Part of that outcome was due to Perry's incoherent performance in the debate. I feel like we're finally starting to see the real C student from Texas A&M shining through. Part of that outcome, however, was due to Herman Cain's 9-9-9 tax proposal. From NPR:
Most importantly, Cain's plan has a short name that rhymes (I believe the people who need to have political ideas presented to them in short, catchy blurbs will allow nine to rhyme with itself...twice). Beyond that, it would call for a 9% flat income tax, a 9% national sales tax, and a 9% corporate tax rate, thus the 999 Plan, and it proved very popular with the crowd at last week's Florida republican debate.
Obviously taxes are a cornerstone of the GOP platform, specifically lowering them through the floor. Herman Cain states his position in his very first line in the following video:
"Our tax code is the 21st century version of slavery." I'm not sure slavery means what Mr. Cain thinks it means, but that might be secondary to the catchiness quotient the line certainly has. I could easily imagine OUR TAX CODE IS 21ST CENTURY SLAVERY on a rally sign right next to the classic KEEP GOVT OUT OF MY MEDICARE.
Obviously slavery in this country was one human being owning another human being for the purposes of forced labor. I guess Cain is claiming that taxes effectively make us the property of the government because they take everything we work for? And by everything I mean zero for corporations like GE? I'm not really sure how the analogy works, but it is evocative even though it makes the ghost of Harriet Tubman weep openly.
There's no denying that taxes are a burden... that's why they're called a tax, which literally means a burden, instead of being called a "massage with happy ending." But I think to conflate a burden with slavery... well, that seems wrong enough that I don't need to dwell.
From the campaign video:
"My 9-9-9 economic growth and jobs plan is a major step towards tearing the chains off the backs of the American people."Now by the American people, he means the wealthy, and by tearing the chains off, he means shifting them down to lower income brackets. Some details of the plan:
— Cut the corporate tax rate to 9 percent from its current level of up to 35 percent.
— Replace the six brackets of the personal income tax, which range from 10 percent to 35 percent, with a flat 9 percent rate.
— Institute a 9 percent national sales tax to fund the federal government (in addition to state and local sales taxes).
— The plan would eliminate the estate tax, payroll taxes and taxes on capital gains.
It would leave these provisions alone:
— Deductions for businesses on investments and purchases from other businesses;
— Deductions on charitable donations, up to an unspecified amount; and
— Deductions for businesses that employ residents living in designated lower-income "empowerment zones," as well as income tax deductions for residents living in those zones.So right off the bat, capital gains taxes and estate taxes are gone. So are payroll taxes, which I assume is more to ease the employer side of the burden. Almost all deductions also disappear, except for two that specifically apply to businesses and one that feels more applicable to people with money (not that they are bad deductions per se).
Cutting the corporate rate isn't the end of the world if you're closing the myriad of loopholes used every year to duck covering their due. I can't say if 9% is a reasonable rate to charge once those loopholes are closed, but I guess 9% is better than the zero I mentioned above from GE.
But the obvious problem I have is one a lot of people have, and that's the regressive nature of flat and sales taxes. Rich people will see their tax rate drop to 9% from its current 30-50%. The poorest tax payers will essentially see their tax rate go from zero when all is said and done, up to 9%. Both the rich and the poor will bear the added burden of a 9% sales tax on top of the state and local sales taxes already paid. The upside to that, form the NPR article:
The downside is that the poor will now have to spend disproportionately more of their income on sales taxes. There are certain things we just can't avoid buying to get by. Everyone will see those prices rise, but the impact on someone making $20,000 will be far greater than someone making $100,000. Not rocket science.Economist Will McBride of the Tax Foundation says some of Cain's ideas make a lot of sense. A national sales tax, for instance, would mean taxing people for the things they consume, which means they'd spend less and save more. And McBride says a higher savings rate would benefit the economy long-term."When you tax saving and investment you are taxing growth, essentially, and you want to encourage thrift, not discourage it," he says.
Beyond that:
There's also the question of how much revenue Cain's plan would bring in and whether it would deepen the budget deficit. Cain says the plan would be revenue-neutral, meaning it wouldn't raise more money in total, and that it would lead to higher economic growth, so revenues would increase over time.
But William Gale of the Brookings Institution says we've heard all that before. He says there's no evidence tax cuts do much to affect economic growth.
"Tax policy is full of these Utopian ideas that have never been tried, but everyone's promising that their idea is going to make the difference," Gale says. "And I just don't see it."I think we can look at our current economy for proof that tax cuts don't necessarily equal growth or jobs. Taxes have been slashed in order to combat the recession and we currently have essentially zero job growth in the economy. Companies are recording boosted profits, but they are still slashing jobs.
We've demonstrated that cutting taxes are good for profits, but I'm not sure it goes any further than that.
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