those job producing small buisnesses with which every politician is so enamored) will be forced out. More simply, a sales tax is a tax on consumption…aka being human.
As a side note, what buisnesses would be exempt from a national sales tax? Groceries? Car dealers? Would government institutions have to pay sales taxes?…ha
As I understand Cain’s 9-9-9 plan, it removes the embedded taxes in every product (I’ve seen numbers in the 17-24% for the embedded taxes). That has to dramatically lower product costs. It certainly would cause many who pay no Federal tax currently to pay some tax, spreading the burden.
I’m not willing to dismiss the plan entirely, but I realize its chance of passage even if Cain becomes president is practically zero. Politicians use the tax code to buy votes. His 9-9-9 plan would severely restrict that. Plus he also says it is an “intermediate” step to the Fair Tax. Whether you like the Fair Tax or not, the danger is in the “Intermediate” becoming permanent. It would have to be written so it couldn’t be monkeyed with.
I doubt Washington could do it. The Tea Party will have significant impact, but it will be like kicking a 10 ton marshmallow – no matter how hard you kick, it will just sit there, unmovable.
Still Cain and his 9-9-9 plan are a Hell of a lot better than any other serious candidate’s ideas. Ron Paul is stuck and going nowhere fast.
I am pessimistic, for what I think are good and obvious reasons.
Based on everything that I know about politicians and government tells me everything I know need to know about “9-9-9″–lies, bullshit and more theft.
To even discuss it or take it serious is ridiculous.
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