Coming off what was arguably his worst debate performance, Herman Cain’s 9-9-9 plan is still taking fire from conservatives and libertarians over the fact that the national sales tax portion of the plan is essentially a value added tax (or VAT).
The Herman Cain campaign released details of the revenue expected to be collected from his 9-9-9 tax plan. Here are the estimates for 2010:
- $701 billion from the 9 percent personal income tax.
- $753 billion from the 9 percent retail sales tax.
- $863 billion from the 9 percent business VAT.
Yikes! By far the largest tax haul under the Cain plan would be from the business VAT—a tax which would be hidden from most voters.
By the way, the Cain business tax is not a tax on “corporate income,” as some media stories are identifying it. The new revenue data makes it clear that it is a tax on all value added by all businesses in the nation—corporate, partnership, and proprietorship.
If you watched the Republican debate last night, you noticed the increased scrutiny on Herman Cain’s 9-9-9 plan. The criticism isn’t without risk. If they hit him too harshly, they risk victimizing him and emboldening his base of support. If they’re too lenient, the quick-witted Cain wll turn make sure that it blows up in their face.
But Cain has tipped his hand in what he has to come back with as conservatives lay out very serious concerns about the proposal; and it’s clear that he isn’t ready to argue on substance. His staff has responded to criticism with a simple line, “the problem with that analysis is that it is incorrect.” Cain’s own recent defense of the plan laid out in an editoral leaves more questions than answers.
Even the editors at the conservative National Review are unconvinced that Cain’s good intentions will bring the benefits that he claims:
As I’ve noted over the last week or so, Herman Cain’s gimmicky 9-9-9 plan is receiving increased scrutiny from conservatives weary of a value added tax (or VAT). Grover Norquist, president of Americans for Tax Reform and prominent conservative, elaborated on his criticism of Cain’s plan yesterday on the Morning Joe:
Grover Norquist, the president of Americans for Tax Reform, the anti-tax advocacy group best known for soliciting pledges from politicians not to support any legislation that would raise taxes, said Thursday that he did not support Herman Cain’s 9-9-9 tax reform proposal.
“It’s like having three needles in your arm taking blood out. It’s much more dangerous than just one,” Norquist said on MSNBC.
Cain’s proposal would replace the current code with a 9 percent tax on all personal income, corporate income and sales.
Liberals have argued that the plan would be regressive — raising the taxes of the poor and middle classes, while lowering those of the rich — and inadequate to fund the federal government, while conservatives have warned that enabling the federal government to impose a sales tax would open up a new way for future generations to raise taxes on Americans.
“With the caveat that I understand this cry of rage that people have about the present structure and wanting to do something radically different, I’m much more comfortable taking the present mess and chipping away at it like an ice sculpture to get it down to what you want,” Norquist said.
The criticism of Herman Cain’s 9-9-9 tax plan has been ramped up over the last couple of days. It had already been knocked by Kevin Williamson of the National Review as unrealistic Dean Clancy of FreedomWorks explains that it could be used as cover for a VAT, and Grover Norquist also notes the problems with the proposal.
The possibility that Cain’s tax plan could be lead down this road is also bothering Cato Institute economist Dan Mitchell, who had already expressed an issue with the proposal:
it seems that I was too nice in my analysis of Mr. Cain’s plan. Josh Barro and Bruce Bartlett are both claiming that the business portion of Cain’s 9-9-9 is a value-added tax (VAT) rather than a corporate income tax.
In other words, instead of being a 9 percent flat tax-9 percent sales tax-9 percent corporate tax, Cain’s plan is a 9 percent flat tax-9 percent sales tax-9 percent VAT.
Earlier this week, I noted some of the criticism of Herman Cain’s 9-9-9 plan from conservative circles, Kevin Williamson of the National Review chalks it up as “wishful thinking that borders on fantasy,” while Dan Mitchell of the Cato Institute doesn’t like that it keeps the income tax in the tax code.
Dean Clancy, vice president of FreedomWorks — a leading tea party organization, sees good in the proposal; but notes that there are some glaring problems that could lay the precendent for bad tax policy in the future:
The first problem is that it doesn’t get rid of the income tax. In fact, it adds a new tax — a national sales tax — on top of the income tax. Cain clearly intends that eventually the income tax will be eliminated. But what’s to guarantee that outcome? And if we want to get rid of the income tax — and we should — why not do it right from the start? Is it possible that he realizes that if he did it all in one step, folks might not be as keen on the plan (say, because his national sales tax would have to be closer to 25% than 9%)?
The second problem with Cain’s plan is more serious. The plan puts in place the infrastructure for a VAT — a Value Added Tax. That’s bad. Very bad.
Back in May, Herman Cain answered a few questions from Conor Friedersdorf of The Atlantic dealing with Libya and civil liberties issues. Cain’s answers on the USA PATRIOT Act were disappointing; and quite frankly, showed a severe lack of respect for the Fourth Amendment, especially for someone that supposedly wants to restore the Constitution.
Oddly though, Cain rejected the idea of a president authorizing the death of American citizen, as in the case of Anwar al-Awlaki, without due process guaranteed by the Fifth Amendment. Here the relevant part of the interview (Friedersdorf’s questions are in bold):
President Obama has said that he has the authority to assassinate American citizens if he’s declared them an enemy combatant in the War on Terror. Al Awlaki is one guy who is on the official government list where he can be taken out. Do you have any thoughts on that? Is it a good policy because it allows us to take out Americans who may have joined Al Qaeda? Or is it a bad policy-
Well first of all, this is the first that I have heard - you’re saying it’s okay to take out American citizens if he suspects they are terrorist related. Is that what you said?!
Yes, that’s what I said.
Soundbytes are always a way to gain support, and we’re frequently heard Herman Cain mention his 9-9-9 tax plan during debates and news reports from the stump. But is it a serious tax proposal or a gimmick that we can add to the growing list of problems with the Cain? Kevin Williamson, managing editor the conservative National Review and author of The Politically Incorrect Guide to Socialism, explains why it’s a cheap rhetorical tool, not a serious policy proposal:
[L]et’s take a look at 9-9-9 on its own merits. Mr. Cain says the proposal would be revenue-neutral. I have my doubts. The federal government took in about $2.2 trillion last year. Based on personal-income and business-income figures from the IRS, and consumer-spending figures from the Gallup survey, my English-major math suggests that a 9 percent tax on all of the above produces about $1.7 trillion in revenue, meaning that 2010’s $1.7 trillion deficit would have been more like a $2.2 trillion deficit — from calamity to catastrophe. If Mr. Cain’s team is building in some growth assumptions into the fiscal forecasts, they must be sunny indeed.