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Is Herman's tax plan a tax increase for middle America?

I've not run the numbers yet, but this is looking like a tax increase for my family. Does that 9% apply to every dollar I earn? Will the 9% consumption tax apply to food?

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Yes. It will actually hurt the poor and middle class more with higher prices via tax increases on goods. Federal Reserve Herman Cain doesn't care about the poor or middle class.

Good point Max.

The national sales tax will surely be the internet sales tax they have been seeking. And, by the way 999 upside down is 666. LOL Cain is just another globalist minion. I can't believe people actually falling for this garbage.

The whole 666/999 thing is

The whole 666/999 thing is rather amusing, but I can't see Cain gaining much traction anyway. It's going to be Romney for the GOP... I can feel it.

Just awful

It is a terrible tax increase for retirees and low income people. Nine percent sales tax!

Ĵīɣȩ Ɖåđşŏń

"Fully half the quotations found on the internet are either mis-attributed, or outright fabrications." - Abraham Lincoln

Depending on your state,

Depending on your state, 15-18% after state sales tax.

Also, since this is the federal government, it will tax interstate internet sales, and be an internet tax too.

And for the support of this Declaration, with a firm reliance on the protection of Divine Providence, we mutually pledge to each other our lives, our fortunes and our sacred honor.

Anyone who talks about a tax before the repeal of the 16th

amendment wants both. It is guaranteed we would have an added income tax (9%) and a national sales tax (another 9%). I pay far too much as it is. How about no tax!

Great comments...

... also if you saved a $100,000 of after-tax income under the old system and now you want to spend it.. you would only have $91,743 to spend, the rest goes to Cain's buddies at the IRS.

Heaven help you if your state has, say, a 7% sales tax. That leaves you with $85,741 to spend of your after-tax savings.

People who earn less than $50K a year won't go for the 9-9-9 tax, they'll call 9-1-1 and ask for a defibrillator.

Plano TX

That's a good one! LOL

I hope Dr. Paul uses your line in the next debate!

Tax, Tax, Tax plan

Tax, Tax, Tax plan

Does anyone know whether

Does anyone know whether Social Security and Medicare payroll taxes would be eliminated under Cain's plan? If not, I don't see how this would decrease the tax burden on the middle and lower classes. In any case, the rates would eventually be raised and we would end up with an confiscatory income tax and a burdensome sales tax. The hardest part about getting a burdensome VAT here (it's not the same as Cain's sales tax, but similar in the idea of taxing consumption) in addition to the income tax, like they do in Europe, is getting it passed in the first place. Once it's passed, it's much easier to raise the rates.

Yes, he claims to eliminate the payroll tax, the inheritance

tax, and the capital gains tax in order to do this.

I don't think even "Fair Taxers" want this plan, because even they don't want to retain corporate or personal income taxes.

Cain's plan is a mess, and we'll end up with probably at least 20-25% on all three eventually if not sooner.

Yup!!!

I don't see why more people don't get this, maybe because Cain is a good salesman. Remember the last salesman that became president?

Yes, this is a harsh increase in taxes on the poor and middle class. Since most people live check to check and can't save, it's basically a flat rate tax of 18%. Considering 50% of people pay no taxes and about 75% pay less than 18%, it is a tax increase on most (the poorest) people. It is a huge tax decrease for the wealthy since they will effectively pay 9%, since the sales tax affects them least (as a percentage of income). This would drastically widen the income gap.

It also opens the door for having both an income tax and sales tax, upon which both could be raised in the future. This plan is very bad news!!!

Close, it's actually about 16.5% on everyone.

9% income tax, and then 9% tax on purchases made with net income. (part of net income will go to pay for goods and services, and part will go to pay the sales tax) That 9% sales tax is not on gross income, but on the purchases made out of net income.

I did the math below for the median income level, but it works no matter what numbers you plug in.

After income taxes, you have 91% left over for net. But not all of this 91% can be spent directly, some of it will go to pay for the federal sales tax. Thus, the amount you can spend on goods and services = net income ÷ 1.09. (if you knew something cost say 1.09 with a 9% tax, then dividing by 109% gives you the original item price - $1)

For our purposes, we're dealing with a net as a percentage, so 91% ÷ 1.09 ≈ 83.486239%

100% - 83.486239% ≈ 16.513761% or roughly a combined tax rate of 16.5% on everyone regardless of income level.

