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Cain Tax Plan

post #1 of 27
Thread Starter 

I would love if anyone could explain exactly how this is *supposed* to work out.

 

Here's an article about it:

http://economix.blogs.nytimes.com/2011/10/11/inside-the-cain-tax-plan/

 

The idea is that all federal taxes would be replaced with a 9% personal income tax, a 9% corporate income tax and a 9% sales tax.  Eventually those would all be replaced (I think) with something like a 30% VAT?

 

 

post #2 of 27

I'm assuming this would replace the tax code so most (all?) exemptions would probably go away. Would the 9% income tax exempt people making below a certain amount because my first thought is that this could be really hard on the poor.

post #3 of 27

There is an amount that is exempt from taxes. It is usually the first 30K that someone makes, so anyone making below that would not pay the 9% income tax. Everyone would pay the 9% sales tax, which is an idea I love. It is something more easily in your control as to how much you pay in taxes; it also taxes the underground economy. It most plans, food and medicine are not taxed at 9%, but at something lower. I lvoe the idea of simplifying the tax code- talk about easy to figure out!

post #4 of 27
Thread Starter 
Quote:
Originally Posted by mar123 View Post

There is an amount that is exempt from taxes. It is usually the first 30K that someone makes, so anyone making below that would not pay the 9% income tax. Everyone would pay the 9% sales tax, which is an idea I love. It is something more easily in your control as to how much you pay in taxes; it also taxes the underground economy. It most plans, food and medicine are not taxed at 9%, but at something lower. I lvoe the idea of simplifying the tax code- talk about easy to figure out!



That is standard, but from what I have read about his plan:

 

1) there are *not* deductions (so even the very poor would pay federal income tax)

2) there are *no* exemptions (all items would be taxed at point of sale)

 

How would it tax the underground economy (I'm not disaggreeing, I just don't understand)?

 

post #5 of 27

http://www.hermancain.com/999plan

 

Well there is his site where he lays it out. I haven't heard him say anything about it later shifting to a 30% VAT and I've watched all the debates. Personally I'm not a fan of the plan because I don't trust the Feds enough to give them a NEW SALES TAX. I haven't heard anything about how he plans to fund social security with the payroll tax removed, but then Obama has already screwed over social security by reducing the payroll tax. The tax code is a complete mess and something needs to be done but I don't like giving the Gov yet another way to tax us.  I don't buy for one minute that a national sales tax effects the underground economy. 

post #6 of 27

cat.gifSorry, edited my post out for irrelevance and I had to feed my cat.


Edited by CatsCradle - 10/12/11 at 7:04pm
post #7 of 27

The underground economy is the people who are only paid in cash. By having a National Sales Tax, those people would be contributing.

 

The payroll tax is not the same as Social Security. Yes, Obama reduced the payroll tax, i.e. income tax taken out of your check. That did not affect Social Security at all.

post #8 of 27
Quote:
Originally Posted by mar123 View Post

 

The payroll tax is not the same as Social Security. Yes, Obama reduced the payroll tax, i.e. income tax taken out of your check. That did not affect Social Security at all.


It's true that the income tax and social security withholding are not the same.  However, the Tax Relief Act which was signed into law last December 2010 allowed for a 2% reduction in social security withholdings (for only one year) for individuals making up to $106,800.  Employers will continue to contribute the old rate and as far as I can tell, the individual payroll withholding will return to the old 6.2% in January 2012.  The Social Security system itself will not be compromised by the 2% reduction, as the Act allows the "loss" to be supplemented by the general fund.  It was part of a compromise package to allow the Bush tax cuts (to higher income people) to extend for an additional two years.
 

 

post #9 of 27
Thread Starter 
Quote:
Originally Posted by mar123 View Post

The underground economy is the people who are only paid in cash. By having a National Sales Tax, those people would be contributing.

 

The payroll tax is not the same as Social Security. Yes, Obama reduced the payroll tax, i.e. income tax taken out of your check. That did not affect Social Security at all.



I understand the theory behind the sales tax "catching" people who are only in the underground economy now.

 

Yes, the payroll tax is not the same as social security, but one part of payroll taxes are what funds Social Security. 

