Cain's 9 - 9 - 9 Plan: Chart of Tax Brackets & How Much Your Taxes Would Change...

[Nebor]

I already did an analysis of a $50,000 income family in another thread, and they were major losers under 9-9-9. You would be, too.

We're out of money. Everyone has to pay.

 

[Eos]

If any tax plan is ever passed that guts the current system, loopholes will be found. Even in a "no loophole" system. It's what people do.

 

[Zorba]

That makes the assumption that businesses are paying no taxes now. If a business is being taxed at an effective rate of 18% now, it's effectively getting its taxes cut in half. That money would flow to stockholders, or to customers, or to employees, or to cash on hand, or to some combination thereof. Other businesses would be less profitable or otherwise be taxed at a low rate - for instance, General Electric. That company would see a 9% tax increase. That money would come from stockholders, or from customers, or from employees, or from cash on hand, or from some combination thereof. It's not nearly as simple as this chart indicates for individuals either.

My own exceptions to the 999 tax plan are three: I don't think it's moral to tax wage income but not investment income, I don't think the tax as structured will raise anywhere near as much income (thus requiring rapid and substantial rate increases), and I don't think it's wise to give government another major tax it can raise.

From my understanding of the 9-9-9 plan is that the 9% would be on company revenues, not profits, which is vastly different than what we have today. And that employee pay/benefits would specifically not be deductible.

For Cain's website:

9% Business Flat Tax

• Gross income less all purchases from other U.S. located businesses, all capital investment, and net exports.
• Empowerment Zones will offer deductions for the payroll of those employed in the zone

So this would basically destroy my industry and specifically my company, that has very large revenues with very (relatively) small profits.

 

[Nebor]

So this would basically destroy my industry and specifically my company, that has very large revenues with very (relatively) small profits.

It wouldn't destroy an industry. The industry would just relocate to a friendlier tax haven.

 

[Zorba]

It wouldn't destroy an industry. The industry would just relocate to a friendlier tax haven.

There are some industries that are required by law to be owned and operated by American companies. I would also think that it would be hard to hide your American made revenue.

For example, the airlines would have to jack up the price of a ticket by 9% to cover the new tax on revenues. Then the consumer would have to pay the new 9% sales tax on the ticket. Overnight airfare just jumped 18%, in an industry that people shit a brick if prices go up by $5.

 

[woolfe9999]

We're out of money. Everyone has to pay.

If everyone has to pay, then why are the wealthy getting a tax cut under this plan?

 

[Nebor]

If everyone has to pay, then why are the wealthy getting a tax cut under this plan?

I assume they would be covered under another plan more appropriate to their wealth?

 

[Gamingphreek]

Despite all these simple attempts at charts that cover a broad spectrum of audiences with a distinct set of liberal assumptions, I come out on top should this plan pass. These analyses are moronic - their assumptions are really shocking and they overlook broad aspects of the plan.

 

[Jhhnn]

Despite all these simple attempts at charts that cover a broad spectrum of audiences with a distinct set of liberal assumptions, I come out on top should this plan pass. These analyses are moronic - their assumptions are really shocking and they overlook broad aspects of the plan.

Well, if the plan truly had merit, we'd see other analyses that would account for the other broad aspects you seem to think exist.

At best, it wouldn't raise middle class taxes while lowering taxes at the top, again, further starving the govt of revenue. It runs completely against the grain of popular sentiment & the actual needs of the country.

You'd come out ahead? It's not all about you.

 

[halik]

Despite all these simple attempts at charts that cover a broad spectrum of audiences with a distinct set of liberal assumptions, I come out on top should this plan pass. These analyses are moronic - their assumptions are really shocking and they overlook broad aspects of the plan.

I'm glad you've brought specific arguments and data to show us otherwise...

The only way you'll come up on top is if you save a large fraction of your income and are in the upper end of the income distribution. Another way to think of this is that it's a jobs plan funded by the poor - the incidence of the policy is pretty clear and it will likely increase employment numbers, but again the lower 50% is paying for it.

I'd probably end up getting a break out of it, since I'm around top 5% of the distribution and save a shit-ton of money (paying off grad school loans)... but that doesn't add the plan any merit. It's still a stupid policy, as I've got far more disposable income than than the median family of 4.

 

[Gamingphreek]

I'm glad you've brought specific arguments and data to show us otherwise...

The only way you'll come up on top is if you save a large fraction of your income and are in the upper end of the income distribution. Another way to think of this is that it's a jobs plan funded by the poor - the incidence of the policy is pretty clear and it will likely increase employment numbers, but again the lower 50% is paying for it.

