9-9-9 and the UK

I just returned from London where one of the topics du jour was Herman Cain.   There is a great deal of fascination about a man about whom little is known on the international stage.   However his 9-9-9- proposal is generating a great deal of debate as to whether it would be feasible.  However, no one can forget that the UK in 1973, under a Conservative Government, added a Value Added Tax (in essence a national sales tax) as a new source of revenue to help offset the cost of the National Health Service and other expenditures.

The people were assured that it would never exceed 10%; as a matter of fact in 1974 the rate was pegged at 8%.   As part of the package personal income tax rates were decreased.

However by 1979 (a mere five years later) and under a Labour Government, the rate was raised to 15%.  The personal income tax rates were also increased.

Today the VAT is at 20%, the personal income tax rates are: 40% of taxable income above $55,650.00 and 50% of taxable income above $230,000.00.    There is little wonder why the British economy is stagnating.

While I admire the simplicity of Mr. Cain's proposal, he must address the long term viability of a national sales tax still coupled with an income tax.  There must be either one or the other or at a minimum require a 2/3 vote of Congress to raise either tax, something that would require a Constitutional Amendment.   To leave both at the mercy of future Congresses and Presidents without a significant braking mechanism is a disaster waiting to happen.

I just returned from London where one of the topics du jour was Herman Cain.   There is a great deal of fascination about a man about whom little is known on the international stage.   However his 9-9-9- proposal is generating a great deal of debate as to whether it would be feasible.  However, no one can forget that the UK in 1973, under a Conservative Government, added a Value Added Tax (in essence a national sales tax) as a new source of revenue to help offset the cost of the National Health Service and other expenditures.

The people were assured that it would never exceed 10%; as a matter of fact in 1974 the rate was pegged at 8%.   As part of the package personal income tax rates were decreased.

However by 1979 (a mere five years later) and under a Labour Government, the rate was raised to 15%.  The personal income tax rates were also increased.

Today the VAT is at 20%, the personal income tax rates are: 40% of taxable income above $55,650.00 and 50% of taxable income above $230,000.00.    There is little wonder why the British economy is stagnating.

While I admire the simplicity of Mr. Cain's proposal, he must address the long term viability of a national sales tax still coupled with an income tax.  There must be either one or the other or at a minimum require a 2/3 vote of Congress to raise either tax, something that would require a Constitutional Amendment.   To leave both at the mercy of future Congresses and Presidents without a significant braking mechanism is a disaster waiting to happen.

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