Tag: Herman Cain

Cain 9-9-9: Huge Tax Haul from VAT

The Herman Cain campaign released details of the revenue expected to be collected from his 9-9-9 tax plan. Here are the estimates for 2010:

  • $701 billion from the 9 percent personal income tax.
  • $753 billion from the 9 percent retail sales tax.
  • $863 billion from the 9 percent business VAT.

Yikes! By far the largest tax haul under the Cain plan would be from the business VAT—a tax which would be hidden from most voters.

By the way, the Cain business tax is not a tax on “corporate income,” as some media stories are identifying it. The new revenue data makes it clear that it is a tax on all value added by all businesses in the nation—corporate, partnership, and proprietorship.

Sorry Mr. Cain, I think your tax plan gives the federal government far too much room to grow in coming decades as entitlement cost pressures increase. I’d suggest dropping 9-9-9 and going with my 15-15-15 tax plan. After that, you could move on to proposing a detailed plan for spending cuts, as candidate Ron Paul has delivered.

Cillizza on Cain and Know-Nothing Foreign Policy

Asked on Meet the Press this weekend whether the alleged Iranian plot to assassinate the Saudi ambassador was an act of war, Herman Cain gave the following response:

After I looked at all of the information provided by the intelligence community, the military, then I could make that decision.  I can’t make that decision because I’m not privy to all of that information… I’m not going to say it was an act of war based upon news reports, with all due respect.  I would hope that the president and all of his advisers are considering all of the factors in determining just how much, how much the Iranians participated in this.

That struck me as a refreshingly reasonable position. Yet the Washington Post’s election handicapper, Chris Cillizza, decided to make that quote the centerpiece of an article on Cain’s “know-nothing foreign policy.” He then presents a poll showing that Republicans don’t care much about foreign policy this year, only to conclude that foreign-policy ignorance could be a fatal handicap for Cain. His evidence for that conclusion is a quote from Max Boot of the Council on Foreign Relations, who specializes in arguing for wars and imperialism. Boot, as it happens, just wrote a blog post for Commentary titled, “Iran Plot Goes Straight to the Top,” where he attacks those willing to question the evidence against Iran’s leaders and vaguely supports attacking them.

Cillizza’s article makes clear that foreign-policy ignorance is far preferable to the Washington Post’s idea of expertise. The worst part is that Cain, who claims not to know what neoconservatives are, seems likely to become one, call Boot for advice, and win the Post’s respect.

Look Before You Leap on Cain’s 9-9-9 Tax Plan

I like the overall approach of Herman Cain’s 9-9-9 tax plan. As I recently wrote, it focuses on lower tax rates, elimination of double taxation, and repeal of corrupt and inefficient loopholes.

But I included a very important caveat. The intermediate stage of his three-step plan would enable politicians to impose both an income tax and a national sales tax. I wrote in my earlier post that I had faith in Herman Cain’s motives, but I was extremely uncomfortable with the idea of letting the crowd in Washington have an extra source of revenue.

After all, Europe’s welfare states began their march to fiscal collapse and economic stagnation after they added a version of a national sales tax on top of their pre-existing income taxes.

But it seems that I was too nice in my analysis of Mr. Cain’s plan. Josh Barro and Bruce Bartlett are both claiming that the business portion of Cain’s 9-9-9 is a value-added tax (VAT) rather than a corporate income tax.

In other words, instead of being a 9 percent flat tax-9 percent sales tax-9 percent corporate tax, Cain’s plan is a 9 percent flat tax-9 percent sales tax-9 percent VAT.

Let’s elaborate. The business portion of Cain’s plan apparently does not allow employers to deduct wages and salaries, which means – for all intents and purposes – that they would levy a 9 percent withholding tax on employee compensation. And that would be in addition to the 9 percent they presumably would withhold for the flat tax portion of Cain’s plan.

Employers use withholding in the current system, of course, but at least taxpayers are given credit for all that withheld tax when filling out their 1040 tax forms. Under Cain’s 9-9-9 plan, however, employees would only get credit for monies withheld for the flat tax.

In other words, there are two income taxes in Cain’s plan – the 9 percent flat tax and the hidden 9 percent income tax that is part of the VAT (this hidden income tax on wages and salaries, by the way, is a defining feature of a VAT).

This doesn’t make Cain’s plan bad from a theoretical perspective. The underlying principles are still sound – low tax rates, no double taxation, and no loopholes.