I'd probably end up getting a break out of it, since I'm around top 5% of the distribution and save a shit-ton of money (paying off grad school loans)... but that doesn't add the plan any merit. It's still a stupid policy, as I've got far more disposable income than than the median family of 4.

http://forums.anandtech.com/showthread.php?t=2199244

Never said it is all about me, but when analysis firms release broad graphs stating that all these taxes go up when it simply isn't true, is aggravating and misleading.

I also fail to see how a Family of 4 would incur 100% of the sales tax while living at the poverty line. My last post in the above linked thread showed that I, while single, don't spend near that much. Even if you multiple my food by 4, I don't spend near that much. Everything outside of housing and bills you can get used which doesn't have ANY sales tax.

-GP

 

[Anarchist420]

If any tax plan is ever passed that guts the current system, loopholes will be found. Even in a "no loophole" system. It's what people do.

QFT. It doesn't matter whether it's a tariff, a sales tax, or an income tax, people will find a way around it, which means government doesn't work any better than a stateless society. Did the government protect us from 9/11? No. Do they do sting operations? Yes. Does it endanger us more than it protects us? Yes. Anarchy isn't perfect either, but at least it's ethical so it's closer to perfection than big government. I hate the government giving a monopoly on currency and rewarding corporations and people who don't give back anything close to what they get at best and cause mass destruction at best. I also hate the government waging wars at my expense and being told it's for my safety when I'm smart enough to know that it's not.

 

[halik]

http://forums.anandtech.com/showthread.php?t=2199244

Never said it is all about me, but when analysis firms release broad graphs stating that all these taxes go up when it simply isn't true, is aggravating and misleading.

I also fail to see how a Family of 4 would incur 100% of the sales tax while living at the poverty line. My last post in the above linked thread showed that I, while single, don't spend near that much. Even if you multiple my food by 4, I don't spend near that much. Everything outside of housing and bills you can get used which doesn't have ANY sales tax.

-GP

That's a bit simplistic on your end - day care, healthcare, school supplies, *... kids cost a ton of cash.

Empirically speaking, the average US savings rate is around 5%, which means the (1-0.05 ) of your after tax would get taxed at the federal 9%. So irrespective of any hypothetical scenario, empirical data shows the incidence is on the lower half of the income distribution.

Savings rate also correlates strongly with income, which adds to the regressiveness of the tax.


http://research.stlouisfed.org/fred2/data/PSAVERT.txt

 

[Gamingphreek]

Average US savings rate is around 5%, which means the (1-0.05 ) would get taxed at the federal 9%

Could you clarify what you are talking about?

 

[xBiffx]

I'm glad you've brought specific arguments and data to show us otherwise...

The only way you'll come up on top is if you save a large fraction of your income and are in the upper end of the income distribution. Another way to think of this is that it's a jobs plan funded by the poor - the incidence of the policy is pretty clear and it will likely increase employment numbers, but again the lower 50% is paying for it.

I'd probably end up getting a break out of it, since I'm around top 5% of the distribution and save a shit-ton of money (paying off grad school loans)... but that doesn't add the plan any merit. It's still a stupid policy, as I've got far more disposable income than than the median family of 4.

You keep going with the liberal assumption that 100% of the 95% of your income after savings will be assessed the 9% sales tax. This simply is not true for everyone, hence GP's frustration.

 

[halik]

Could you clarify what you are talking about?

On average, people only save 5% of their after tax income. That would imply that the other 95% will get taxed at the 9% rate.

 

[halik]

You keep going with the liberal assumption that 100% of the 95% of your income after savings will be assessed the 9% sales tax. This simply is not true for everyone, hence GP's frustration.

How is that a "liberal" assumption - isn't the premise that there will be no other deductions to shield your income from said sales taxes? The above is true for the average american, as it comes from the average saving rate.

Also it's interesting that no one seems to disputing that the biggest benefactors of the 999 plans are the people with high income...

 

[Patranus]

How exactly do they arrive at someone making $10,000 (or less) paying $1,122 more when the only guarantee is that they will be paying $900 in federal income taxes?

Secondly, this ignores that fact that they are adjusting the 7.5% payroll taxes taken out at your end and not compensating for the 7.5% payroll tax taken out of your paycheck by your employer. $10,000/(1-0.075) = $10,810. $10,810 * 0.09 = $972 federal income tax border.

Thirdly, this ignores potential increase in wages due to a reduction in corporate income tax.

Fourthly, this assumes that 100% of your post tax dollars goes towards taxable expenses.

 

[Patranus]

On average, people only save 5% of their after tax income. That would imply that the other 95% will get taxed at the 9% rate.

You are also assuming that "poor" people only but new taxable products.

 

[xBiffx]

How is that a "liberal" assumption - isn't the premise that there will be no other deductions to shield your income from said sales taxes? The above is true for the average american, as it comes from the average saving rate.

Also it's interesting that no one seems to disputing that the biggest benefactors of the 999 plans are the people with high income...