The only way to reduce the amount actually paid in tax, and thus the overall percentage of gross income, would be to spend less than net income in the year. This is of course, easier to do for people who make more than their standard of living, and are able to save. (though they will pay a 9% income tax on any returns on their savings)

Essentially, with Cain's system the new system will have the highest tax rates for anyone spending everything they earn each year, and rates effectively getting less, though actual payments getting higher, for anyone managing to live within their means and saving.

While this sounds crappy at first, and it is for many reasons, it does have the added benefit of encouraging frugality and savings over consumption. You get the same benefits though with no income tax at all, AND you don't kill the economic engine at the same time. (and relieve everyone of the red tape as well)

If you run your own business,

If you run your own business, I believe you could eliminate the vast majority of your taxable income by decreasing or eliminating most of your salary and incorporating your assets.

Edit:

Misread post.

And for the support of this Declaration, with a firm reliance on the protection of Divine Providence, we mutually pledge to each other our lives, our fortunes and our sacred honor.

What are you talking about? 9% on gross income, yes, then

9% sales tax.

That can't possibly work out to 18% of gross income. It's mathematically impossible.

The 9% sales tax has to come out of whatever you have to spend, thus reducing the amount you have to spend before the sales tax.

Look, if all you had was a 9% income tax, then you'd have 91% left over to spend on goods and services.

But you will also now have a 9% sales tax. This will reduce the amount you have to spend on goods and services by the amount of the tax. The sales tax can't come out of thin air, it has to come out of net income, thus reducing purchasing power. To calculate this you divide by the sum of 100% and the tax rate into net income. Thus it works like this for every $ you make and spend:

Gross = $1.00
Personal Income tax = 9¢

Net income after personal income tax = 91¢

Amount available for purchase price of goods and services = 83.5¢

9% sales tax on 83.5¢ = 7.5¢

9¢ + 7.5¢ + 83.5¢ = $1.00

Thus on every dollar, the effective combined income and sales tax is 16.5¢ - or 16.5%.

According to your math, net income after both taxes is $1.00 - 18¢ = 82¢, but 82¢ x 9% ≠ 9¢.

82¢ x 9% = 7.38¢ That's a discrepancy in your math of 1.62%. The reason for this is the 9% is exclusive of the sale, but has to come out of net (and thus gross) income.

I'm not trying to defend the dumb plan, just pointing out the real effective tax rates. (assuming 100% expenditure, which would apply to anyone at or below poverty level and most likely many above it)

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If you still can't follow that think of it this way:

If you make $10,000 under this plan, how much will you pay JUST in personal income taxes?

Answer: 9% or $900

That leaves 91%, or, $9,100 to spend.

If everything you buy has a 9% sales tax on it, and you spend all $9,100, how much of it will go to sales tax, and how much will go to the actual goods and services (presuming no other state or local sales tax)?

Answer:

Sales Tax Amount = $750

Original product/service price before sales tax = $8,350

(if you don't see that multiply $8,350 by 9%, you get $750, the amount of sales tax paid)

You can check this math this way:

$900 personal income tax +
$750 sales tax +
$8350 purchases =
$10,000

Thus, the two taxes paid total $1,650 ($900+$750).

$1,650 ÷ $10,000 = 16.5% effective combined personal income and sales tax rate.

It doesn't matter what numbers you use. If every dollar earned is spent, and you pay a 9% income and a 9% sales tax, the combined rate is 16.5%.

I erased my post before you

I erased my post before you replied. Not sure how you replied to it.

I thought you said Cain wanted an income tax on net income instead of gross.

FYI - it's not mathematically impossible. You don't pay income tax before you receive it. It just means you go in debt and owe the IRS what you don't have anymore. But that isn't what I posted.

And for the support of this Declaration, with a firm reliance on the protection of Divine Providence, we mutually pledge to each other our lives, our fortunes and our sacred honor.

Well in that case I understand the confusion.

Sorry to be so long winded. Maybe it will help someone who doesn't understand the math then.

And my guess is perhaps I managed to click save before you did.

scratch that. I see what you mean now. Weird.

I was sitting in a huge crowd of Republicans (Florida Straw

Poll) when they erupted in cheers and thunderous applause in response to Cain's proud proclamation of his new 9% sales tax plan. WTH????!!