But if I was uneasy when I thought that the 9-9-9 plan added a sales tax on top of the income tax, then I am super-duper-double-secret-probation uneasy about adding a sales tax and a VAT on top of the income tax.

Here’s my video on the VAT, which will help you realize why this pernicious tax would be a big mistake.

Again, this doesn’t make Cain wrong if we’re grading based on economics or philosophy. My anxiety is a matter of real-world political analysis. I don’t trust politicians with new sources of revenue. Whether we give them big new sources of revenue or small new sources of revenue, they will always figure out ways of pushing up the tax rates so they can waste more money trying to buy votes.

Herman Cain and Individualism

Many political pundits have dismissed presidential hopeful Herman Cain as a long shot. However, coinciding with a Washington Post exclusive of the recently announced presidential candidate, a new IBOPE Zogby Interactive Poll shows Herman Cain, businessman and radio talk show host, edging out other leading GOP presidential candidates among Republican primary voters. Cain garnered 19% of vote, the plurality response, finally surpassing Governor Chris Christie who received 16% of the vote. A new Gallup poll shows Herman Cain with the leading Positive Intensity Score among potential GOP contenders at 25%, among those who recognize him. His name recognition has jumped from 21% in March to 37% in May.

Cain began receiving substantial media attention due to his popularity with the Tea Party; he recently won a Tea Party Patriots convention straw poll and has garnered 25% of voters most likely to vote for the Tea Party presidential candidate, with Chris Christie at 18%. In addition, GOP pollster Frank Luntz found Cain to be the winner of the first Republican presidential debate in the FOX News-sponsored focus group.

Cain’s recent popularity has brought to the forefront controversial statements he made earlier this year starting with an interview discussing the role of Muslims in American Society with ChristianityToday. ThinkProgress followed up with Cain during the Conservative Principles Conference in Des Moines, IA, asking him whether he would be comfortable appointing a Muslim to his Cabinet or as a federal judge. Herman Cain responded that he would not:

CAIN: No, I will not. And here’s why. There is this creeping attempt, there is this attempt to gradually ease Sharia law and the Muslim faith into our government. It does not belong in our government. This is what happened in Europe. … and now they’ve got a social problem that they don’t know what to do with hardly….I get upset when the Muslims in this country, some of them, try to force their Sharia law onto the rest of us.

In a subsequent Fox interview, Cain clarified his statement:

CAIN: …I did say no. And here’s why…I would have to have people totally committed to the Declaration of Independence and the Constitution of this United States, and many of the Muslims … are not totally dedicated to this country or our Constitution and many of them are trying to force Sharia law on the people of this country. …I don’t have time to be watching someone in my administration if they are not totally committed to the Declaration and the Constitution of the United States and the laws of this country.

Cain’s blanket condemnation of Muslims as generally unpatriotic is troubling. For starters, Cain’s view of Islam as a disqualification for public office runs contrary to the very Constitution that he claims to cherish: “no religious test shall ever be required as a qualification to any office or public trust under the United States.” (Constitution Article VI)

Second, Cain’s public statement of his prejudice—and the fact that such a statement is not widely condemned by both sides of the political spectrum—perpetuates stereotypes, increases religious tension, and contradicts the notions of freedom and individualism upon which this country was founded. People are more than the religion they profess. Individuals are a complex combination of environmental factors, choices, personal experiences, will, and culture. Prejudice such as Cain’s emphasizes the group over the individual. In a prejudiced society, individuals are not held accountable for their own actions, but instead are responsible for the actions of other members of the group with which they are identified—irrespective of the fact that these actions are entirely out of their control.

Individuals pursue their ambitions with hopes of happiness and success. Individuals face the costs and benefits of their decisions, and individuals take risks and reap the losses or rewards of those risks. Individualism unlocks an engine of innovation and prosperity, as people—as individuals—are incentivized and motivated to seek out new ventures. Collectivism in all its forms—from communism to racism—is antithetical to individualism and supplants an individual’s drive to better herself with a sense of hopelessness, since her opportunities are not determined by her own merits, but her group identity.

Cain’s remarks about Muslims are a regrettable perpetuation of religious stereotypes and an affront to the founding principles of this country. Such a worldview runs counter to the conditions under which opportunity and prosperity may flourish. Cain should have known better. More importantly, none of Cain’s Tea Party supporters—if they truly understand the principles behind the Declaration of Independence and the Constitution—should support such statements.