What does Cain's 9-9-9 Plan Do, and Will the Plan Work?

Harvey M. Sheldon

Republicans need to understand and believe that a candidate's programs make sense, before  that candidate  is nominated and chosen to be their candidate for President.  As a registered Republican I am intrigued by the apparent popularity of Herman Cain.  He is a well-spoken, very intelligent man and he has a record of considerable accomplishment in terms of financial acumen, analytical and business skill.  He proclaims a 9-9-9 Plan.  Wondering what it entails, I went to his official campaign Website to learn. 

It is explained there as follows for its initial phase:

"Phase 1 - 9-9-9

  • Current circumstances call for bolder action.
  • The Phase 1 Enhanced Plan incorporates the features of Phase One and gets us a step closer to Phase two.
  • I call on the Super Committee to pass the Phase 1 Enhanced Plan along with their spending cut package.
  • The Phase 1 Enhanced Plan unites Flat Tax supporters with Fair tax supporters.
  • Achieves the broadest possible tax base along with the lowest possible rate of 9%.
  • It ends the Payroll Tax completely - a permanent holiday!
  • Zero capital gains tax
  • Ends the Death Tax.
  • Eliminates double taxation of dividends
  • Business Flat Tax - 9%
    • Gross income less all investments, all purchases from other businesses and all dividends paid to shareholders.
    • Empowerment Zones will offer additional deductions for payroll employed in the zone.
  • Individual Flat Tax - 9%.
    • Gross income less charitable deductions.
    • Empowerment Zones will offer additional deductions for those living and/or working in the zone.
  • National Sales Tax - 9%.
    • This gets the Fair Tax off the sidelines and into the game."

I frankly need someone to explain the Plan and its initial phase better than Cain's website does. Does the tax on "gross income" include a tax on money paid for expenses such as payroll?  The choice of the word "investments" to characterize deductibles from gross income is usually indicative of capital good purchases or investment in another company.  My wonderful wife believes 9 percent on Gross Income means you just take 9 percent off the top, period. 

That latter notion is a readily understandable proposal, but, it is not stated that simply, and as stated, does it really work for all business enterprises?  If you are a company with a high cost of production, and your production costs are not all deductible (since, or if, they are not all "investments") you may not have any profit left after  paying all your costs, especially if you took nine percent off the top of every dollar you received and sent it to Uncle Sam.

His nine percent national sales tax is another stunner.  I already pay almost ten percent sales tax on purchases in Chicago.  Does the Cain proposal mean that my sales tax essentially doubles?  It seems to mean that, and I have to wonder whether that price increase really will help boost the economy.

As best I can tell his "Super Committee" reference means the special committee set up by the last minute bill that authorized the hike in the debt ceiling, a couple of months ago and avoided federal agency shutdowns.  With all due respect, I doubt that we can realistically place much reliance on that group to make the sort of breakthrough Mr. Cain hopes for, or any breakthrough, for that matter.

In short, let's not let enthusiasm get ahead of understanding the facts about Mr. Cain and his ideas.  As a former Chairman of the Federal Reserve Bank of Kansas City, I suspect he has a clearer explanation of 9-9-9 than his website provides.  He intends it as a transition phase to a fair tax, but since when have tax changes been swift and temporary taxes ever been kept temporary by Congress?  Meanwhile, I hope Randall Hoven or one of the other more regular economics commenters on American Thinker will weigh in on the 9-9-9 plan.   Would it really get government off our backs and energize the economy?  How much money could it be expected to raise?  Aside from its catchy title, might it not make more sense for Mr. Cain simply to say he favors wholesale revision of the business and personal tax structure in the United States, with lower flat and fair rates, to revive the economy?  

And how about some good old-fashioned zero-based budgeting for every single federal department?

Republicans need to understand and believe that a candidate's programs make sense, before  that candidate  is nominated and chosen to be their candidate for President.  As a registered Republican I am intrigued by the apparent popularity of Herman Cain.  He is a well-spoken, very intelligent man and he has a record of considerable accomplishment in terms of financial acumen, analytical and business skill.  He proclaims a 9-9-9 Plan.  Wondering what it entails, I went to his official campaign Website to learn. 

It is explained there as follows for its initial phase:

"Phase 1 - 9-9-9

  • Current circumstances call for bolder action.
  • The Phase 1 Enhanced Plan incorporates the features of Phase One and gets us a step closer to Phase two.
  • I call on the Super Committee to pass the Phase 1 Enhanced Plan along with their spending cut package.
  • The Phase 1 Enhanced Plan unites Flat Tax supporters with Fair tax supporters.
  • Achieves the broadest possible tax base along with the lowest possible rate of 9%.
  • It ends the Payroll Tax completely - a permanent holiday!
  • Zero capital gains tax
  • Ends the Death Tax.
  • Eliminates double taxation of dividends
  • Business Flat Tax - 9%
    • Gross income less all investments, all purchases from other businesses and all dividends paid to shareholders.
    • Empowerment Zones will offer additional deductions for payroll employed in the zone.
  • Individual Flat Tax - 9%.
    • Gross income less charitable deductions.
    • Empowerment Zones will offer additional deductions for those living and/or working in the zone.
  • National Sales Tax - 9%.
    • This gets the Fair Tax off the sidelines and into the game."

I frankly need someone to explain the Plan and its initial phase better than Cain's website does. Does the tax on "gross income" include a tax on money paid for expenses such as payroll?  The choice of the word "investments" to characterize deductibles from gross income is usually indicative of capital good purchases or investment in another company.  My wonderful wife believes 9 percent on Gross Income means you just take 9 percent off the top, period. 

That latter notion is a readily understandable proposal, but, it is not stated that simply, and as stated, does it really work for all business enterprises?  If you are a company with a high cost of production, and your production costs are not all deductible (since, or if, they are not all "investments") you may not have any profit left after  paying all your costs, especially if you took nine percent off the top of every dollar you received and sent it to Uncle Sam.

His nine percent national sales tax is another stunner.  I already pay almost ten percent sales tax on purchases in Chicago.  Does the Cain proposal mean that my sales tax essentially doubles?  It seems to mean that, and I have to wonder whether that price increase really will help boost the economy.

As best I can tell his "Super Committee" reference means the special committee set up by the last minute bill that authorized the hike in the debt ceiling, a couple of months ago and avoided federal agency shutdowns.  With all due respect, I doubt that we can realistically place much reliance on that group to make the sort of breakthrough Mr. Cain hopes for, or any breakthrough, for that matter.

In short, let's not let enthusiasm get ahead of understanding the facts about Mr. Cain and his ideas.  As a former Chairman of the Federal Reserve Bank of Kansas City, I suspect he has a clearer explanation of 9-9-9 than his website provides.  He intends it as a transition phase to a fair tax, but since when have tax changes been swift and temporary taxes ever been kept temporary by Congress?  Meanwhile, I hope Randall Hoven or one of the other more regular economics commenters on American Thinker will weigh in on the 9-9-9 plan.   Would it really get government off our backs and energize the economy?  How much money could it be expected to raise?  Aside from its catchy title, might it not make more sense for Mr. Cain simply to say he favors wholesale revision of the business and personal tax structure in the United States, with lower flat and fair rates, to revive the economy?  

And how about some good old-fashioned zero-based budgeting for every single federal department?