9-9-9

Without getting too political, because I know how much people love discussing politics, lets just say that I kinda thought that Herman Cain's 9-9-9 tax proposal was a little ridiculous. I have also seen multiple graphs from economists that show that almost 90% will end up paying more taxes than they do now, which isn't necessarily a bad thing, except that the top 1% of Americans will actually end up paying hundreds of thousands less in taxes, meaning that the rich will pay even less taxes than they pay now, which is less (percentage-wise) than most Americans already. This is a good graph to show it:

http://jaredbernsteinblog.com/9-9-9-in-one-really-long-graph/

Anyway, I haven't really heard or understood anything about this plan that I thought would be good except the basic idea of a flatter tax rate and a much simpler tax code, which of course would be great. Just to explain as simply as possible what it is for those who aren't following the race, the 9's stand for a 9% income tax (to completely replace the current tax code), a 9% corporate tax rate (which is really a business-transaction tax), and a 9% national sales tax (this would be paid on top of whatever state sales tax you already pay).

I just read an article in Time that explains that the U.S. is the only rich country in the world without a national sales tax or value-added tax (VAT). In other countries, this works really well because it's pretty tough to pull off tax fraud if there is a consumption tax because simply, if you buy anything, you pay a tax, the end. Also, Americans more than any other country, buy too much and use credit way too often. Other countries moderate this behavior by having the consumption tax. The article states: "The government will always get less of behaviors it taxes and more of what it subsidizes." What a simple way to put it.

While I still don't like his plan, the idea of a national sales tax is great, assuming that the income tax code is simplified and changed so that the poor don't carry too much of the tax burden. I am all for paying taxes because as much as people say they hate paying them, we would all be way worse off without roads, public schools, social security, medicare and all the other public services we are used to.

Chief Justice Earl Warren in 1952 said, "Many people consider the things which government does for them to be social progress but they regard the things the government does for others as socialism." When it comes to taxes, I think that's something everyone should keep in mind. Herman Cain's plan would be terrible no matter which economist does the numbers, but it's worthwhile that he is putting forth the idea of a national sales tax, and more important, a simpler tax code. I hope Obama jumps on that idea at least!

What I learned: Herman Cain's 9-9-9 tax plan, while economically terrible, isn't as crazy as it sounds when you boil it down to the principals.