Its liberal because it doesn't assume anything about average but rather the worst case. All of the charts that I have seen have tried to state the tax increase for the average american. Well some people spend 100% of their income (ok 95% if they are an "average" saver) while others spend less, even much less than 100%. So how can a chart be telling an average american that their taxes are going to increase this much when the calculations used to make that chart weren't average but rather the extreme, i.e. 100% spenders. Never is the assumption that you spend everything you make stated when these charts are presented. Just that if you make between this much and that much, your taxes WILL WITHOUT A DOUBT GO UP THIS MUCH. Doesn't make sense.

 

[Patranus]

How is that a "liberal" assumption - isn't the premise that there will be no other deductions to shield your income from said sales taxes? The above is true for the average american, as it comes from the average saving rate.

Also it's interesting that no one seems to disputing that the biggest benefactors of the 999 plans are the people with high income...

You have to make the same assumptions for all people in all income brackets.
If we are to assume that someone making $10,000 spends 95% of their income then you have to make the same assumption for someone making $1,000,000.

Using those assumptions someone making $10,000 pays $900 in income taxes with $9,100 after tax income of which $8,645 is spent and taxed at $778.05 or a total tax burden of $1,678.05 in federal taxes which equates to about 16%.

Someone making $1,000,000 would pay $90,000 in income taxes with $910,000 after tax income of which $846,000 is spent and taxes at $77,805 or a total tax burden of $167,805 in federal taxes which equates to about 16%.

Seems pretty equatable to me.

 

[Patranus]

They also don't account for possible reduction in prices or increase in salary due to reduction in corporate income tax which varies from 15% to 35%. As you can see, a reduction in corporate income taxes could easily make up for the increase in costs of goods brought on by a national sales tax.

 

[Fern]

How exactly do they arrive at someone making $10,000 (or less) paying $1,122 more when the only guarantee is that they will be paying $900 in federal income taxes?

Secondly, this ignores that fact that they are adjusting the 7.5% payroll taxes taken out at your end and not compensating for the 7.5% payroll tax taken out of your paycheck by your employer. $10,000/(1-0.075) = $10,810. $10,810 * 0.09 = $972 federal income tax border.

Thirdly, this ignores potential increase in wages due to a reduction in corporate income tax.

Fourthly, this assumes that 100% of your post tax dollars goes towards taxable expenses.

Yeah, and I'm also gonna call shens on the chart.

Cain keeps talking about the taxes embedded in product costs being removed. I don't see where this is accounted for either.

IMO, Cain has wed himself to this 9-9-9 plan. His identify is all wrapped up in it. He'd better get out front and explain this better with own charts or he may be going down fast.

Fern

 

[Gamingphreek]

You have to make the same assumptions for all people in all income brackets.
If we are to assume that someone making $10,000 spends 95% of their income then you have to make the same assumption for someone making $1,000,000.

Using those assumptions someone making $10,000 pays $900 in income taxes with $9,100 after tax income of which $8,645 is spent and taxed at $778.05 or a total tax burden of $1,678.05 in federal taxes which equates to about 16%.

Someone making $1,000,000 would pay $90,000 in income taxes with $910,000 after tax income of which $846,000 is spent and taxes at $77,805 or a total tax burden of $167,805 in federal taxes which equates to about 16%.

Seems pretty equatable to me.

Well the problem with extrapolating the assumption to the wealthier americans is simply that the poor spend that money out of necessity (Thus it is more likely they will spend a greater percentage of their income).

As you and xBiffx said; however, they present the worst-case assumption as average and don't acknowledge any other cases.

I stated that I make in the 75K-100K range and have to be very watchful of my finances given the area I live. There was a general consensus amongst the liberals in the thread that I was pretty wealthy. So if we are now saying that 75K-100K is wealthy, why are we assuming that my taxes go up??

A fair assessment of this plan would project multiple cases for a given salary range and lifestyle and report the findings for each. Not one chart to rule them all....

 

[Gamingphreek]

Yeah, and I'm also gonna call shens on the chart.

Cain keeps talking about the taxes embedded in product costs being removed. I don't see where this is accounted for either.

IMO, Cain has wed himself to this 9-9-9 plan. His identify is all wrapped up in it. He'd better get out front and explain this better with own charts or he may be going down fast.

Fern

I have heard positive commentary regarding Cain asking people to do their own math on it and/or look at his analysis (Which probably has a very positive spin to it). I feel like this sense of empowerment may be part of his draw - he isn't up there showing off a bunch of formulas, he is saying, "See for yourself and draw your own conclusions. Sometimes it will be better, sometimes it will be worse"

At the same time, I see what you are saying. Perhaps a little more clarification on different topics within the plan. Concrete answers regarding food, empowerment zones, etc... Additionally, it might be beneficial to release a series of studies given different income ranges and lifestyle situations to reassure people.

-GP