Tax Related 999 tax plan from Herman Cain

[taxxcpa]

999

The 999 plan sounds good from the standpoint of being simple, but it is too simple. You can't squeeze blood out of a turnip.
A simplified income tax would be a better solution. I would disallow all itemized deductions, including contributions, with the possible exception of medical expenses above a certain level.
I would allow a standard deduction something like it used to exist many years ago: [10% of AGI not to exceed $ 1000 back in the 1950s] Today it probably should be 10% not to exceed $ 25,000. I would allow exemptions for up to three children. (When I was in the Air Force, they gave an allowance for up to three children, but did not increase it for those who had a side career as a reproducer.)

All tax credits for both the rich and the poor should be eliminated. Welfare should be separate from the tax code.

Of course, I realize that there are a lot of special interests and voting blocks to which politicians are eager to pander, so they will never simplify the tax rules.

[JohnH]

I don't get the logic. How could any business make pricing decisions without regard to taxes when taxes are a part of their costs? Doesn't matter where the taxes come into the equation - any tax figured at any step in the proces will find its way into the ultimate price of the product or service. The fact that it's hidden a little further behind the curatin doesn't change the economic facts.

If Cain is spinning it that way, then that would lead me to think he's even less informed about economics than I first thought.

[dtlee]

This is all conjecture.

I think he is saying that by having a 9% VAT, there will be 9% in taxes added to the final product.

In a typical product today, a corporation thinks of a tax a as a cost and then tries to make a margin over its costs. Thus, there is a tax and a markup on the tax before it gets to the consumer. If the product goes through several manufacturers, the markup gets marked up repeatedly along with additional taxes and markups. In the end, you have this jumbled mess where the average consumer thinks you should tax corporations more because they make all the money (not realizing that the consumer actually ends up paying the tax).

Among the supposed benefits to Cain's tax system proposal is that it will be more obvious to the end consumer whether any tax is included in that final price or not.

[JohnH]

In the end, you have this jumbled mess where the average consumer thinks you should tax corporations more because they make all the money (not realizing that the consumer actually ends up paying the tax).

I agree completely with respect to that last point. The demonstrations taking place all around the country prove that point. People can't seem to get it through their heads that corporations don't pay tax - their customers pay tax. Corporations are simply a very lucrative conduit for the government to collect taxes from consumers while playing this little shell game called "Tax the Corporations." But it works, so the politicians will keep on doing it.

[kpangelinan]

I think he is saying that by having a 9% VAT, there will be 9% in taxes added to the final product.

In a typical product today, a corporation thinks of a tax a as a cost and then tries to make a margin over its costs. Thus, there is a tax and a markup on the tax before it gets to the consumer. If the product goes through several manufacturers, the markup gets marked up repeatedly along with additional taxes and markups. In the end, you have this jumbled mess where the average consumer thinks you should tax corporations more because they make all the money (not realizing that the consumer actually ends up paying the tax).

Among the supposed benefits to Cain's tax system proposal is that it will be more obvious to the end consumer whether any tax is included in that final price or not.

This is how I understood it as well.

I agree completely with respect to that last point. The demonstrations taking place all around the country prove that point. People can't seem to get it through their heads that corporations don't pay tax - their customers pay tax. Corporations are simply a very lucrative conduit for the government to collect taxes from consumers while playing this little shell game called "Tax the Corporations." But it works, so the politicians will keep on doing it.

Agreed!!!

[WhiteOleander]

I don't really see anyone ever drastically changing the current system. Primarily because of the huge gov't machine now in place to regulate and collect taxes. They can't just shut down the IRS and all connected agencies. Talk about high unemployment!!!! We will all still be sitting at our desk figuring out what does and does not have to be paid to good ole Uncle Sam no matter who gets elected. Someone may change some things here and there, but as they say, "The more things change, the more they stay the same." Just my .02 cents.

[kpangelinan]

I don't really see anyone ever drastically changing the current system. Primarily because of the huge gov't machine now in place to regulate and collect taxes. They can't just shut down the IRS and all connected agencies. Talk about high unemployment!!!! We will all still be sitting at our desk figuring out what does and does not have to be paid to good ole Uncle Sam no matter who gets elected. Someone may change some things here and there, but as they say, "The more things change, the more they stay the same." Just my .02 cents.

There's some truth to this statement, however, I believe the legislation being proposed for the FairTax has something in place for a transition, ie: IRS stays in place for XX years and so forth.

But it would be a monumental task for sure.

[Davc]

Of course, I realize that there are a lot of special interests and voting blocks to which politicians are eager to pander, so they will never simplify the tax rules.

That's not the only reason. The tax code is used as a mechanism to control the economy and behavior.

[Burke]

I haven't looked at his 999 plan, hard to take it seriously. I imagine if he manages to become president he'll have as much luck pushing it through in it's simplified form as Obama has pushing, well, anything through.

I agree. It's great press, but everyone is aware (and he too) that he cannot do anything in regard to this matter by himself. He has to have the support of Congress. Can you imagine 600 members coming up with something simple? It's politics that have brought us the tax code we have now, and Bush II pushed it to a fine art. If they just let all of those cuts expire as they were originally designated, (I purposely did not say intentioned) the natl debt would reduce significantly in 10 years.

