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News Link • Economy - Economics USA

Herman Cain’s 999 plan: a misleading pitch

• Washington Post
9-9-9 will pass, and it is not the price of pizza because, it has been well-studied and well-developed… The problem with that analysis [that it will not raise enough revenue] is that it is incorrect. The reason it's incorrect is because they start with assumptions that we don't make. Remember, 9- 9-9 plan throws out the current tax code. ... Now, what 9-9-9 does, it expands the base. When you expand the base, we can arrive at the lowest possible rate, which is 9-9-9.”

— Herman Cain, Washington Post-Bloomberg debate, October 11, 2011

 A family of four making $50,000 a year “are still going to have some money left over.”

— Cain, on MSNBC, October 12, 2011

It almost sounds like something out of the movie “Dave,” in which the accidental president enlists his accountant friend, Murray Blum, to help him figure out the federal budget.

 During Tuesday’s Washington Post-Bloomberg debate, Herman Cain, the former chief executive of Godfather’s Pizza, named Rich Lowrie of Cleveland as “my lead economist” who helped develop Cain’s signature “9-9-9” plan for overhauling the federal tax system. “He is an economist, and he has worked in the business of wealth creation most of his career,” Cain said.

 Actually, according to Lowrie’s Linked-In profile, he has a bachelor’s degree in accountancy from Case Western Reserve University, not economics. Lowrie, in an e-mail, said he did not consider himself an economist, just “senior economic advisor” to the Cain campaign. Donor information maintained by Opensecrets.org shows he has donated $1,500 to Cain in 2010 and 2011, but also contributed $2,300 to Mitt Romney in his first run for the presidency in 2007.

Okay, so Cain may have exaggerated the qualifications of his economic guru. But he has forcefully defended his ‘9-9-9’ plan, both during Tuesday night’s debate and on MSNBC’s “Daily Rundown” on Wednesday. Many readers have asked us to examine the plan and explain it, so let’s take it for a test drive.

The Facts

 The “9-9-9” label is actually a bit of misnomer. Cain would toss out much of the current federal tax code and replace it, eventually and only temporarily, with three taxes — a 9 percent income tax, a 9 percent business transactions tax and a 9 percent federal sales tax. On paper, the first two look like cuts, because payroll taxes for Social Security and Medicare (now nearly 15 percent, including corporate contributions) would be repealed. The sales tax would be new, on top of existing state sales taxes.  

 But note that we said the “9-9-9” would happen eventually — and then only temporarily. That’s because it is only the second step of a planned three-step process. The first step would cut individual and corporate tax rates to a top 25 percent rate (down from a current high of 35 percent). Then the final step would replace all of the taxes — even the 9s — with a national sales tax, known by proponents as a “Fair Tax.”

 (As denizens of Washington, we find this three-step process to be highly dubious. It takes years, even decades, to fundamentally overhaul the tax code. Herman Cain is going to do this three times in his presidency? But we digress.)

 

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