Herman Cain's '999 plan': long overdue tax reform or job killer?
Herman Cain's political star is lately on the rise, thanks in no small part to the persistent marketing of his '9-9-9 plan' to reform the tax code. Independent economists say the plan takes us into uncharted territory.
Herman Cain's political star is lately on the rise, thanks in no small part to the persistent marketing of his so-called 9-9-9 plan – the presidential candidate's blueprint for reforming what many see as a complex and unpopular US tax code.Skip to next paragraph
But Mr. Cain, who won a Florida straw poll of the GOP faithful Saturday and who now is tied for third with Newt Gingrich among Republican presidential candidates in a recent average of three nationwide polls of Republicans, promises that 9-9-9 will do much more than simplify the tax code. Cain, the former chairman of Godfather’s Pizza says it represents "a bold solution" for reinvigorating the whole US economy.
The elements of the Cain plan are 9 percent flat tax on household income, a 9 percent corporate tax, and a 9 percent national sales tax. There are no deductions except for charity. It's a graspable concept – and one that increasingly has been getting bursts of applause during GOP presidential debates.
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“This is an attempt to shift the tax burden away from production and towards consumption, to balance the load,” says Rich Lowrie, Cain’s Cleveland-based senior economic advisor. “This taxes everything once but nothing twice.”
Mr. Lowrie, who is not an economist, says by “ripping out a whole bunch of taxes” prices of goods will fall, US exports will be more competitive and business will thrive. He claims the plan will create 6 million new jobs as business becomes more competitive.
“In the price of things is the embedded cost of all taxes,” he says. “We will be exporting goods without the taxes built into them and hitting imports with the sales tax. It will level the playing field.”
Independent economists who have studied Cain's 9-9-9 plan say the plan would take the nation into uncharted waters. The US has never had a national sales tax except for gasoline. It’s not clear what would happen to state and local services. States and municipalities would be carrying a new burden since they would have to pay the tax too. And, economists say the plan would favor those with high incomes.
“I can understand how a presidential candidate may want to start out and go a different way,” says John Silvia, chief economist at Wells Fargo Securities in Charlotte, N.C. “But, we have to know how we’re going to get from here to there – there are a lot of implications for this.”
One of the major implications would be moving the nation away from consumption. That may not be so bad, says Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pa. “The more we save and invest, the stronger our economy would be.” But, he quickly adds, “It’s not exactly what I would do, but I sympathize with the spirit.”