Herman Cain’s 9-9-9 plan has caught the political world on fire, best demonstrated with his prominence in the latest Republican debate. Though few viewers could likely recite any answer Mitt Romney gave, anyone who follows politics has likely heard about Bachmann’s evoking the dreaded mark of the beast, or Huntsman’s latest lame attempt at a memorable debate joke. (Off topic: How pissed is he that Gary Johnson, in one debate, accomplished what Huntsman has failed to do in four months?) In spite of the attacks from his critics, Cain’s 9-9-9 plan has catapulted him to the top of the polls and now even carries the support of noted economist Arthur Laffer. But is it REALLY a good idea?
In the interest of full disclosure, I am a proud supporter of the FairTax movement. If you aren’t familiar with the FairTax, it is a 23% national sales tax that would replace all federal taxes on personal and corporate income (for some of the finer details try Google). Of the 2012 Republican nominees, only Gary Johnson and Herman Cain has voiced support for this proposal with Cain offering the 9-9-9 plan as a transitional step towards implementation of a full FairTax. It was this very issue that initially gave me a favorable opinion of Cain’s candidacy. Unfortunately, while I sympathize with what Cain is trying to do, if the 9-9-9 plan ever became reality it would likely be one of the gravest mistakes in many decades.
On the surface there is a lot to like here. Assuming it would pass as is, 9-9-9 would completely flatten the tax code, eliminating horrific 20,000+ pages of tax code that no one truly understands. Not only would this save incalculable man hours in filling out repetitive tax forms, but millions of dollars in the cost of tax compliance for families alone. Further, with a genuinely flat tax code, lobbying will decrease as tax credits disappear. These are all reasons why I support the FairTax.
There are also a lot of poorly thought-out criticisms of 9-9-9 (and sales tax in general). Relying on the political go-to move of the demagogue, defenders of the status quo describe horror stories of poor people being forced to starve due to the added cost placed on goods with the sales tax. While it is true that a sales tax will increase the retail price of goods and services, this line of reasoning typically only looks at one side of the equation. Since payroll taxes are gone, people have more take home pay. Since corporate taxes are reduced in 9-9-9 (or eliminated completely in the FairTax), the price of producing goods goes down (which is reflected in prices). The ease of tax compliance makes administration costs go down (which is reflected in prices).
But is it regressive? Since Americans typically spend a greater amount of their income the less wealthy they are, some critics complain the tax benefits the wealthy at the expense of the rich. While it is possible that a greater percentage of income will be taxed, the less wealthy also enjoy the greatest benefits of this sort of reform. A flat 9% corporate tax attracts foreign industry more likely to employ new blue collar workers than white collar executives. No pay check withholding means working class Americans are no longer deprived of potential interest on earned wages. Most importantly, with a flat tax rate, the working class will be on the same playing field with more powerful groups who can currently take advantage of tax code loopholes though costly political manipulation. This isn’t tax regression, but tax equality.
If I can dismiss some of the most common criticism of Cain’s plan, why can’t I support it? Unfortunately 9-9-9 is dangerously naïve and tragically short-sighted.
Grover Norquist best highlighted the flaw in Cain’s proposal when he said recently, “Having three taxes, all of which can grow – it’s like having three needles in your arm taking blood out, it’s much more dangerous than having one.” If you are going to open a door for government to collect revenue by way of a sales tax, you have to slam shut others. 9-9-9 leaves the income tax wide open.
Now Cain would probably respond by saying that he would never raise income taxes, and that 9-9-9 is only a stepping stone to a true sales tax. Unfortunately his word isn’t enough. Herman Cain, should he win the Presidency, won’t hold the office forever. As Obama has learned, the ability to accomplish a key campaign promise early in your presidency, doesn’t mean you will be able to follow through on others later. 9-9-9 plays a dangerous game of Trust Washington and I have no interest in playing. Though Cain’s lack of true government experience has served to be a political weapon, it is this same inexperience that may be the source of his apparently legislative naivety. I have a hard time seeing anyone familiar with Washington gridlock making a proposal heavily reliant on legislative restraint and future promise the focal point of his campaign.
Herman Cain should be celebrated for his continuing to highlight the need for serious, bold tax reform and applauded by his continued insistence to bring new proposals to the conversation. But, as Michelle Bachmann would probably delight in reminding the former CEO, the road to hell is paved with good intentions.