Herman Cain's 9-9-9

[dbacks fan]

This looks good on the surface, but inacting a 9% Federal Sales Tax would add $.09 on every dollar that you spend on top of city, county, and state sales tax already in place. So in most states, the sales tax when people go to the store to buy groceries will double. So people on fixed incomes would lose what they can purchase because the tax would be close to $.20 for every dollar they spend. It sounds like a small amount, but it adds up quickly. Not to mention, that would add 9% if you buy a car, home appliance, have someone do work on your home, etc etc. Yeah, the 9% flat income tax would offset the 9% Fed sales tax to an extent, but you would pay more in the Fed sales tax at the end of the year then you saved in the income tax.

[Conan71]

This looks good on the surface, but inacting a 9% Federal Sales Tax would add $.09 on every dollar that you spend on top of city, county, and state sales tax already in place. So in most states, the sales tax when people go to the store to buy groceries will double. So people on fixed incomes would lose what they can purchase because the tax would be close to $.20 for every dollar they spend. It sounds like a small amount, but it adds up quickly. Not to mention, that would add 9% if you buy a car, home appliance, have someone do work on your home, etc etc. Yeah, the 9% flat income tax would offset the 9% Fed sales tax to an extent, but you would pay more in the Fed sales tax at the end of the year then you saved in the income tax.

Follow this up closer.  I'm willing to bet he's borrowing on his close friend, Neil Boortz' "Fair Tax".  That plan has a "pre-bate" in it for lower income people so it's not a regressive tax on them.

A consumption-based tax system is not a panacea for all the ills of the current tax code, but it would eliminate so many loopholes and increase collections based on the calculations used to figure the program.

[YoungTulsan]

Another question: Would it be a 9% tax or a 12.5% tax?

The Fair Tax people try to call a 30% tax a 23% tax by reverse engineering the rate.

Something that costs $100 would cost $130, which is a 30% tax.   They then take the $30 tax and divide it by the $130 total price
$30 is 23% of the total price when the price is $130.

If the Cain tax plan follows that logic, it would be 12.5%, as something which costs $100 would be $112.50.

[YoungTulsan]

Not to mention, that would add 9% if you buy a car, home appliance, have someone do work on your home, etc etc. Yeah, the 9% flat income tax would offset the 9% Fed sales tax to an extent, but you would pay more in the Fed sales tax at the end of the year then you saved in the income tax.

Think of the effect on buying a $25,000 car.  Would you be able to finance the tax, or would it be due immediately like the state excise tax?  The added cost of purchasing a car would go up $2250 or $3125 depending on how they call it 9% (see previous post)

What about the lender financing the higher cost.   What extra value does your collateral have when an extra $3000 is slapped onto your car?   Wouldn't that pose a greater risk to the lender?   Wouldn't interest rates have to be jacked up considerably for that risk?

[Teatownclown]

Whackie tax plan that punishes the saver and taxes what's already been taxed once before when first earned.

Hilarious to me that this guy won the Florida Straw Poll. Go Herman! You're making the GOP/Teabaggers proud.

[Red Arrow]

Would you be able to finance the tax, or would it be due immediately like the state excise tax? 

I expect you would be able to finance it as can already be done.  Think of the car dealership ads that say "We pay your tax and tags.".  You know they don't pay it, it's in the price of the car. The state gets their money right away which keeps them happy.  You get to pay the tax and first year tag over the time of the loan.

[Red Arrow]

Yeah, the 9% flat income tax would offset the 9% Fed sales tax to an extent, but you would pay more in the Fed sales tax at the end of the year then you saved in the income tax.

That would obviously depend on how much tax you presently pay and how much you spend.

From the 2009 Forms and Instruction Booklet (The last one the Feds mailed out.):

A taxable income of $55,000 yields a Federal Income Tax of $9944. for a single taxpayer status.  $9,944/$55,000= .1808  (18.08%, I'll round off to 18%)  At 9% tax, you would pay $4972. in income tax.  In order to pay the "other" $4972 in sales tax, you would have to spend $4972/.09 = $55,244. That would be more than your original taxable income.

If the single exemption and single standard deduction are eliminated, add $9350 to the taxable income.  New taxable income = $64350.  2009 rates give $12,269 in tax.  $12,269/$64,350 = .1907 (19%).  9% of $64350 is $5791, leaving $6478 to spend. $6478/.09 = $71978.

[Red Arrow]

Another question: Would it be a 9% tax or a 12.5% tax?

The Fair Tax people try to call a 30% tax a 23% tax by reverse engineering Business Math Manipulating the rate.

Something that costs $100 would cost $130, which is a 30% tax.   They then take the $30 tax and divide it by the $130 total price
$30 is 23% of the total price when the price is $130.

If the Cain tax plan follows that logic, it would be 12.5%, as something which costs $100 would be $112.50.

Where do you get 12.5%?

