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Peter Schiff exposes the Achilles heel of Herman Cain's 999 plan


"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."

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One question...

While i certainly don't like the 999 plan, I am a little confused by Schiff's argument. Yes, the deductions for businesses being able to deduct employee wages are eliminated, which would in theory cause employee wages to be reduced by 9%. However, since the corporate tax that those businesses were paying is now lowed from about 35% currently to 9% under Cain's plan, wouldn't the businesses end up with a net increase in capital and a net tax decrease? So therefore there would be no need for an 9% wage reduction because although the deductions are eliminated, the corporate taxes are lowered substantially which offsets the cost of the deduction eliminations and even helps businesses save additional capital. Some please explain. Thanks.

It would be better if people like Shiff used the correct

terminology when discussing these issues.

Nobody ever could deduct employee wages from their own tax burden. They could deduct employee wages as an expense in determining what their taxable income was, and they then calculated tax liability based on this taxable income.

I think Schiff must be confused. Take this example.

Assume a business takes in $10,000,000 as revenue, and pays employees $9,000,000 plus pays its share of FICA tax on these salaries at the rate of 7.65% or $668,500. This leaves $331,500 of net taxable income ($10,000,000 - $9,000,000 - $668,500 = $331,500) which is taxed at the current rates resulting in $108,635 tax due.

The way Schiff explains it, the $9,000,000 is no longer deductible, and I gather there is no longer a payroll tax, but just a 9% tax on income determined without deducting salaries. The entire $10,000,000 income is taxable at 9%, so the corporate tax is now $900,000 instead of the $108,635 under the current system. So instead of walking away with a net after tax profit under the current system of $222,865 they will have a net after tax profit of $100,000; this corporation's net after tax profits just got cut by about half, or another way of looking at it is their total tax burden went from $777,135 ($668,500 + $108,635) up to $900,000, an increase of 15.8%.

This makes no sense, so either Cain is a total whack job (probably so) who will destroy what is left of the US economy, or Schiff is a lousy tax accountant and does not understand what Cain is proposing, if even Cain understands it himself.

Sounds like time to send out even more layoff notices.

"Bend over and grab your ankles" should be etched in stone at the entrance to every government building and every government office.

Schiff is interpreting it as

Schiff is interpreting it as he wants to interpret it.

Cain is vague on purpose. Actually smart politically.

Here is the thing: Corporations want no part of 9-9-9.

Businesses in American pay an effecitve tax rate of about 5%. Corporations are probably on the lower end of that scale because they hide everything and get subsidies (see GE). So taxing them at 9% flat would be a big increase.

Income tax flat at 9% is putting way too much of a burden on the poor, who IMO have been made poor largely because of the actions of that top 1%. Look, this is common sense. A guy making 10,000 a year can't afford 900 dollars as much as someone making one million a year can afford 90,000. And that 1 million dollar/guy probably relies a lot more on the government than the poor guy. The more wealth you have, the more dependent you are on government services like the military, docks, roads, courts, etc. You end up "using" those services more.

Lastly, a 9% sales tax is just stupid; simple regression mathematics. You DIRECTLY impact the cost of goods. While companies will have to reduce their prices somewhat, in general, this will lead to less consumption, which will lead us further into this depression.

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

This federal sales tax

would start out at 9% just to get it established, and then it would quickly rise, and rise, and rise. No new taxes.

Remember that post a few

Remember that post a few weeks ago where people accused Schiff of being a Cain shill?

The Big BUT is

that in spite of Herman Cain's 9-9-9 "plan" being somewhat better than what we have now, why would anyone think (supposing that he might get elected????) that he would ever follow through on that plan? He has already proven himself an accomplished liar, so I think all this talk about a plan by Herman Cain can be completely dismissed and not worth any more discussion. RON PAUL is the only candidate who will follow through with any promises

"Nothing is as it appears; everything is smoke and mirrors"

How is it that you conclude the 9-9-9 plan is better than

what we now have? Are three needles draining our life blood really better than two. What about cutting the US government back to what is Constitutionally authorized (maybe 5% of its current size) instead of playing the public for fools with an advertising slogan that just raises the same or even more revenue from the public, pretending that this will cure our ills. Is it any wonder that people are afraid to invest in the US economy?

What about the inflation tax, the transfer of wealth out of the pockets of the masses that results from currency inflation. Herman Cain is a supporter of the Federal Reserve Bank, having been a governor of the Kansas City branch. He fully endorses the Federal Reserve out of thin air money system. He admires Alan Greenspan, of all people.

The only sane reaction to the nine, nine, nine plan should be nein, nein, nein, Heir Herman Cain.

"Bend over and grab your ankles" should be etched in stone at the entrance to every government building and every government office.

A technicality

If employees get 9% less due to salary reductions to compensate for the payroll tax, their income tax will be on their net income after that reduction, not on the amount they would have earned otherwise. Less than 9% of what they're getting now.

Here's the math.

If you earn $100,000 now, you'd get $91,000 after the payroll tax comes out of your wages. So the 9% tax on that would be $8190 rather than $9100. Not a big deal, but still an error Schiff should have caught.