 

post #10 of 27
Thread Starter 

From Cain's Site:

 

 

Quote:

 

  • It ends the Payroll Tax completely – a permanent holiday!
  • Zero capital gains tax
  • Ends the Death Tax.
  • Individual Flat Tax – 9%.
  • Gross income less charitable deductions.

 

 

 

So, individuals will have a flat tax of 9%.  Currently (excluding the little "tax holiday" right now) SS & Medicare are taxed at a 7.65% rate. 

 

I cannot see how this would POSSIBLY be revenue neutral. 

 

Additionally, it says right there that the income tax would be based on GROSS income minues charitable deductions (no other deductions).  So, to me, that means that everyone would be taxed on their first dollar.

 

I included the zero capital gains tax and zero "death tax" becasue I think those are the most sickening inclusions--- why should you be taxed lower on money you don't work for than money you do?

post #11 of 27

According to this article/information this doesn't look like a good deal.  Well unless you are rich.

 

http://firstread.msnbc.msn.com/_news/2011/10/12/8290508-tax-group-9-9-9-a-major-tax-cut-for-the-rich-substantial-increase-on-others?ocid=twitter

 

 

post #12 of 27

At first this sounded promising but the more I read the more it appears it benefits rich people, large businesses and maybe some small businesses although since worker's wages would not longer be exempt from taxes, I'm thinking I'd end up paying out more not less for my employees in taxes irked.gif

 

But it's funny how it seems like it's gaining popularity...I think people must be thinking they will keep all their current deductions but even then, it's the poor who will be most hurt by something like this.

post #13 of 27
Thread Starter 
Quote:
Originally Posted by dogmom327 View Post

 

But it's funny how it seems like it's gaining popularity...I think people must be thinking they will keep all their current deductions but even then, it's the poor who will be most hurt by something like this.


I'm having a really hard time seeing how someone with any empathy could support this.  There are so many people/families out there who are just barely making it as it is WITH the EIC, no federal sales tax, etc... There is just *no* way they could survive with less money and that's what this would ask them to do. 

 

post #14 of 27
Quote:
Originally Posted by TiredX2 View Post

I'm having a really hard time seeing how someone with any empathy could support this.  There are so many people/families out there who are just barely making it as it is WITH the EIC, no federal sales tax, etc... There is just *no* way they could survive with less money and that's what this would ask them to do. 

 

 


Basically that is my sense too.  Taxes go up for the working poor, go down for the working (or non-working) wealthy.  The only group that would benefit ultimately are the wealthy.  (disclaimer:  I say this as someone who is a top earner in this economy and I get a lot of flack from family members for being a 1 percenter, although at the very low end of the one percent.  I would gladly pay a little more if it meant putting people back to work.  I live comfortably with a lot of fall back if we should run into tough times, and I recognize the fact that a healthy economy on all levels creates a a better quality of life for me and kin, simply because I don't want my child growing up in an environment where there are huge disparities between the haves and have nots.  All I seek is fairness, not socialism, as some would like to think.  Fairness in that people are taxed according to their income, investments, breaks, or lack of.).

 

post #15 of 27
Quote:
Originally Posted by CatsCradle View Post

 

Basically that is my sense too.  Taxes go up for the working poor, go down for the working (or non-working) wealthy.  The only group that would benefit ultimately are the wealthy.  (disclaimer:  I say this as someone who is a top earner in this economy and I get a lot of flack from family members for being a 1 percenter, although at the very low end of the one percent.  I would gladly pay a little more if it meant putting people back to work.  I live comfortably with a lot of fall back if we should run into tough times, and I recognize the fact that a healthy economy on all levels creates a a better quality of life for me and kin, simply because I don't want my child growing up in an environment where there are huge disparities between the haves and have nots.  All I seek is fairness, not socialism, as some would like to think.  Fairness in that people are taxed according to their income, investments, breaks, or lack of.).

 


Thank you for saying this.  I feel the same way about healthcare.  Without adequate, affordable healthcare we are creating an unhealthy society.  I strongly disagree with those that say healthcare is NOT a right.  That kind of statement blows my mind.

