9-9-SWINE: "Ultimately, Cain wants the country to adopt a Fair Tax," A.K.A. "National Sales Tax."

[Amerigo Vespucci]

Much less attention is paid to the fact that his 9-9-9 plan is just an early step in his tax reform plans. (Taxes you'll still pay under Cain's plan)

Ultimately, Cain wants the country to adopt a Fair Tax. He's not the first presidential candidate to propose it. In 2008, for instance, Mike Huckabee made it a central part of his economic plan.

So what's a Fair Tax exactly?

In essence, it's a national sales tax that would replace the current tax code entirely and all the credits, deductions and exemptions that go along with it.

http://money.cnn.com/2011/10/17/news/economy/cain_999_plan/index.htm

Here's what Bruce Bartlett had to say about a National Sales Tax in 2004:

August 09, 2004, 8:47 a.m.
A National Sales Tax No Vote
The rates would be vastly higher than what you might suspect.

http://old.nationalreview.com/nrof_bartlett/bartlett200408090847.asp

***

An unstated assumption is that the 23 percent rate proposed by Linder is comparable to existing state and local sales taxes, where the tax comes on top of the purchase price. Thus, a 5 percent sales tax on a $1 purchase comes to $1.05. But that’s not the way the Linder plan works. He deceptively calculates the rate as if the tax is part of the purchase price. He calls this the tax-inclusive rate. Calculating the rate the normal way people are accustomed to with state and local sales taxes would require a 30 percent tax rate, not 23 percent.

When Congress’s Joint Committee on Taxation scored the Linder proposal four years ago it estimated that it would actually require a tax-inclusive rate of 36 percent, not 23 percent, to equal current federal revenues. Calculating the rate in a normal, tax-exclusive manner would mean a 57 percent rate.

Economist Bill Gale of the Brookings Institution notes that supporters of the sales tax assume that there will be no tax evasion under their proposal and that the size of government will not grow, even though they would send a large annual check to every American in order to offset the regressivity of the tax. Making realistic assumptions, Gale estimates that the tax-inclusive rate, comparable to Linder’s proposed 23 percent rate, would actually have to be about 50 percent. A rate comparable to existing sales taxes would be close to 100 percent. And let us not forget that state and local sales taxes would come on top of the federal sales tax, pushing the total rate even higher.

***

This means that if you are sick and have large doctor bills, you are going to pay 30 percent on top to the federal government. (Alternatively, you would pay 30 percent more for health insurance.) If you buy a new house listed for $150,000, your actual purchase price is going to be $195,000, including the sales tax. (Alternatively, there could be a tax on the imputed rent homeowners pay themselves for living in their own homes.) And if your children receive $20,000 worth of education each year from the local public schools, somehow or other you are going to have to pay an additional $6,000 to the federal government.

[OHdem10]

1. This deepening the shift from the rich paying taxes to the Middle

Working Class and poor shouldering the burden.

Another accountant and Ezra Klein said this amounted
to those making 50K annually and all those under
50K having over 30% increase in taxes.

[Southerner]

3. I have looked at the Fair Tax before. One thing opponents usually fail to mention...

...is that it removes all income taxes and removes almost all deductions. It does not simply add a consumption tax on top of everything else.

For balance to this discussion let me post a couple snippets from the Fair Tax website:

http://www.fairtax.org/site/PageServer?pagename=about_fairtax_four#regressive

"The FairTax actually eliminates and reimburses all federal taxes for those below the poverty line. This is accomplished through the universal prebate and by eliminating the highly regressive FICA payroll tax. Today, low and moderate income Americans pay far more in FICA taxes than income taxes. Those spending at twice the poverty level pay a FairTax of only 11.5 percent -- a rate much lower than the income and payroll tax burden they bear today. Meanwhile, the wealthy pay the 23 percent retail sales tax on their retail purchases."

"Consider, for example, your typical billionaire, of which America now has more than 400. These fortunate few are invested primarily in equities on which they pay taxes at a 15 percent rate, whether their income comes in the form of capital gains or dividends. In addition to having the income from their wealth taxed at a low rate, the principal of their wealth is completely untaxed either directly or indirectly. Assuming they and their heirs spend only the income earned on the wealth each year, the tax rate today is 15 percent. In contrast, under the FairTax, the effective tax rate is 23 percent. Hence, the very wealthy will pay more taxes when the FairTax is enacted. In a nutshell, those who spend more will pay more but low, moderate and middle income taxpayers will benefit from the greatest gains in reduced tax liabilities."

So, I have no idea how all the numbers add up but they are saying the poor will pay nothing, the middle class less, and the wealthy more. Sounds fishy.

[Amerigo Vespucci]

5. Of course its architects are going to paint a rosy picture on their own Website

www.fairtax.org?

Hell yes, that's exactly where I'd go if I wanted the truth.

"The poor will pay nothing?" HORSESHIT. Read the Bartlett piece.

[Erose999]

6. But because the "Fair" Tax is a consupmtion tax, those who spend the greater portion of their income

will have the greatest tax burden.

A family living on $30,000 will spend most of that during the course of a year.

A family living on $3 million will only spend a tiny portion of that income.

Even though a loaf of bread costs both families $2, it costs the $30k family more than the $3mil family because the $2 is a greater portion of their total.

In other words:

999 = 666

[Southerner]

8. Wrong

With the Fair Tax, a household making $30,000 would get all of the taxes back from the federal government. They pay nothing. A household making $3 million is taxed on everything they buy.

I looked at Cain's 999 plan page and it it makes no mention of a deduction for lower income people however.

[WinkyDink]

10. And storekeepers would make this distinction how? (Have you heard of V.A.T.?)

[Southerner]

12. They don't have to.

Everybody still reports their income for the year and the feds dole out compensation according to income I guess based on some formula.

[Ikonoklast]

11. State taxes would go up dramatically.

[Erose999]

13. Tell me more about how that would work? As I understand it Fair Tax is consumption only. What am I

missing?

[Erose999]

2. This is the part I don't get "even though they would send a large annual check to every American in

order to offset the regressivity of the tax"

How is that any different than what we have now? You can't "abolish the IRS" if you're still having to send people checks from the gov't every month.

Some conservative plans even claim that they will send out rebate checks every month. The IRS has a huge beaureaucracy to process people's taxes and send out a check once a year and these "FairTax" cocknuckles want to process and send out checks once a MONTH? And somehow claim that this will "shrink the size of gov't"

These assholes are pretty stupid.

Also, Herman Cain says his 666 plan will only affect people who buy new items. I get 2 impressions from that:

1.) This does encourage people to re-use and repurpose stuff to avoid the tax, so at least thats good.

2.) On the other hand, it sends the message "you're not good enough to buy new".

[Ship of Fools]

4. He also threw in some line about used diapers and used milk ... am I remembering that

correctly, or was that an Onion thing? Gawds help me, I'm getting further and further bamboozled by the very fine line that exists now between reality and satire!! If this country/planet survives long enough for me to see my dotage, by then I think I'll either be completely insane or in a permanent state of drunken stupor -- or maybe both.

[Evasporque]

7. brilliance...tax the poor and middle class and give the wealthy a tax cut....

That is awesome...

[taterguy]

9. Dupe

:shrug: