9-9-9 :: I'll play

[Gamingphreek]

Your claimed 15% savings under Cain are utter nonsense. You're completely ignoring the effects of deductions and the Cain sales tax.

You said you're giving 10% to charity. That means you itemize. If you own a house and pay a mortgage, that and your property taxes are deductible, too. Assume a typical $300,000 mortgage on a $400,000 house in Loudoun country. That's a $12,750 deduction. And Loudoun's property tax rate is 1.285% = $5140. So you'd be deducting an additional 17,940 from your income. The $1000 or so you pay toward your health care premiums comes right off the top. And of course there's you 6% pre-tax 401IK (and if you really "save all you can," why on earth don't you put more in?).

I don't itemize. I haven't been giving that much for long and, since I don't have any other deductions, it probably isn't enough.

As I said, I don't own a house or have a mortgage. I'm living in an apartment. I do have an auto payment though. Thus, my Federal Taxable Income is as listed in the original post.

Additionally, all my calculations were based on gross income, not net. Thus, I have essentially taken my 401k out of the equation.

We also have to deduct your state income tax. Based on the above figures (and a $80,000 starting point), your Virginia taxable income is $48260, for a VA income tax of $2,517.

From looking at my pay-stubs, my state income tax is based off of my Federal Gross Taxable Income. I detailed it in my original post

Add it all up, and your taxable income goes down to $45,743 (assuming an $80,000 starting point). And lest we forget, you reduce that by an additional $3700 as your personal exemption amount. So your taxable income is $42,043, for a federal income tax of $6,688, or 8.36%% of your full wage.

I've completely ignored flexible spending accounts and child-care accounts, which come right off the top of your income. But you're young and healthy and have no kids. But just wait a few years.

Hope so on the kids part

So, your total federal tax bill under current rules would be be 8.36 + 7.65 = 16.01%. Hmmmm.

And under Cain? Well, you're at 9% of 72,000 right off the bat, that's 8.1% of the original. And after paying your state taxes and charity and 401K, you're left with 64,683 of income to spend, every penny of which is taxed at 9%. Only you know how much of that you save, but let's assume 15%, leaving $54,980 (but if you do save this much, again I ask why on earth wouldn't you more generously fund your 401k?). You'll pay 9% of that (= $4948) when you spend it, or 6.19%. So the grand total for you is 16.01% versus 14.29%. A 1.90%% benefit, or $1520. But if your economic situation shifts ever so slightly - if you add one dependent (with a corresponding increase in your health care premium) or have $5000 more in deductons, that entire difference will disappear.

And if your life situation shifts a little more, you'll be in the hole. Being in the upper half of the middle class, you might be able to do a little better under Cain, but you could easily do a lot worse. And if you're poor or in the bottom half of the middle class, you'll certainly do worse.

But if you're wealthy, you cannot possibly fail to save a huge amount under Cain. If you're taking in $1 million a year and spending a half million, you were paying out 20 to 35% under the current rules and would be paying 12.5% under Cain.

You are ignoring the fact that if you are that wealthy, your purchases are likely a lot more expensive, thus the sales tax will likely hit you harder

Nothing about your personal example refutes the assertion the the 9-9-9 plan is highly regressive. A massive shift of taxes from the wealthier to the less wealthy.

I still don't understand. You through around a hypothetical situation whereas I provided the actual percentages based off of my paystub. I found that I came out significantly better in this situation. Even in a $50K family of 4 scenario, they should come out on top if they are responsible with their earnings.

See inline comments.

 

[ultimatebob]

I'm paying an adjusted federal income tax rate of 11% right now, thanks to the tons of mortgage interest and property taxes I'm paying and able to deduct.

With this "9-9-9" plan, I'd now be paying 18% on top of the insanely high state and city taxes I'm paying here in Connecticut. That sucks.

 

[Gamingphreek]

If you make between 75k and 100k anually, you're solidly in the middle class, but you're earning nearly double the individual median income, so we'll say upper middle class. Poverty level for an individual is around 12k.

Right off the bat, let's assume the person living at poverty level isn't paying taxes; they're probably getting refunds on pretty much all withholdings at a Federal level, and probably at the state level as well. So that gives them $1,000 a month in spending money.

