Herman Cain's 9-9-9 Plan = Tax the Poor

I am sitting here looking at my income tax return from 2010 and thinking about Tea Party favorite Herman Cain. My federal tax return is about one-half inch thick, and it cost a bundle to have it prepared. There is, of course, the 1040 form, as well as schedules A, B, C, and D, plus forms 8582, 2106 EZ, 4562, and so on.

I really wish good ol’ Herman Cain actually knew what he was talking about with his 9-9-9 plan. I wish it would actually work and that it would lower my taxes and make the tortuous experience of dealing with income tax returns just sort of go away. But Cain is nuts, and his 9-9-9 plan is hooey.

That is why Mitt Romney and Rick Perry and all the rest of the GOP field gave Cain’s plan such a smackdown in Tuesday’s GOP debate in Las Vegas.

It’s hard for anyone to actually be too detailed about a critique of Cain’s proposal to totally revamp the entire tax policy of the largest economy on the earth because there are so few details available. If you go to Cain’s website, click on his 9-9-9 brochure, and then paste it in a Word doc, you’ll see it has fewer words than this blog post.

Due to the plan’s brevity alone, there are a lot of things about the plan that people who might like the catchy name (and Cain’s cheery optimism) might not realize. I was having coffee with a pretty smart lawyer yesterday, and I mentioned that Cain’s plan would place a 9-percent sales tax on legal fees. She was surprised and alarmed. It will also come as an unhappy surprise to people who live in rental apartments or condos to discover that Cain’s plan would place a 9 percent sales tax on the rent they pay. Or people who have credit cards or teeth: The sales tax will apply to the interest rate charges you pay on your credit cards and to fees that you pay your dentist. In short, we’re talking about lots of new taxes that will really hit the middle class and below.

While at the same time, some taxes that only the most fortunate among us pay will just disappear. No more estate taxes, no more taxes on capital gains and dividends.

Cain’s 9-9-9 plan also proposes a flat 9-percent income tax. This will be a huge tax break for the wealthy and a tax increase on the poor and many elderly. Using an analysis performed by the Tax Policy Center, a recent report on PBS found that:

… the Cain plan would give the very richest taxpayers an average tax cut of almost $1.7 million. [but] A typical middle class taxpayer would pay about $3,000 more. Low-income Americans would be hit hard. Instead of getting tax rebates, they would face a tax increase of almost $1,700.

When the non-partisan Politifact looked at the Tax Policy Center’s analysis, they found that:

83.8 percent of tax filers would get a tax increase under Cain’s plan.

On the other hand, most of the tax filers who make more than $1 million would get a tax cut under the Cain plan … And the average tax cut for millionaires would be $487,300.

As Robertson Williams, a Senior Fellow at The Tax Policy Center put it: “the rich would make out like bandits”

One of the things that economists and tax experts like to talk about is how taxes incentivize behaviors. Cain’s plan would eliminate all taxes on profits earned by multinational corporations outside the United States.

Pretend for a moment you are a psychologist for a global corporation (they are, after all, just like people). Now predict what the effect it would have on corporate behavior, if they know that all the profit earned outside the U.S. would be free of all US taxes – and that that money could then be “repatriated” tax free.

It was a good thing that Mitt Romney and Rick Perry and all the rest of Cain’s fellow GOP presidential hopefuls attacked him for this plan. The 9-9-9 plan is a Koch Brothers inspired scheme to shift an enormous portion of the tax burden off of the delicate shoulders of the rich and onto the shoulders of the poor and middle class. I felt some love for them in that moment.

Now all the GOP candidates should go back to the drawing boards and re-jigger their own plans. Because all them that have been proposed so far basically do the same thing as Cain’s. Stick it to the poor, and lift up the rich — that eems somehow wrong to me.