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9 responses to 9 false attacks on 9-9-9

by Herman Cain

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Do you know why candidates for office tend to be reluctant to propose
detailed plans? Because they know the plans will be flyspecked and
picked apart by just about everyone. Inviting criticism doesn't help you
to get votes.

But fear of criticism prevents you from conceiving solutions to
problems. So even if avoidance of criticism helps in propelling you to
an election victory, how are you supposed to effectively govern? How are
you supposed to fix the problems you told everyone you were going to

That's why I'm happy to see so much criticism of the 9-9-9 plan
I've proposed. It shows that people are thinking seriously about a
substantive idea. When people stop obsessing over "gaffes" and campaign
strategy, and start honing in on fixing the country's economic problems, we are getting somewhere.

This is not to say, of course, I'm going to leave poorly founded
criticisms of the plan unanswered. Certain objections to the plan are
circulating in the usual places, driven by the same kind of thinking
that has left us with a stagnant economy, $14 trillion in debt and
mounting entitlement obligations. These criticisms deserve responses,
and here they are:

Claim No. 1: The 9 percent sales tax, which is one-third of the formula, is regressive and hurts the poor, many of whom pay no federal income taxes now.

Response: This claim ignores some important aspects of the plan.
One is that we eliminate the 15 percent payroll tax, which allows for no
deductions at all – not even for charitable contributions. Some critics
have argued that the poor still come out behind because employers pay
much of the payroll tax. That demonstrates a basic misunderstanding
about how compensation works in the business world. An employer decides to accept a certain
cost-of-employment for each employee, and the employer's share of the
payroll tax is part of that cost. It comes out of your compensation
whether you realize it or not. Also, a flat tax is not – by definition –
a regressive tax. Everyone pays the same rate. And it is not an added
tax, but a replacement tax, whose total burden is determined by the consumer's spending decisions.

Finally, the best way to help the poor is by spurring economic
growth, which the current tax code will never do, and which the 9-9-9
plan is specifically designed to do.

Claim No. 2: Creating a new tax is merely setting the
stage for higher rates on all taxes, as untrustworthy politicians will
surely raise them.

Response: First of all, that is not a criticism of the 9-9-9
plan. It is a criticism of politicians. If you don't want the rates
raised, don't elect politicians who will raise them. Even if we repealed
the 16th Amendment and eliminated the income tax,
as some demand in return for establishing a consumption tax,
politicians could raise that rate, too. What's far more important here
is the fact that the very simple, flat-rate structure of the 9-9-9 plan,
which allows no deductions, loopholes or exemptions
(with the exception of charitable contributions for the income tax), is
a far more growth-friendly tax structure than the mangled mess of
rates, taxes, exemptions and ill-conceived incentives we have today. It
virtually eliminates the massive compliance costs of the current tax
code, and it restrains the size of government.

By taking away the politicians' gateway drug of loopholes and
deductions, we make it much more difficult for them to mess with the tax
code. Having said that, any plan could be criticized for what it would
look like if someone messed it up. The plan as I'm proposing it is a
huge improvement over the status quo.

Claim No. 3: The plan redistributes wealth from the poor to the rich.

Response: It does no such thing. It is fair and neutral, taxing
everything once and nothing twice. What's more, we are getting ready to
propose empowerment zones for economically struggling areas in which the
rates will be even lower. That will allow the poor to benefit even more
from the plan than they already would.

Claim No. 4: The plan should have included a pre-bate to offset the sales tax.

Response: The last thing we need is to establish another federal
entitlement, which the proposed pre-bate would quickly become. And it's
not necessary. The consumption tax replaces ones already embedded in
prices. It's not the prices that would increase, but the visibility of
the taxes being paid. Right now, money is deducted from your paycheck
and you never see it, so it doesn't feel like you paid a tax. But you
did. With the 9-9-9 plan, you feel it, and I suspect a good many people
who clamor for higher taxes will start to feel differently as a result.
But they won't be paying more than before. They'll just be more aware of

Claim No. 5: The business tax represents a new tax on labor.

Response: Paul Krugman of the New York Times makes this claim
because we do not allow businesses to deduct the cost of labor from
their taxable revenue. But the claim is bogus for several reasons.
First, we are reducing the corporate tax rate from 35 percent to 9
percent, so the tradeoff is a much lower rate paid on more of a
company's income. Second, we treat capital and labor the same, both with
the corporate tax and with the income tax. That is fair and neutral.
What's more, the current system taxes both capital investment by business and capital gains by individuals. That's a double tax, and the 9-9-9 plan eliminates it.

Claim No. 6: The numbers don't add up. The 9-9-9 tax wouldn't generate enough revenue.

Response: Several groups apparently "ran the numbers" and came to
this conclusion, including Bloomberg News and the Center for American
Progress. Our report, which they do not appear to have read,
demonstrates that it generates the same revenue as the current tax code,
and our methodology is visible for anyone to see. Those who are making
this claim should release their scoring so their methodology is as
visible as ours.

Claim No. 7: The 9-9-9 plan is a really an 18 percent value-added tax plus a 9 percent income tax.

Response: That's an argument? That some might be able to give it a
disagreeable label? What we have done is split the incidence of the tax
so it is harder to evade – since you'd have to dodge two taxes, not
just one, to save the 18 percent. And by eliminating loopholes we've
made that virtually impossible to do anyway. I don't really care what
people call it. What matters is how it works.

Claim No. 8: Some people (like Herman Cain) who may live off capital gains, would pay no income taxes. Is that fair?

Response: First, one of the benefits of the 9-9-9 plan is that,
even if someone doesn't pay much or any of one of the taxes, he or she
is still likely affected by the other two. More to the point, though,
everyone has the same opportunity to work hard, earn capital and put
that capital at risk. Whatever I have earned has come from hard work,
good decisions (and some bad ones), a willingness to take risks and a
constant honing of strategy. Nothing is stopping anyone else from doing
the same thing. I realize many are being told there are no opportunities
available to them, but that is not true and I wish people – for their
own sakes – would stop listening to such doom and gloom and come to
understand all the opportunity that truly exists, and learn how to
access it.

Claim No. 9: It won't pass.

Response: Politicians propose things that can pass.
Problem-solvers propose things that can work. One of the worst instincts
of Washington types is to judge an idea not on its substantive merits,
but on their perception of its political viability. I do not
underestimate the challenge of getting any good idea through Congress,
but I have said all along that if you propose a good idea, and the
people understand the idea, they will pressure Congress to pass it.

So there. I welcome the robust discussion and the many questions
that are being raised about the 9-9-9 plan. Asked and answered. What
else do you want to know?

Added: Oct-17-2011 Occurred On: Oct-17-2011
By: copperdog3
Tags: Cain, Herman, 999, 9-9-9, sales tax, VAT, politicians, pizza, Godfather's, regressive, income, capital gains
Location: United States (load item map)
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