9-9-9 :: I'll play

[Gamingphreek]

A lot of these articles really have me confused. Especially this one:
http://www.latimes.com/news/politics/la-pn-cain-axelrod-20111017,0,7647069.story

Most notably, this quote:

“I think you add the 9-9-9 up and get to 27 (percent) because that’s probably what poor and middle class people will end up paying once the thing gets implemented.”

These people in office are highly intelligent - why in the world do they think:
A. That the poor and middle class will spend 100% of their income when calculating 27%
B. The business tax somehow applies to everyone...

--------------------------

In response, I'll play the game here. Under the current system:
-I'm single
-I have a Bachelors degree
-I live in Loudoun County Virginia
-I donate 10% of my gross income to charitable organizations
-I put 6% of my gross income into a 401K
-My work pays for part of medical, dental, and vision insurance
-I only claim myself as a deduction
-My only debt is my car payment which I have positive equity on.
-I make between 75K-100K annually

As of right now:
Federal Withholding consumes 15.80% of my Gross Income equaling 17.08% of Federal Taxable Gross Income.
Federal MED/EE consumes 1.43% of my Gross Income equaling 1.54% of my Federal Taxable Gross Income.
Federal OASDI/EE consumes 4.13% of my Gross Income equaling 4.47% of my Federal Taxable Gross Income.

As of right now:
VA Withholding consumes 4.66% of my Gross Income equaling 5.03% of my Federal Taxable Gross Income.

In total, the Federal Government consumes 21.36% of my gross income. That equates to 23.08% of my Federal Taxable Gross Income.

Under what we know about the 9-9-9 plan:
I'll pay 9% income tax on my Gross Income less 10% due to charitable donations.

Every time I make a purchase, that purchase will be 9% of that items value.

I do not own a business, thus the last '9' does not apply to me.

In short, I'll go from paying 21.36% of my gross income to the Federal Government, to paying 9%.... A difference of 12.36% in my favor-- A middle class working american citizen.

Questions?

-GP

 

[Dman8777]

Exactly. And the US already has revenue problems.

 

[Gamingphreek]

Exactly. And the US already has revenue problems.

Well the argument I hear is that the tax burden shifts to the Middle and Lower Income families which is very clearly false.

I'm not economist, but I think the closing of a vast majority of loopholes will generate the additional revenue needed while putting more money in the pockets of american families.

For instance, Dan Snyder just bought a $70M Yacht. $630K of that would back to the Federal Government. Businesses and organizations that devote huge amounts of people to "working the system" will finally have to pay their taxes - a HUGE boost in revenue all by itself.

-GP

Edit: And let me also reiterate that my purpose in this thread is simply to prove the argument that 9-9-9 "shifts the tax burden to middle and lower income families" is false. I'll argue about the other point like I just did; however, I don't have enough knowledge or know-how to really say where the other revenue is coming from that makes this plan neutral.

 

[soundforbjt]

Do you own a house or do you rent? Rent may be taxed 9% under Cain's plan. How much do you spend a year? How much do you contribute to your healthcare, another 9%. Gas, food, etc all goes up 9%. Cable TV, internet. How much do you purchase a year for everything?

edit: It also seems to favor singles & working couples more than families.

 

[xBiffx]

GP, you just brought logic, common sense, and arithmetic to the debate. You just lost probably half of the audience right there. This is the problem. I still think that there is more to the 9-9-9 plan but you have simplified the basics which should have made things easier to understand.

 

[Gamingphreek]

Do you own a house or do you rent? Rent may be taxed 9% under Cain's plan. How much do you spend a year? How much do you contribute to your healthcare, another 9%. Gas, food, etc all goes up 9%. Cable TV, internet. How much do you purchase a year for everything?

Not really a fair question... How in the world am I supposed to add up all of my purchases over the course of a year? I try to save as much as I can while paying down my Auto Loan. I don't spend outside of my means.

At any rate, if I'm saving 15.36% of my income a year, it doesn't matter because, if I should spend 100% of my income, the upper extrema is 9%. So I still come out on top by 6.36%.

I think it is also important to note that only new items will be taxed at 9%. Used items will not be taxed at all. So the people who are less fortunate can avoid a good portion of the 9% sales tax.

-GP

 

[Gamingphreek]

GP, you just brought logic, common sense, and arithmetic to the debate. You just lost probably half of the audience right there. This is the problem. I still think that there is more to the 9-9-9 plan but you have simplified the basics which should have made things easier to understand.