Rent: $300. This is very, very low, but we'll assume that this person lives with roommates.
Food: $100. This is assuming that the person is taking advantage of food stamps, which will generally cover a significant portion of food for a given month.
Utilities: $150. This will primarily be electric, water, waste removal and heat (if separate); no cable TV, cheapest internet available, cheapest cell phone plan available.
Car: $100. This includes both the cost of car payments, assuming a cheap, used car with financing relative to income status (so, pretty terrible), and the cost of maintenance/gas.

That's the required monthly expenses; $650, before anything else is considered. Not too bad; they still have $350 left over for any other spending (which they'll probably want to use, since their life seems pretty Spartan right now). But they don't have medical insurance, so any medical costs will hit them significantly harder than someone who is covered (ie middle-class Americans who get that benefit through their job); that might come out to $500 per year (but we'll just ignore it).

OK, so now let's factor in the 9-9-9. They're no longer bringing home $1,000 a month, they're bringing home $910. Their required monthly expenses have gone from $650 to $708.50. They've gone from having $350 in disposable income a month to just over $200. And keep in mind, this isn't just "fuck around" money, this is money to spend on every other expense that they might have to cover in a given month; car repair, doctor's bills, any unforeseen home expenses. If they want to go out once a week for $25 a night, they've used up half their disposable income. And anything they purchased would be subject to that 9% sales tax, so that $200 disposable income is actually only $182.

So as far as numbers go, their effective tax burden went from 0% to 14.85% (ignoring their disposable income since there's no guarantee they'll spend it). But this is also assuming that they're allowed to stay on food stamps, and Herman Cain has certainly seemed to favor reducing welfare spending across the board. If this person were suddenly taken off food stamps, virtually all of their disposable income would go straight into the food budget and leave them $0 for spending per month on any unforeseen expenditures or entertainment. If they wanted to spend anything else? Borrow it, put it on the credit card, go into debt and never get out because their real wages per month are entirely going to items that are required for basic survival.

So, your tax burden may go down, being in the upper 40% of wage earners. Someone in the bottom 15% of wage earners would see their taxes grow by huge numbers. The math is right there. Can you still not see why people say that this plan unfairly shifts the tax burden from the wealthy to the lower classes? Saying that everyone should pay a little into the system is fine, but why should a "fair share" dictate that a Wal-Mart greeter have absolutely no money apart from what is required for survival while a mortgage broker has enough to afford a second home for vacations?

Incidentally, while researching these numbers, I was shocked to find that over 15% of Americans live on poverty level wages. $12,000 a year is nothing at all, or $22,000 for a family of four... Outrageous.

I believe Cain has stated there would be rebates for those who live below the poverty line so they don't run into a majority of what you described.

At the same time, I think the poverty line is kind of jacked up. I would hope some more thought goes into it.

As for your question regarding a Wal-Mart greeter vs a Broker..... sorry that is the way the world is. It stinks that they don't have enough for the niceties in life, but not everyone is going to. How is it fair that someone can buy a Yacht when I can barely afford to buy a shiny new car?

Not everyone is going to have a cushy comfortable life. If you are seeking happiness through possessions and money, you aren't going to find much there.

Furthermore, the great thing about America is that there are ways to advance/succeed. If they aren't happy about their job as a greeter, start finding ways to advance beyond that!

Additionally, as xBiffx stated, it is unlikely that basic food items will be taxed given a national sales tax scenario.

-GP

 

[xBiffx]

I'm paying an adjusted federal income tax rate of 11% right now, thanks to the tons of mortgage interest and property taxes I'm paying and able to deduct.

With this "9-9-9" plan, I'd now be paying 18% on top of the insanely high state and city taxes I'm paying here in Connecticut. That sucks.

Only 18% if you save zero.

 

[Gamingphreek]

I'm paying an adjusted federal income tax rate of 11% right now, thanks to the tons of mortgage interest and property taxes I'm paying and able to deduct.

With this "9-9-9" plan, I'd now be paying 18% on top of the insanely high state and city taxes I'm paying here in Connecticut. That sucks.

Yea that does stink that you would end up paying more.

At the same time, I don't understand where you got that 18% figure. Are you really spending 100% of your income?

-GP

 

[OutHouse]

I'm paying an adjusted federal income tax rate of 11% right now, thanks to the tons of mortgage interest and property taxes I'm paying and able to deduct.

With this "9-9-9" plan, I'd now be paying 18% on top of the insanely high state and city taxes I'm paying here in Connecticut. That sucks.

where did you get 18% from?

