Dick Morris sez....

[bergall]

I usually find Dick Morris to be very well informed, if not a bit opinionated. I think he provides a fair assessment of 9-9-9....

Published on TheHill.com on October 18, 2011

In 1980, facing a terrible economy, Ronald Reagan called for a new tax program: 10-10-10. Based on the Kemp-Roth bill, he called for 10 percent cuts in income taxes for three years. He got it, and it kindled 20 years of prosperity.

Now, Herman Cain understands that we need fundamental reform to get our economy moving. He calls for replacing the current system with just three levies of 9 percent each on personal income, corporate income and consumption. There would be no capital gains tax, inheritance tax, Social Security tax or Medicare tax. Just 9-9-9.

His proposal is breathtaking. Currently, the lowest top tax rate is Poland's 18 percent. And Poland is the only European nation that had no recession. If Cain passes 9-9-9, we will thrive and become the destination of choice for every business and businessman. Look at what Reagan's tax cuts achieved, and at the best-performing state economies, where there is no income tax.

The proposal, naturally, attracts critics and skeptics.
Some worry that it will add to the deficit. But that's not likely.

· Americans now earn $12.5 trillion of personal income. Tax it at 9 percent with no deductions and you generate about $1.125 billion.

· We spend $10.3 trillion. A 9 percent tax would yield about $927 billion.

· Net corporate income (after dividends) is $1.1 trillion. A 9 percent levy would generate $100 billion.

· That comes to $2.152 billion, about the same as our actual revenues of $2.162 billion for fiscal 2010.

And then, when you factor in the economic growth this plan will engender, the scenario becomes even better.

Liberals worry that the tax would shift the burden from the rich to the middle class. No, sir. Americans making $50,000 to $60,000 a year now pay an average of 6 percent of their income in income taxes. But they also pay 6.5 percent in FICA levies and 2.9 percent in Medicare payroll taxes (a total of 15.4 percent). The Cain proposal would replace these with a flat 9 percent, saving them 6.4 percent.

Of course, the middle class would also have to pay a 9 percent sales tax, but it would be largely offset by the savings in their payroll taxes.

Cain says that competitive pressures would hold down prices and force businesses to eat much of the 9 percent sales tax. Employers would not have to pay their 6.5 percent share of payroll in Social Security taxes, and their corporate taxes would be cut. For commodities with high price elasticity -- like cars -- competition will hold down prices. But for inelastic purchases -- like food and drugs -- some of the tax would probably be passed on. For the middle class? It's a wash.

More compelling is the possible impact on the poor. A family making $20,000 to $30,000 a year pays only 3 percent of its income in taxes (much of it more than offset by tax credits). But it still pays 6.5 percent in FICA and 2.9 percent in Medicare taxes. So the requirement that such a family pay 9 percent in personal income taxes would probably be fully offset by the cut in payroll taxes. But the poor might face higher prices. Cain plans to spell out how he can mitigate the impact on the poor through special empowerment zones. We need to see the details. Certainly, the poor would benefit from the increased employment, wages and growth the Cain tax cuts would generate.

Conservatives worry that 9-9-9 will open the door to a European Value-Added Tax that starts at 9 percent but goes up each year. Cain proposes that a two-thirds vote be required to raise rates. But a simple act of Congress could change that.

The real answer is political. If the Republican Party surges back to power in 2012, captures the Senate, keeps the House and takes the presidency, it can make sure the rates don't go up. Republicans usually can count on 40 votes in the Senate; we just have to use them.

The 9-9-9 is a good, good plan that can save our economy.

[CalHunter]

Morris makes his points well but needs to do more proofreading of his work. 9% of $12.5 Trillion comes out to a lot more than just $1.125 Billion. Cain's idea has some merit and could likely be tweaked with a small progressive bump and eliminating the write-offs and excessive regulations. Interesting material to debate though.

[bergall]

Originally Posted by CalHunter

Morris makes his points well but needs to do more proofreading of his work. 9% of $12.5 Trillion comes out to a lot more than just $1.125 Billion. Cain's idea has some merit and could likely be tweaked with a small progressive bump and eliminating the write-offs and excessive regulations. Interesting material to debate though.

dunno if the proofreading needed to be done by Morris or Newsmax.
BUt 9% of 12.5 trillion appears to be $1.125 TRILLION.

So it looks like his 9-9-9 plan does in fact broaden the tax base, but it does nothing to pay down the debt. It will REPLACE the current system almost dollar for dollar, giving tax decreases to the most heavily taxed people. I do not quite grasp a couple of concepts tho:
1: how a national sales tax would not affect the price of goods and
services to the consumer
2: the removal of all deductions might dampen the housing
markets, disallowing mortgage interest deductions and
deductions for 'operating costs' for people running rental
real-estate properties as second income properties.
3: he depends heavily on the decrease in federal tax to provide
tax relief to those who can no longer claim deductions for
certain other expenditures
4: the plan does not in any way address state taxes which can be
quite a burden....property taxes....state sales and income taxes
come immediately to mind.
5: his proposal to come up with 'oppportunity zones' where
businesses can realize tax breaks for operating in depressed
areas to the benefit of local people (businesses, merchants,
municipalities, etc.).

To my knowledge, there is no codified legislation for this plan, and without majorities in both houses, President Cain will never see his 9-9-9 enacted. There's a lot of 'hubbub' about a 'wash' in tax revenues as outlined in this plan. If 9-9-9 fails to stimulate the kind of revenue-generating dynamism, we'll have a new tax system on top of a stagnating economy, high jobless rate, and a housing market languishing in want of people willing to invest. I dunno...