I know I'm probably oversimplifying some aspect (I agree there is probably more to the plan) and I'm only looking at one case, but I really am just interested in learning about where all these other figures are coming from (By those opposed to the plan).

 

[Dman8777]

The 999 plan is nothing other than a flat tax. The equality of flat taxes have been de-bunked a million times.

It may or may not increase the tax burden of middle and lower income families. That depends on too many factors to make general statements. What can be said definitively is that a flat tax reduces the burden on the wealthy. Is that what the US needs right now? Probably not.

 

[xBiffx]

I know I'm probably oversimplifying some aspect (I agree there is probably more to the plan) and I'm only looking at one case, but I really am just interested in learning about where all these other figures are coming from (By those opposed to the plan).

I know. I agree with what you presented, who can't, its just math. The problem is when people make the assumption of spending 100% of your income when trying to debunk this plan. That is simply not realistic. Cain has even said himself that this plan would encourage more saving and less spending.

 

[sactoking]

These people in office are highly intelligent - why in the world do they think:
A. That the poor and middle class will spend 100% of their income when calculating 27%
B. The business tax somehow applies to everyone...

Your premise is incorrect because it assumes that these two statements are incorrect.

For the poor and a good portion of the middle class, 100% of income is not spent. In reality consumption is greater than 100% of income. This is a result of various other sorts of income and subsidies available. The data is widely available to review. Subsistence expenditures versus discretionary expenditures are a much larger proportion of expenditures for the poor and middle class. So, yes, it is not untoward to assume that the 9% sales tax proposed would hit virtually every dollar not taken by the 9% income tax.

You also miss that the business tax does apply to everyone. From Cain's own site (http://www.hermancain.com/999plan) the 9% business tax would be levied on "Gross income less all purchases from other U.S. located businesses, all capital investment, and net exports". What's missing there? Labor. Labor would not be a deductible expense. Every business in the US would cut wages ~9% to compensate for this effective payroll tax, pushing wages down and more people into the realm where the 9% sales tax affects more of their income (as above).

 

[Dman8777]

Edit: Sactoking beat me to it.

 

[soundforbjt]

Not really a fair question... How in the world am I supposed to add up all of my purchases over the course of a year? I try to save as much as I can while paying down my Auto Loan. I don't spend outside of my means.

At any rate, if I'm saving 15.36% of my income a year, it doesn't matter because, if I should spend 100% of my income, the upper extrema is 9%. So I still come out on top by 6.36%.

I think it is also important to note that only new items will be taxed at 9%. Used items will not be taxed at all. So the people who are less fortunate can avoid a good portion of the 9% sales tax.

-GP

Also, now you're saving 15.36% and before you said:

A difference of 12.36% in my favor

?
Which is it?


Does Cain's plan eliminate SS and fica, etc immediately? Don't see any info on his site that claims that.
If not, you're forgetting to include those.

 

[xBiffx]

Your premise is incorrect because it assumes that these two statements are incorrect.

For the poor and a good portion of the middle class, 100% of income is not spent. In reality consumption is greater than 100% of income. This is a result of various other sorts of income and subsidies available. The data is widely available to review. Subsistence expenditures versus discretionary expenditures are a much larger proportion of expenditures for the poor and middle class. So, yes, it is not untoward to assume that the 9% sales tax proposed would hit virtually every dollar not taken by the 9% income tax.

You also miss that the business tax does apply to everyone. From Cain's own site (http://www.hermancain.com/999plan) the 9% business tax would be levied on "Gross income less all purchases from other U.S. located businesses, all capital investment, and net exports". What's missing there? Labor. Labor would not be a deductible expense. Every business in the US would cut wages ~9% to compensate for this effective payroll tax, pushing wages down and more people into the realm where the 9% sales tax affects more of their income (as above).

Except that business pays more than 9% on all things this tax is on so they won't have to compensate for anything given this savings. Oh and if they purchase their supplies from within the US they pay zero tax...again not gonna have to compensate for much there.

 

[her209]

<Republican>
Taxes on businesses are passed onto consumers. Therefore, the consumers end up paying the business's 9&#37; tax.
</Republican>

 

[xBiffx]

<Economist>
Taxes on businesses are passed onto consumers. Therefore, the consumers end up paying the business's 9% tax.
</Economist>

FTFY. Party affiliation does not even play into that argument.

