With the exception of a few jabs from his Republican rivals Jon Huntsman, Michele Bachmann and Rick Santorum, GOP presidential candidate Herman Cain and his 9-9-9 tax plan have remained pretty much unscathed from anti-tax Republican and Tea Party critics who have attacked every attempt by President Obama to restore tax levels to the pre-Bush era.
In fact, new polls reveal Herman Cain leading the GOP field.
Cain, who has recently surged to the front of the pack of GOP presidential contenders, is drawing attention for his idea of eliminating the tax code completely and replacing it with his "easy to comprehend" 9-9-9 plan.
The 9-9-9 plan would include a 9 percent tax on all new consumer purchases, a 9 percent business tax and a 9 percent income tax. Cain claims the plan is already generating popular support among voters.
“I can be walking through the airport going through security and a TSA agent will say, ‘Hello Mr. Cain: 9-9-9,'" Cain recently told CNBC. “If the public understands it, they will support it and demand it. That is going to be the difference. It is not a complicated piece of legislation.”
But the odds are, when the public understands it, the vast majority of taxpayers will be horrified to realize they would actually face a huge tax increase, according to Bruce Bartlett, a senior official in the Reagan and George H.W. Bush administrations, who described the 9-9-9 plan as a “distributional monstrosity.”
Actually, when you hear Bartlett explain it, you begin to understand why Cain supports his 9-9-9 proposal: The poor get stuck with the lion's share of the tax -- and the rich get a break.
“The poor would pay more while the rich would have their taxes cut, with no guarantee that economic growth will increase and good reason to believe that the budget deficit will increase” Bartlett recently wrote in the New York Times. “Even allowing for the poorly thought-thought promises routinely made on the campaign trail, Mr. Cain’s tax plan stands out as exceptionally ill-conceived."
The current tax code provides a series of deductions, credits and exemptions to ease the tax burden on all households. As a result, some 38 percent of U.S. households pay little or no taxes.
But with the 9-9-9 plan they would have to pay a rate of 9 percent, with no deductions. On top of that, consumers will have to pay a national 9 percent sales tax, which would go on top of state and local taxes. In California, which has an 8 percent sales tax, that would mean a whopping 17 percent sales tax.
Business owners would come out ahead as they could pay themselves with dividends (which would no longer be taxed) instead of wages. That would effectively reduce their total tax rate to about 18 percent. Corporations love the idea because their 35 percent tax rate is cut to 9 percent.
USC law professor Edward Kleinbard has called the 9-9-9 plan “a terrific example of fiscal hocus pocus.”
Cain and advisors who have reviewed the plan insist that it would collect enough money to replace the current tax code and not add to the federal budget deficit, but Bloomberg News said it would only account for about half of the federal budget.
NYU law professor Daniel Shaviro thinks part of the popular appeal of Cain’s plan is that it appears to hold tax rates to single digits, even though the cumulative tax paid by most households would amount to 27 percent.