[veritas]

Hmmm

I agree. It's great press, but everyone is aware (and he too) that he cannot do anything in regard to this matter by himself. He has to have the support of Congress. Can you imagine 600 members coming up with something simple? It's politics that have brought us the tax code we have now, and Bush II pushed it to a fine art. If they just let all of those cuts expire as they were originally designated, (I purposely did not say intentioned) the natl debt would reduce significantly in 10 years.

did you know spending is up 120 billion this year over last year?

[joanmcq]

I agree completely with respect to that last point. The demonstrations taking place all around the country prove that point. People can't seem to get it through their heads that corporations don't pay tax - their customers pay tax. Corporations are simply a very lucrative conduit for the government to collect taxes from consumers while playing this little shell game called "Tax the Corporations." But it works, so the politicians will keep on doing it.

That is not what the protests are about. The protests are about the enormous payouts to the heads of corporations in wages, bonuses and severance, even if the company is being run into the ground or causes massive disruptions to the world economy. The wealth is being concentrated at the top with no end in sight. The spread in this country between the wage/ salary of the average worker and the CEOs of the same company is at a level not seen since the robber baron era, which launched the banking and other reforms in the 1930s & 1940s. Paying a CEO multi-millions doesn't increase shareholder value or run the company better: in fact it enriches the few at the expense of both the shareholders and the rest of us.

[Jiggers]

That is not what the protests are about. The protests are about the enormous payouts to the heads of corporations in wages, bonuses and severance, even if the company is being run into the ground or causes massive disruptions to the world economy. The wealth is being concentrated at the top with no end in sight. The spread in this country between the wage/ salary of the average worker and the CEOs of the same company is at a level not seen since the robber baron era, which launched the banking and other reforms in the 1930s & 1940s. Paying a CEO multi-millions doesn't increase shareholder value or run the company better: in fact it enriches the few at the expense of both the shareholders and the rest of us.

Similar to paying our representatives in Congress, isn't it? They can't get their act together and come up with a decent plan to help the economy or fix the tax code.

Or paying these highly over-paid sports gods who can't win a game?

[AZ-Tax]

When it comes to political pudits......

I received this email link today and thought it explained the issue a little bit more. When you get into the site, click on the DickMorris.com tab

http://www.dickmorris.com/blog/999-t...v-lunch-alert/

When it comes to political pudits that use to be a Dem and now a Repub OR a Repub and now a Dem, I usually stay clear. To me they just decided to spin their story the opposite way (no, probably not the truth, truth has no spin). Its a spinning money wheel for most of them.

[kpangelinan]

That's not the only reason. The tax code is used as a mechanism to control the economy and behavior.

Uh.....yup! The adjust the code every time there's a way, or the stock market is down, or a major catastrophe happens like a hurricane, etc.

Saw this from the tax foundation.....they had a great write up on the 999 plan.

Under Reagan, more than 45% of the total income tax burden in America came from the bottom 90% compared to today, where it completely flip flopped (no pun intended to our flip flopper politicians) where the bottom 90% now only pay 29.5% of the burden. The top 1% took on 25% of the total tax burden, compared to today's 36.7% share. It's this and other entitlement programs that widen the gap between the rich and the poor, pushing us towards the very definition of socialism. It's just not sustainable in a free market/economy. So, while the bottom 90% have experienced great decreases in their taxes that last 25 years, the Rich have seen huge increases in their taxes, making Cain's plan look like it's benefiting the rich and hurting the poor...it is, but it's bringing it (THE REAL DEBATE I THINK) to more fair levels; THE SAME LEVELS THAT SAW, arguably THE GREATEST PROSPERITY UNDER REAGAN, OUR COUNTRY HAS EVER SEEN.

[David1980]

Uh.....yup! The adjust the code every time there's a way, or the stock market is down, or a major catastrophe happens like a hurricane, etc.

Saw this from the tax foundation.....they had a great write up on the 999 plan.

Under Reagan, more than 45% of the total income tax burden in America came from the bottom 90% compared to today, where it completely flip flopped (no pun intended to our flip flopper politicians) where the bottom 90% now only pay 29.5% of the burden. The top 1% took on 25% of the total tax burden, compared to today's 36.7% share. It's this and other entitlement programs that widen the gap between the rich and the poor, pushing us towards the very definition of socialism. It's just not sustainable in a free market/economy. So, while the bottom 90% have experienced great decreases in their taxes that last 25 years, the Rich have seen huge increases in their taxes, making Cain's plan look like it's benefiting the rich and hurting the poor...it is, but it's bringing it (THE REAL DEBATE I THINK) to more fair levels; THE SAME LEVELS THAT SAW, arguably THE GREATEST PROSPERITY UNDER REAGAN, OUR COUNTRY HAS EVER SEEN.

The change in percentage of taxes paid by the top 1% has nothing to do with tax rates and everything to do with the percent of total income. If you increase the percent of U.S. income that goes to the top 1% while keeping tax rates fixed, they will pay a higher percent of total U.S. taxes. As a higher percent of U.S. income goes to the top 1% you would have to keep reducing their tax rates to keep the percent of U.S. tax paid by the top 1% the same.