 

post #16 of 27

DH and I talk a lot about this. Our income is going up. We feel very lucky and possibly if things continue to go well we will eventually make it to the upper middle class (or upper class depending on COL). We don't mind paying more in taxes when we do. That's how it works. It is possible for us to start a business and do well because of the society our tax dollars fund. It makes sense we'd pay more than someone who is trying to figure out if they can buy another loaf of bread.

post #17 of 27
Quote:
Originally Posted by dogmom327 View Post

DH and I talk a lot about this. Our income is going up. We feel very lucky and possibly if things continue to go well we will eventually make it to the upper middle class (or upper class depending on COL). We don't mind paying more in taxes when we do. That's how it works. It is possible for us to start a business and do well because of the society our tax dollars fund. It makes sense we'd pay more than someone who is trying to figure out if they can buy another loaf of bread.



I agree.  I was sitting on the train at 6:00 am this morning and looked up and saw the Lion King ad for the production on Broadway.  I know it sounds corny but the song I remember from that play/musical is the "Circle of Life."  The idea is premised on the fact that every living thing is dependent on another living thing, or things, to to survive.  I think that people mistake 'quality of life' for the amount of dollars in their pockets.  I disagree with that concept.  I've been through several decades in my own town where tax dollars made a huge difference in quality of life:  the difference between walking down a street either fearing or not fearing for your personal safety because of the availability of street lamps or a staffed local police precinct; the availability of books in my local library (which not only makes knowledge available to lower and middle income people but creates a safe haven for kids to go when their peers are choosing less desirable routes; decent roads and transportation to get people to their jobs; etc.).  I could go on and on but I think you get my drift.  A society that feels safe and that can operate with less adversity is a more productive society.  Hungry people care only about their physical pain of hunger, not about innovation and the desire to succeed beyond the taking care of immediate physical needs.

 

Back to the original topic:  I don't believe for a minute that the Cain tax plan is a no-brainer.  

 

Go ahead, tax all income at the same percent.  I still get my deductions and benefits simply because I'm in the top bracket and had the opportunity (and good luck) to be in the position I am today.  I still win!  (Snark, snark...and more snark.).  biggrinbounce.gif

post #18 of 27
post #19 of 27

I'm all for simplifying the tax code.  I'm even OK with a flat tax...but I always thought something around 17-18%, not 9% made more sense.  I do believe that one would have to give people an out on the first 40,000 or so, but I'm not sure of the exact figure.

 

I'm OK with a VAT or national sales tax too--but only if it goes to pay for universal health care or something along those lines.  I do worry about a slippery slope however.  9% this year... and then in five years, oops we need more money...so now it's 11%....then 13%, etc.  I'm not sure how that can be avoided.

 

I'm glad that Cain has a plan--even though I don't think it has a snowball's chance in heck of passing.  I also think it would lead to more debt, not less.  The thing is, the way our government is now...with all the lobbyists and corporate interests...I don't see any real reform happening regardless of who is elected. Both parties are looking out for their sponsors and donors--not the American people as a whole.  The GOP more so, but the Dems have been selling out as well.  I think that Pres. Obama is much more centrist than he's been portrayed--and even he can't get things done.  I think we need electoral reform first.  Citizens United was a stupid stupid decision.  

post #20 of 27
Quote:
Originally Posted by umsami View Post

I'm all for simplifying the tax code.  I'm even OK with a flat tax...but I always thought something around 17-18%, not 9% made more sense.  I do believe that one would have to give people an out on the first 40,000 or so, but I'm not sure of the exact figure.

 

I'm OK with a VAT or national sales tax too--but only if it goes to pay for universal health care or something along those lines.  I do worry about a slippery slope however.  9% this year... and then in five years, oops we need more money...so now it's 11%....then 13%, etc.  I'm not sure how that can be avoided.

 

I'm glad that Cain has a plan--even though I don't think it has a snowball's chance in heck of passing.  I also think it would lead to more debt, not less.  The thing is, the way our government is now...with all the lobbyists and corporate interests...I don't see any real reform happening regardless of who is elected. Both parties are looking out for their sponsors and donors--not the American people as a whole.  The GOP more so, but the Dems have been selling out as well.  I think that Pres. Obama is much more centrist than he's been portrayed--and even he can't get things done.  I think we need electoral reform first.  Citizens United was a stupid stupid decision.  


Agreed!

 

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