 

[Fern]

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...
-snip-

I think a better question is why they think poor people will pay 27% since one of those "9's" is for corporate tax. Poor people, or any 'people', won't be paying that 9% on corp income.

If someone wants to argue the corp's 9% is embedded in products so they do actually pay it, I'll point corps generally pay close to 30% now and a drop to 9% would make products cheaper not more expensive. That would be a savings for poor people.

Fern

 

[ElFenix]

So my statement is correct. Has nothing to due with party affiliation. Or were you trying to say otherwise?

business don't pass on all of the tax. economists don't hold that opinion because it's not borne out by the charts. so, no, your statement is not correct.

 

[dank69]

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?
...

Start with net income last year - interest paid on debt - amount you saved. That should give you a ballpark.

 

[Gamingphreek]

Start with net income last year - interest paid on debt - amount you saved. That should give you a ballpark.

Oh I know how to calculate it and, if I really thought it would add to this thread, I would take the time to do it; however, I just don't see it being productive.

My point is that it is unlikely that someone spends 100% of their income -- I know I don't [spend that much] so I would be saving more money.

-GP

 

[DrPizza]

So, let's say I was a multimillionaire. A lot of my income comes from capital gains. No longer taxed. (Right?) And now, if I purchase things *in the U.S.*, I have to pay an extra 9% sales tax on them?? HELLOOOOOO vacation home in the Bahamas!

 

[werepossum]

Oh I know how to calculate it and, if I really thought it would add to this thread, I would take the time to do it; however, I just don't see it being productive.

My point is that it is unlikely that someone spends 100% of their income -- I know I don't [spend that much] so I would be saving more money.

-GP

You'd be surprised at how many people spend as much or even more than they earn. I know several people who have credit card debt nearing their gross yearly income.

I think a lot of people would be better off under Cain's plan, but the ones who would be worse off are mainly the ones who can least afford it. I hate rewarding stupidity and punishing intelligence, but I'm not a big fan of unduly punishing the downtrodden either, even when it's their own fault. I also don't think that the rates would long remain at 9-9-9, not if you eliminate capital gains tax. Tax capital gains along with regular income and I'd probably be okay with the plan. (I say probably because I don't think that taxing investment income less than wage income is ethically supportable, so I haven't bothered to learn more about it.)

I think everyone should pay the same rate, with no deductions except number of people in the household, on all earnings above the poverty level regardless of source. I see the benefits in doing so using a sales tax, and also the benefits of doing so using an income tax.

 

[ultimatebob]

Yea that does stink that you would end up paying more.

At the same time, I don't understand where you got that 18% figure. Are you really spending 100% of your income?

-GP

Fairly close... thanks to a big huge property tax hike a few years ago, I can only afford to put a few hundred bucks in my 401k every year.

So, it would probably be closer to 17.8%. Still sucks.

 

[Lithium381]

You'd be surprised at how many people spend as much or even more than they earn. I know several people who have credit card debt nearing their gross yearly income.

I think a lot of people would be better off under Cain's plan, but the ones who would be worse off are mainly the ones who can least afford it. I hate rewarding stupidity and punishing intelligence, but I'm not a big fan of unduly punishing the downtrodden either, even when it's their own fault. I also don't think that the rates would long remain at 9-9-9, not if you eliminate capital gains tax. Tax capital gains along with regular income and I'd probably be okay with the plan. (I say probably because I don't think that taxing investment income less than wage income is ethically supportable, so I haven't bothered to learn more about it.)

I think everyone should pay the same rate, with no deductions except number of people in the household, on all earnings above the poverty level regardless of source. I see the benefits in doing so using a sales tax, and also the benefits of doing so using an income tax.

this. this is "fair share" if you're impovershed then don't worry about it.... but everyone needs to contribute. everyone. I'm sorry that you're poor and you barely make ends meet, but who's to say that someone that isn't a millionare isn't happy. i'm happy and I have yet to make a lifetime income of $300,000. I'm 27.

 

[duragezic]

Seems to me that this plan would hurt the poor and middle class while giving the wealthy more of a tax break at a time when they pay a relatively low % of their income to taxes.

Figure that a poor or low-mid class person spends basically all they make in a year. So whatever effective tax rate they pay now is surely a lot lower than Cain's proposed ~18% (9% income tax + 9% sales tax since they spend all income).