Not only is the first 9 now an 18, but some observers have noted that we need to add an additional 9 for the inflation tax due to the Federal Reserve policies Mr. Cain has indicated he prefers (Greenspan). So if we add state and local sales tax to the federal sales tax, as noted in a comment below, we now have 18-9-18-9.


And Cain tries to distance himself from the image of a politician by doing exactly what they do. Shuffle the money around the table like a shell game but make it look like you've done something.




Cain's plan doesn't address

Cain's plan doesn't address the definition of income and he wants to implement it through the super congress....

"The economy's not a class you can master in college. To think otherwise is the pretense of knowledge."

New tax plans always raise taxes

They are first sold to the people explaining all great benefits. Then when implemented taxes are always raised.

I hope Ron Paul's plan tomorrow will include NO changes in the tax structure and ONLY reductions in the tax percentages.

This obviously is not the end goal but it is the only first step in the right direction in this corrupt government structure.

And my favorite percentage is zero.


"Bend over and grab your ankles" should be etched in stone at the entrance to every government building and every government office.


Keep the tax code exactly as it is but make it more and more irrelevant by lowering the percentages step by step to zero.

No need for any lawyers or bureaucrats to rewrite anything and lie to us about the effects it will have (like Nein, Nein, Nein). No need for anybody to learn and understand any new rules.

And when all the percentages are zero it will just disappear all by itself.

The Schiff-man cometh...

Great breakdown. I think it's also worth mentioning how this will effect poor people. Say you're a wage earner in NJ who now pays no income tax, and a state sales tax of 7%. Under Cain's plan you will be working for an even lower wage (payroll costs), and pay an effective sales tax of 16% on new items. Some have made the goatish statement that poor people should "buy used". The problem with that is poor pay a disproportionate amount on their income(80-90%) on necessities that can't be purchased used (food, gas, utilities, insurance, etc.)

- Liberty and Prosperity -

Don't worry about 999

The democrats will destroy this plan for everyone.
If polling shows Obama beating Cain by 10+ points, he'll drop like Perry.

A very viable concept

I have been thinking this also,I think this Cain thing is going to give Ron a last minute boost to the front.It may very well be a good thing.

If I disappear from a discussion please forgive me. My 24-7 business requires me to split mid-sentence to serve them. I am not ducking out, I will be back later to catch up.


Tack on to this the fact that the 9% federal sales tax is on top of the 9% in state an local sales taxes people are already paying and you have the 18-9-18 plan. And notice that the 18's are all on the people, employees and consumers, and the corporations get away with the 9%.

The middle 9 is on the people too

all they business will do is add it to the price and pass it on.

*May the only ones to touch your junk, be the ones you want to touch your junk.*

passed on?

I won't add it to the price, I'll simply make no effort (zero) to start, much less maintain my own business here in "these united states". Yeh, I've thought long and hard about this new biz thing..... I don't work for less than free.
Ayn Rand is correct.
What's her nuts (not Ayn!) said it right; turn 999 upside down. Not hard to figure.

if you read Rothbard, you

if you read Rothbard, you would know, that taxes don't get past to consumers, because the price that business charges for goods and services, is the max price that market sets. What does happen when taxes go up is layoffs, or reuction in production(supply), and that's what raises the prices. so it's even worse.

The Bigger Problem

Herman Cain would not be elected dictator, and the "plan" is not ever going to be implemented, and even if some attempt was made, it would be amended to benefit the interests in control of Congress.

This is why I love Ron Paul. His plan to bring troops home is something he can do on his own (unless Congress wants to declare war).

What do you think? http://consequeries.com/

peter schiff is awesome, wish

peter schiff is awesome, wish he would have found more wrong with it though. At the end of the segment he said the 9-9-9 is better than what we have... not very discouraging.

Well it would mean a

Well it would mean a reduction in taxes for Schiff, who often complains that he's already taxed about 50% of his income through federal and state taxes. His argument is that for productive business owners such as himself, he will now have more capital to invest and be able to grow his business and hire more employees.

Really, anyone who gets his taxes reduced by any plan will have some praise for it, but you gotta give Schiff credit for shooting holes in something that would benefit him personally

Agreed, and what kills me....

Is that people don't really see the danger of giving the Fed's a new vehicle for taxation, i.e. national sales tax? Sure, 9% now. Sure Cain't says that would never change under his watch. After that, then what? Income tax was originally the top 5% earners paying 2 or 3% tax. Look at it now. Bachmann was right about this particular issue during the debate, but her little 'devil in the details' comment I felt derailed the magnitude of this issue. I know you and all the rest of us know this, but we have to make sure this is the FIRST fault of Cain't to point out when talking to others. Some people, like my 50 yr. old sister can't be helped though. She likes Cain't because she thinks it will prove that "we(I assume she means white Republicans) aren't racist" and "he seems like he'd make a good president." When asked WHY she thought he'd make a good president she said "well he seems like a good guy." When I pressed her again and asked WHY she thought he was a good guy, she got flustered and said "Alright I knew I shouldn't start talking politics with you" and hung up. Sadly, this ignorance is not uncommon. And I'm SURE that many Cain't supporters couldn't even tell you what 999 even means. The best I can hope for is for my sister and the throngs of the thoughtless to be too lazy to even vote. Sad, but true.