I thought I was in the twilight zone!

Ann in Florida

herman cain wants to add taxes

herman cain wants to add a federal sales tax on top of state sales taxes. I have asked cain supporters whats all this 999 tax stuff & its all over the place wishy washy, his supporters don't even know. Try it, ask a cain supporter what is 999. I asked cain supporters at Home depot, Lowes, etc. if they would like to add a 9% federal sales tax to what they just bought and it makes them think

They need to be challenged.

They need to be challenged. Cain has gotten by with this slogan without being questioned this long because he hasn't had many numbers, but its a bad plan.

It adds to taxes. It also adds a new type of tax and is unconstitutional. It breaks the federalist system and puts the federal government into every type of retail transaction at the state and local level and into everyone's business. It taxes the internet. And it really does involve buying and selling of every sort, and if you don't like it and refuse to be taxed by the federal government, you'll be arrested or killed if you refuse arrest.

It's a massive step in the wrong direction, and cements the income tax, itself a bad idea.

And for the support of this Declaration, with a firm reliance on the protection of Divine Providence, we mutually pledge to each other our lives, our fortunes and our sacred honor.

ecorob's picture

is the sky blue?

is the grass green?

is cain a corporatist?
was he a federal reserve chief?

yes, your taxes will go up
yes, the wars will continue
yes, the world will die

vote cain 2012, slay abel

its 'cos I owe ya, my young friend...
Rockin' the FREE world in Tennessee since 1957!
9/11 Truth.

Yes, it will most likely be an increase.

Yes the 9% personal income tax applies to every penny you earn.

Yes, the 9% sales tax will apply to every single thing you buy.

Thus, for the median wage earner making $31,100 per year, they will pay 9% of that or $2,799 in federal income taxes. That leaves net income of $28,301. If you spend all of it in the year (very likely) you will be taxed 9% on your purchases. That's not 9% of the $28,301, that's 9% on the purchase price. The purchase price AND the tax will be coming out of the $28,301. So in essence, you will be able to buy $25,964 worth of good or services (including local and state taxes) and then pay 9% on top of that or ≈ $2,337 in sales taxes. In the end, your direct tax burden will be $5,136 with both taxes combined or an effective rate of 16.5%.

Remember too, most people making $31,100 per year ostensibly fall in the 28% bracket, BUT that bracket threshold is based on NET income (after deductions and exemptions). Since the standard head of household deduction is $8,500, this places this return in the 15% bracket. So at least, for everyone earning the median or below, this will be a tax increase. (43% of Americans pay no federal income tax after refunds)

The only way to avoid taxing the poor or taxing necessities would be to raise the rates and engage in some sort of pre-bate scheme like the so-called Fair Tax advocates, thus making every household part of the welfare system.

No matter how you slice it, as long as you give up the moral ground that taxing wages is repugnant, or that there is some justifiable need for the exorbitant spending levels of our current Congress, you can't implement a "fair" system. The only "fair" income tax is NO income tax.

Congress can pay all the bills of what it is SUPPOSED to pay under our Constitution with nothing more than import and export duties. It doesn't need either personal or corporate taxes, any other excise taxes, nor does it need a sales tax.

"Constitution with nothing

"Constitution with nothing more than import and export duties. It doesn't need either personal or corporate taxes, any other excise taxes, nor does it need a sales tax."

No it can't.

You want to have a military budget of 50 billion a year? The opposite of having a military empire isn't having no military at all.

The Congress is authorized to have a post office, to make commerce regular, etc. You want to manage the intrastate infrastructure of this country with 100 billion/year? How about in the case of a national emergency?

How are you going to fund federal courts? How are you going to form the offices that can arrist national corporations for fraud?

How are you going to pay off the interest on accumulated debt?

How are you going to pay the over 3 trillion owed to social security and medicare holders (part of the debt)?

Look, there is a justification for taxation, in that you recieve services from the government. The justification for a progressive tax rate is the basic idea that the more you make, the more you pay, the more you make, the more you depend on the government being there, and at times, the more you make, the more you've made use of government tools to get where you are.

It isn't perfect.

Bill Maher made a very great point, that even if it us "unfair" that a billionaire pays so much in taxes, it is unfair that he is a billionaire in the first place, because the vast majority of the super-rich in this country have made their money not through their own individual skill or talent, but through deception and fraud. These people making so much money are very rarely world-class doctors or lawyers, but most often CEOs, bankers, and hollywood stars who have gamed the system.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

p.s. - why are you spouting communist propaganda on the DP?

