Peter Schiff exposes the Achilles heel of Herman Cain's 999 planSubmitted by emazur on Sat, 10/15/2011 - 04:57
Be sure to read my youtube video description below, as I'm not certain if Schiff's critique is entirely justified
Schiff's bottom line: under Cain's 999 plan, the 15% payroll tax is NOT eliminated but is instead replaced with an effective 9% payroll tax b/c businesses can no longer deduct employee wages from their own tax burden. Because this 9% falls entirely on the employer, where will he get the money to pay for this tax? By reducing employee wages by 9%. Schiff says Cain's plan should therefore be called the 18-9-9 plan: 18% (9% income + 9% effective payroll) + 9% sales tax + 9% business tax. I have presented his view in the youtube graphic.
Though I'm a huge Ron Paul supporter and don't have 9 cents, 9 shits, or 9 rats asses worth of trust in Herman Cain, I'm not entirely sure Schiff's critique is accurate. For instance, Schiff says the employer would be taxed 9% on the wages of the employee, and instead of taking that 9% on the chin the employer will simply reduce his employee wages (I assume by 9%). But aren't employers ALREADY are paying half the employee 15.3% FICA burden, meaning they already are paying 7.65%? 9% would raise the employer burden by only 1.35%. So perhaps the employer would be tempted to reduce employee wages by 1.35%. However, wouldn't the elimination of FICA taxes that the employer himself currently has to pay more than offset that 1.35%? Don't people who are self employed have to pay 15.3% of their own income to FICA? I don't know know enough the 999 plan to say, but wouldn't that 15.3% burden be reduced to either 0% or 9%, a net gain of at least 6.3% for employer that would offset the 1.35% increase he'd pay on employee payroll tax? I don't ask this to defend Cain (I don't always post videos that I'm certain I agree with, but I still find interesting), but want to have an honest discussion - if someone spewed BS about Ron Paul for instance, the misinfo deserves to be corrected. And I've read the Fairtax book that discusses how only the final good would be taxed and gets rid of embedded taxes that are added up along production stages, so that the bottom line price wouldn't really change. A superficial look at Cain's website says that he intends to adopt the same methodology. So would the poor really have their tax burden increased 3% like Peter says? I don't know the answers to all these questions, so feel free to post your own comments or links to articles that discuss this stuff