 

[soundforbjt]

FTFY. Party affiliation does not even play into that argument.

Then you agree: "Therefore, the consumers end up paying the business's 9% tax."

 

[MomentsofSanity]

Then you agree: "Therefore, the consumers end up paying the business's 9% tax."

Plus the extra tax on the increased cost passed onto them...

 

[xBiffx]

Then you agree: "Therefore, the consumers end up paying the business's 9% tax."

How can you not? What business isn't going to pay for all their expenses through the price of their products?

 

[Gamingphreek]

Also, now you're saving 15.36% and before you said:?
Which is it?


Does Cain's plan eliminate SS and fica, etc immediately? Don't see any info on his site that claims that.
If not, you're forgetting to include those.

I fat fingered my response. It is the 12.36%. You could have easily looked at the original post and determined that instead of trying to belittle me.

9-9-9 in and of itself doesn't eliminate SS and Medicare and what not; however, Cain has said that they will be phased out. How? I don't know - I'm not him. I'm basing my figures on the information available to me at the moment.

For the poor and a good portion of the middle class, 100% of income is not spent. In reality consumption is greater than 100% of income. This is a result of various other sorts of income and subsidies available. The data is widely available to review. Subsistence expenditures versus discretionary expenditures are a much larger proportion of expenditures for the poor and middle class. So, yes, it is not untoward to assume that the 9% sales tax proposed would hit virtually every dollar not taken by the 9% income tax.

A couple solutions:
-Start spending the money on used items which would be tax free.
-Live on the essentials. You don't need multiple TV's, phones, and what not. While I understand that they are in poverty, I sincerely doubt that >100% of the average person below the poverty line's income is spent on Rent and Food.

You also miss that the business tax does apply to everyone. From Cain's own site (http://www.hermancain.com/999plan) the 9% business tax would be levied on "Gross income less all purchases from other U.S. located businesses, all capital investment, and net exports". What's missing there? Labor. Labor would not be a deductible expense. Every business in the US would cut wages ~9% to compensate for this effective payroll tax, pushing wages down and more people into the realm where the 9% sales tax affects more of their income (as above).

But that is an unsubstantiated assumption. I sincerely doubt every single business in the US cuts salaries by 9% (Though I am making an assumption too)

Additionally, xBiffx beat me to it, but don't businesses already pay a significant amount in taxes for employees that would go away and be replaced by this? I honestly don't know the in's and out's of the tax system in this manner, but I do know that employers pays a significant amount in taxes per employee in the current system.

-GP

 

[soundforbjt]

Plus the extra tax on the increased cost passed onto them...

yep, another 9%, easy to see who gets screwed here.

 

[xBiffx]

yep, another 9%, easy to see who gets screwed here.

Still less than what business pays now so I doubt you would see an increase in prices at all due to this plan. But then greedy businesses wouldn't be passing on the savings to the consumer so we still somehow get screwed.

 

[her209]

How can you not? What business isn't going to pay for all their expenses through the price of their products?

Why didn't prices go down when the FAA partially shutdown, i.e., no FAA tax was being collected?

 

[xBiffx]

Why didn't prices go down when the FAA partially shutdown?

Refer to my second sentence in my last post.

 

[her209]

Refer to my second sentence in my last post.

So it has more to do with what the company can get away with charging and less to do with passing on taxes. An example: A company makes a widget that no one buys. How much tax are they assessed under the current system? Under Cain's 9-9-9 plan?

 

[soundforbjt]

I fat fingered my response. It is the 12.36%. You could have easily looked at the original post and determined that instead of trying to belittle me.
Sorry, just noticed that. Did'nt mean to belittle you.

9-9-9 in and of itself doesn't eliminate SS and Medicare and what not; however, Cain has said that they will be phased out. How? I don't know - I'm not him. I'm basing my figures on the information available to me at the moment.

Well they have to be added in to your original figures then, for now.




Additionally, xBiffx beat me to it, but don't businesses already pay a significant amount in taxes for employees that would go away and be replaced by this? I honestly don't know the in's and out's of the tax system in this manner, but I do know that employers pays a significant amount in taxes per employee in the current system.

-GP

His site doesn't mention anything about SS, fica, unemployment, etc. contributions businesses currently have to pay.