Plank #2 of the Communist Manifesto's steps to transition to a communist society is:

"2. A heavy progressive or graduated income tax."

Oh yes it can, I've run the numbers.

Import/Export revenue and miscellaneous excises last FY garnered 150 billion.

General government, which includes all constitutional functions, cost 30 billion.

That leaves 120 billion for defense and debt service.

Here's how you do this:

1 - have the Fed buy up all outstanding debt. Period. Current debt holders take present value or nothing at all.
2 - dissolve the Fed and the debt along with it.
3 - restore specie currency and allow competing currencies.
4 - sell off all overseas military assets and use the proceeds for the welfare transition as the States resume control of social policy.
5 - Revitalize the languishing State militia model.
6 - review "general government" expenditures for efficiency improvements.
7 - retain import/export duties for any remaining transition contingencies, and for maintaining a Navy and special forces. (including nuclear arsenal)
8 - utilize only apportioned direct taxes for future "general government" expenditures.

Within one to two years the federal government would be well within its means, we'd have a robust true defense, no debt, and any social policy would be handled at the state and local level much cheaper and more fairly than any one-size-fits all debacle. And we have sound currency to boot, which when combined with the use of direct apportioned taxes, would serve as the necessary checks against future uncontrolled spending by Congress.

This plan accounts for every contingency that is legitimately the responsibility of the Federal Government. (you listed many that are not)

On a specific note, not one dime is owed anyone for Social Security or Medicare. You should know better than that. We've discussed this many times here on DP. Regardless, the States would assume responsibility for anyone currently dependent on such programs, and would be able to do so with no Federal taxation on incomes or wages sucking funds out of their States, and more than likely be able to provide for them much more securely than the current system in place.

As for your last point, I really don't care how much someone else has, or how they got it, you can play that game of theft all you want. Personally, I demand every penny I earn remains mine. If you don't like that, tough cookie. This is America. And I don't buy into your bait and switch ploy of "taxing the rich" when the real target is ME. Your socialist clap trap ways are at an end. There is no stopping an idea who's time has come. Liberty will prevail.

And this outline above, can make it happen very quickly.

BMWJIM's picture

None of these things matter for the dollar

is going to crash. Without Dr. Paul making small changes and getting the military home it is all for nothing.

There is NO justification for taxes!!! Period!

Cut out the Fascist, crony capitalism and it does not matter. I guess it does not matter for Bill Maher is the guru making his very good points. I say we take all his money and everyone else in Hollywood,DC,CEO's, etc.. and send them to Gitmo and all is well.

Your argument is not all that great.

Jim

1976-1982 USMC, Having my hands in the soil keeps me from soiling my hands on useless politicians.

Well the reality is 48% of

Well the reality is 48% of American workers do not pay income tax. Instituting a flat-tax would mean all Americans pay an equal percentage of their income.

If you earn $20K a year, and the tax rate is 10%, you would pay 2K in taxes - as opposed to no income tax now.

If you earn $200K a year, you would pay 20K in taxes.

If you earn $2 million a year, you would pay $200K in taxes. All people would pay an equal percentage.

______
"When the people fear their government, there is tyranny; when the government fears the people, there is liberty."

BMWJIM's picture

Flat tax will not work for they

will NOT get rid of the IRS and the present tax code with the flat tax. This will just be an addition!

Jim

1976-1982 USMC, Having my hands in the soil keeps me from soiling my hands on useless politicians.

Well, first of all, a sales

Well, first of all, a sales tax on top of an income tax means it is a higher tax than either. Your tax is being taxed.

Second, it is unconstitutional. The Constitution doesn't have anything about a sales tax in it. In fact, it breaks the whole idea of federalism again by making sure the Federal government intervenes in every retail business transaction on a state and local level.

Third, it means the internet would be taxed. Most people are against that too.

Fourth, it cements the income tax, which itself is a bad idea. This is a bad idea on top of a bad idea, and cements the national government which never was suppose to be in a very bad way, so no one can buy or sell without being taxed by the federal government.

And for the support of this Declaration, with a firm reliance on the protection of Divine Providence, we mutually pledge to each other our lives, our fortunes and our sacred honor.