Now that Herman Cain's star has, kind of by default, started to rise, I think a closer look at him is warranted.
666 999 tax plan of his.
Bruce Bartlett, a senior Republican economist and long-time associate of the likes of Ronald Reagan, George Bush I, Jack Kemp and Ron Paul, has some impressive credentials to bring to the discussion, and he recently had a column in the NY Times, Inside the Cain Tax Plan:
Little detail has been released by the Cain campaign, so it’s impossible to do a thorough analysis. But using what is available on Mr. Cain’s Web site, I’m taking a stab at estimating its effects.Got that? THIRTY percent tax on all goods and services. Memo to Herman Cain, who as a "business executive" pizza vendor, ought to know this: Our capitalist society is based on buying stuff, and if you put in place a tax that increases the price of that "stuff" by one third, then people are going to buy less of it. And there go the jobs (and this time they just disappear, instead of being outsourced to some Third World country), along with any chance of recovery, along with the very fabric of our society.
First, the 9-9-9 plan is actually an intermediate step in Mr. Cain’s plan to overhaul the tax system and jump-start growth. Phase 1 would reduce individual and business taxes to a maximum of 25 percent, which I assume means reducing the top statutory tax rate to 25 percent from 35 percent.
No mention is made on the site of a tax cut for those now in the 10 percent, 15 percent or 25 percent brackets. This means that the only people who would get a tax rate cut are those now in the 28 percent, 33 percent or 35 percent brackets. According to the Joint Committee on Taxation, only 4 percent of taxpayers pay any taxes at those rates.
. . .
This means that the 47 percent of tax filers who now pay no federal income taxes will pay 9 percent on their total income. And elimination of the payroll tax won’t even help half of them because the earned income tax credit, which Mr. Cain would abolish, offsets both their income tax liability and their payroll tax payment as well.
Additionally, everyone would now pay a 9 percent sales tax on all purchases. No mention is made of any exemptions from this tax, so we may assume that it will apply to food, medical care, rent, home and auto purchases and a wide variety of other expenditures now exempt from state sales taxes. This would increase their cost of living by 9 percent while, at the same time, the poor would pay income taxes.
. . .
And here’s the kicker in the Cain plan. Phase 2 is merely a transition to yet another fundamental tax reform. In Phase 3, the United States would adopt the so-called Fair Tax, which would replace all federal taxes with a 30 percent [!!!] sales tax on all goods and services.
At a minimum, the Cain plan is a distributional monstrosity. The poor would pay more while the rich would have their taxes cut, with no guarantee that economic growth will increase and good reason to believe that the budget deficit will increase.
Even allowing for the poorly thought through promises routinely made on the campaign trail, Mr. Cain’s tax plan stands out as exceptionally ill conceived.
This is not rocket surgery. I learned this fifty years ago, way back in Econ 101. The real question is why didn't Herman Cain learn it?