Thursday, October 20, 2011
Cain would replace the current system of income and payroll taxes with a 9% flat-rate personal income tax, a 9% corporate tax, and a 9% national sales tax. Great idea. Such a system would unburden businesses, provide a tax cut for most Americans, and shift taxation to consumption and away from income generation. This is exactly what our economy needs. But unlike our current corporate tax system, the plan eliminates the deductibility of wages and salaries from corporate income. The net effect is the creation of a brand new 9% tax on wages. When this fourth 9 falls from Cain's sleeve, many of his opponents will likely accuse him of cheating.Schiff still sees merit in the plan, though. (That said, I am cautious about getting rid of tax loopholes, at least until there is real momentum towards restricting government to its proper scope.)
Even with its flaws, the 9-9-9-9 plan would create an economic windfall by lowering the top corporate rate to 9% from 50% (35% at the corporate level and 15% on dividends taxed at the individual level), and simplifying the tax code to reduce unnecessary compliance costs and the economically inefficient behavior that is created by perverse tax incentives.Later, though, Schiff states that he favors cuts in spending to make a "real" 9-9-9 plan possible, by allowing the removal of the de facto new 9% earnings tax.
After hearing Cain's lightweight rivals make silly quips about pizza prices or flipping the digits upside-down, it's good to see a substantive critique of Cain's plan by someone who both favors a strong economy and knows what it would take for us to have one again.