Sunday, October 16, 2011

Is Herman Cain's 9/9/9 tax plan really a 9/18 plan?

According to an article on the American Enterprise Institute's site:

A [value added tax (VAT)] and a retail sales tax are conceptually equivalent consumption taxes, apart from administrative and compliance issues. The [9/9/9] plan is therefore better described as featuring a 9 percent income tax and an 18 percent consumption tax.
That assumes that when Cain says he'll have a "9% business tax," he really means a VAT. I don't know if that's true. The article says it's been "confirmed by the economic analysis circulated by Cain's campaign," but that's pretty vague.

Cain's website says this tax will be on a business's "[g]ross income less all purchases from other U.S. located businesses, all capital investment, and net exports." The Wikipedia entry for "gross receipts tax" (a.k.a. "gross excise tax") says:
A gross receipts tax is similar to a sales tax, but it is levied on the seller of goods or services rather than the consumer.
In the last debate, Cain said his 9/9/9 plan is "simple, transparent, efficient, fair, and neutral." Many people have noted that it's hardly "efficient," "fair," or "neutral," but I'm not even convinced that it's "simple" or "transparent."

UPDATE: The Economist has an editorial entitled "Dial 9-9-9 for nonsense," which says:
Mr Cain touts the simplicity of the 9-9-9 plan, but it is anything but simple. Even after reading about it on Mr Cain's campaign site, I'm still not sure I understand it. I thought I knew that the plan proposed 9% income, sales, and corporate tax rates. But the corporate tax is not a simple reduction in the corporate tax rate, as I had thought, but a value-added-tax on "Gross income less all purchases from other U.S. located businesses, all capital investment, and net exports."
The Editors of National Review have also come out against the 9/9/9 plan, saying that the corporate tax is really a VAT.


Peter said...

I am all for a flat tax across the board, and a national tax, if it is properly implemented. However, this sounds like a regressive tax system which hits the lowest earners in America the hardest. It's a gift to the corporate cash hoarders.

Jason (the commenter) said...

Apparently voters like it. People keep asking Cain about it, and he keeps answering, and his numbers have only gone up.

A 9% national sales tax wouldn't bother me. And I think I might end up paying more because of it. Perhaps it appeals to my frugality. Our country is up to its eyeballs in debts and if everyone was paying for it, it wouldn't seem so insermountable.

It would be a huge weight off my chest.

John Althouse Cohen said...

We'll find out what voters really think when it comes time to vote. Poll respondents aren't the same as voters, even if they're designated "likely voters." The poll respondents who say they support Cain might actually want Cain's specific plan to be enacted. But I think the more likely explanation is that the respondents are disappointed in the other candidates and like the fact that Cain is an outsider and successful businessperson (but seems like more of a staunch conservative than the other successful businessperson in the race). Telling a pollster you support Cain could be a way to make a statement, even if you're not actually going to vote for Cain.