If something costs $100 you only have to add $9.89 to get $109.89.  $9.89/$109.89 = 9%.  I would call that a 9.89% tax myself.   $12.50/$112.50 = 11.1%.  I don't think anyone would try to call that a 9% tax.

I haven't heard anyone trying to confuse the tax rate with what percent of a final price is the tax but then I am not a tax semantics groupie.

The method you describe sounds similar to calculating what percent of your sale price is "profit" compared to how much you marked something up.  I put profit in quotes because it's not profit until expenses are subtracted.

[nathanm]

Whackie tax plan that punishes the saver and taxes what's already been taxed once before when first earned.

I don't have a problem with punishing savers right now. The economy is stagnant precisely because of too much saving. It wouldn't be such a problem if banks were lending the money out, but they're not. To take a page from the Paulist book, Google paradox of thrift.

[Gaspar]

Think of the effect on buying a $25,000 car.  Would you be able to finance the tax, or would it be due immediately like the state excise tax?  The added cost of purchasing a car would go up $2250 or $3125 depending on how they call it 9% (see previous post)

What about the lender financing the higher cost.   What extra value does your collateral have when an extra $3000 is slapped onto your car?   Wouldn't that pose a greater risk to the lender?   Wouldn't interest rates have to be jacked up considerably for that risk?

Actually, no it wouldn't.  Because the corporate rate would decrease for all of the companies that build cars (and the components that go into them) or any other goods for that matter. The price for goods and services would decrease drastically, and because people are taking home more money, what difference that remains would be insignificant.  

Also Conan is right. There would be a probate for basic necessities. Cain is a proponent of the Fair Tax but he differs with most who believe that it can be implemented immediately.  

Where do you get 12.5%?

If something costs $100 you only have to add $9.89 to get $109.89.  $9.89/$109.89 = 9%.  I would call that a 9.89% tax myself.   $12.50/$112.50 = 11.1%.  I don't think anyone would try to call that a 9% tax.

I haven't heard anyone trying to confuse the tax rate with what percent of a final price is the tax but then I am not a tax semantics groupie.

The method you describe sounds similar to calculating what percent of your sale price is "profit" compared to how much you marked something up.  I put profit in quotes because it's not profit until expenses are subtracted.

Red

Where do you get 12.5%?

If something costs $100 you only have to add $9.89 to get $109.89.  $9.89/$109.89 = 9%.  I would call that a 9.89% tax myself.   $12.50/$112.50 = 11.1%.  I don't think anyone would try to call that a 9% tax.

I haven't heard anyone trying to confuse the tax rate with what percent of a final price is the tax but then I am not a tax semantics groupie.

The method you describe sounds similar to calculating what percent of your sale price is "profit" compared to how much you marked something up.  I put profit in quotes because it's not profit until expenses are subtracted.

Red, the "rate offence" is a standard Liberal talking point that you can get on most of the lib sites attacking the FairTax.  There are several more we will hear too, like "If companies are taxed less they are going to just pocket that money and the poor are going to get poorer."  

[we vs us]

Red, the "rate offence" is a standard Liberal talking point that you can get on most of the lib sites attacking the FairTax.  There are several more we will hear too, like "If companies are taxed less they are going to just pocket that money and the poor are going to get poorer."  

Nothing at all like what's currently happening, amirite?

[Gaspar]

Nothing at all like what's currently happening, amirite?

Nothing!

Companies are holding on to profits right now for an entirely different reason. 

amirite?

[Gaspar]

Hey, pull up MSNBC and look at the headlines.  They're treating Cain like some insignificant worm, and they don't even mention he is the "Tea Party candidate."  Also, they don't mention that Cain has logged more time in FL talking directly to constituents than all of the other candidates combined. 

Instead they make this odd jump to the conclusion that because people voted for Cain, they want Christie to run. 

You wonder why MSNBC has become the anus of the network news channels.

[we vs us]

Nothing!

Companies are holding on to profits right now for an entirely different reason. 

amirite?

Yes, you are right:  companies are being taxed less, they've pocketed the money, and the poor are, in fact, getting poorer.  It stands to reason that, if we tax them even less, they will continue doing what they're doing. All the while, the poor -- and also, incidentally, the middle class -- will continue getting poorer.

[AquaMan]

The former governor of Michigan made that very point on the Daily Show this morning. Michigan cut taxes 99 times and made it easier to do business in Michigan, which did nothing but continue to ignore them. There are just too many other factors involved. It wasn't till the state partnered with the Feds in an effort to attract businesses, in particular the batteries for electric cars, that any headway started to be made.

You could cut taxes to zero and outlaw unions and corps will still send their business to China. You could lock the doors on the EPA, OSHA and Justice departments and the corps would just pocket the profits and blame it on something else (that Obama did). We have established that states and the Congress are prostitutes for the pleasure of the corporations.....they're all just haggling on the price right now.