Meanwhile you have a wealthy person currently paying an effective tax rate of what, 25%? Even if they spent almost all of their income, they would have a tax rate of about 18%.

Country has big deficits and debt, poor and middle class struggling while income disparity grows and grows, and you want to even out the tax rates? I know my two examples oversimplify things, but I just can't see how the fuck this makes sense. It's like Republicans can't propose tax reform without giving more breaks to the most wealthy. C'mon guys, you could at least try and sell it to the average person if you said "we'll leave high end tax rates alone, you won't pay more" but nope they want to lower rates even more!

 

[Throckmorton]

$100k isn't middle class. You're in the top 20% of the population. Even at 75k you're in the top 27%. And that's for households, while you're single, which means you're even richer than you think.

Instead of a calculation error you made a reality error.

 

[ultimatebob]

$100k isn't middle class. You're in the top 20% of the population. Even at 75k you're in the top 27%. And that's for households, while you're single, which means you're even richer than you think.

Instead of a calculation error you made a reality error.

It really depends on where you live... $75K might be good in rural Iowa, but it's a substance wage in San Francisco or downtown NYC.

 

[Rangoric]

Don't bother saying you don't get taxed on what you save.

When you are done saving it, you will spend it. And be taxed.

Aside from that, I will love to see Stock sales taxed. But of course they won't be.

 

[Throckmorton]

It really depends on where you live... $75K might be good in rural Iowa, but it's a substance wage in San Francisco or downtown NYC.

In that case I guess Herman Cain wants to help San Franciscans and New Yorkers in the middle class, but not rural Iowans. Interesting.

 

[xBiffx]

It really depends on where you live... $75K might be good in rural Iowa, but it's a substance wage in San Francisco or downtown NYC.

I think you are way off here. In no way is $75k substance wage anywhere. Oh yeah, and its not that much better in Iowa either. For one 8% income tax in IA which is no small potatoes. You don't have to own a car in SF or NY but you do in IA. Rent is undoubtedly higher in SF or NY but that's about it. Again, car payments, insurance, and fuel make up for a lot of a rent payment. The idea that one could not live comfortably off $75K in either of these places is crazy and is in no way a substance wage.

 

[Phokus]

this. this is "fair share" if you're impovershed then don't worry about it.... but everyone needs to contribute. everyone. I'm sorry that you're poor and you barely make ends meet, but who's to say that someone that isn't a millionare isn't happy. i'm happy and I have yet to make a lifetime income of $300,000. I'm 27.

Lol, what? The poor can LEAST afford it. Me and my wife make close to $200k, we don't look at the family making $30k and say, 'boy i wish we were in their situation, those lucky duckies and their 0% federal taxes!"

 

[trenchfoot]

False objectivity from a referee is a very disingenuous thing. The game is rigged. *switches thread*

 

[Patranus]

It really depends on where you live... $75K might be good in rural Iowa, but it's a substance wage in San Francisco or downtown NYC.

Nothing says that you have to live in San Francisco if you work there.
Bart runs to Livermore/Pleasanton, Oakland, Richmond, Berkeley, Fremont, ect.

But these are the *choices* we make.

 

[woolfe9999]

Nothing says that you have to live in San Francisco if you work there.
Bart runs to Livermore/Pleasanton, Oakland, Richmond, Berkeley, Fremont, ect.

But these are the *choices* we make.

Long commutes cost some money and a lot of time. Besides, east bay housing is about 75% of the cost of SF and the peninsula. In other words, sky high compared to the national average. There really are no cheap options in the bay area. You'd have to live 2 hours from SF at a minimum.

 

[Bird222]

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

What is so hard for you to understand that poorer people pretty much pay all of their money out just to survive and richer people have more income that doesn't have to be used to live? Are you familiar with the concepts of 'fixed' and 'variable' costs for a business? There are certain costs that a business will incur regardless if they sell a single item. Think of the poor as having all of their income wrapped up in fixed costs. They are gonna have to pay it regardless.

Someone mentioned an exception for food. I have heard there isn't one so that's another big hit for the poor unless they can find some used food. Hey who wants used food? Let me just say, I am not anti-business but don't be surprised if businesses try to cut pay or at least not give raises because they don't get the payroll deduction anymore even though their total taxes have gone down. They'll try it until something (the market?) makes them not do it.