I'm not sure how I feel about the 9-9-9 plan yet. I'm pretty sure it will raise my taxes I pay each year, but i'm not sure if that should matter. I'd rather look at what's best for the country, rather than what's best for my own personal finances.

So far though, it seems like all the opponents of the 9-9-9 plan have been pushing me toward it. Maybe it's because I like Herman Cain so much, it's push back against those who criticize him? I'm not sure. What I do know is that more things Hugh Hewitt says against it, the more I like it.

As to what you wrote about, I believe you're in error.

The first error, I believe, is comparing it to a VAT. Or maybe I just misread you. I know you said it wasn't, that a VAT was worse, but it seems like you were making the connection above. Just for clarity sake, it's not a VAT.

Moving on. How would I know here in Washington State if the tax went up or remained the same (Down is never an option with taxes).

For one, I pay attention.

But, most people don't. Here's the kicker though with his tax. It's only on new products. Not on used goods. This would be immediately recognizable on something like the purchase of a new car vs a used car. I bought a used car recently and I still had to pay 2k in taxes to Washington State. Under the Herman Cain plan, I wouldn't have paid any taxes to the Federal Government. On the other hand, I go in and purchase brand new, I pay the extra amount.

Does that hurt new car sales? It might.

But that's the beauty of a tax like this. If it becomes too outlandish, we can always buy used goods and avoid the tax.

This means that the government clearly hurts itself by making the tax too punitive. Not only does it hurt itself, it hurts the rest of the economy.

We have an electorate (Tea Party) that has brought a lot of attention to taxation in the United States. Suddenly, we started talking about how much to cut taxes.

So, I think it would be harder than you think to raise from the 9% and I think there is a possibility that if it collected more money than expected, it could be lowered as a "stimulus".

Not that this will convince you, Dafydd, but the Club for Growth has endorsed Cain's 9-9-9 plan.

http://lonelyconservative.com/2011/10/club-for-growth-endorses-herman-cains-9-9-9-plan/

I don't see a 9-9-9 system being useful; it has all the overhead of a completely income tax system, plus all the overhead of a corporate tax, plus all the overhead of a sales tax.

However, are you joking about writing checks? Income tax is constructed of necessity in such a way that you DON'T write checks. The system depends on most people receiving a refund most of the time. Withholding is the characteristic evil of the system, and there's no way around it.

A sales tax system is FAR more transparent, especially one built the way all of the state systems I've seen are built (with a tax percentage you have to know because all prices are required to be listed without tax). It's possible that the system might be modified to not work that way, but it would take politicking to change from the currently normal way of doing things.

Now, I'm especially surprised you think this, because you live in CA, and you know how our sales tax works, complete with the fact that we have county-level and metropolitan variations in our sales taxes.

I do admit that the "Fair Tax" has problems, although I also think it's far superior to what we have now. But any way we do it, we won't fix our tax problems until we manage to switch to some kind of consumption tax, instead of our insanely awkward so-called "income tax" (which is impossible to define, hence the controversy about capital gains, gifts, death taxes, and so on). Not to mention the problems with undocumented people like illegal aliens and under-the-table payments.

-Wm

Wtanksleyjr:

However, are you joking about writing checks? Income tax is constructed of necessity in such a way that you DON'T write checks. The system depends on most people receiving a refund most of the time. Withholding is the characteristic evil of the system, and there's no way around it.

Do you file a 1040 form? Everybody who makes more than a very small amount during the year must do so (or 1040 EZ). Take a look at line 60: That tells you the total income tax you paid.

Everybody who fills out the form, whether by hand or by some software like TurboTax, anticipates line 60 with dread. If it turns out that we already paid more than we owe, we're relieved; if we still owe even more tax than we paid, we're devastated -- and scared we might not be able to pay. But there's no getting around knowing exactly how much income tax you paid (and how much SE tax, if you have a business).

But with the sales tax, you have no idea at the end of the year how much NST you paid, unless you're anal enough to keep a record of every purchase you made and the tax assessed; nobody here in California sends me an itemized receipt for my CA sales tax... do you get one of those?

Over the last couple of years, CA sales tax was jacked up; there was very little outcry from Californios -- why not? Well, because you only knew about the increase if you paid attention to the news (which most people don't). If the state income tax had gone up as high a percent as the sales tax (a 16% increase), I think many, many more people would have noticed; they would have realized they had to pay more on April 15th, or that their refund was significantly smaller than last year's.

Bottom line to all commenters: I do not trust the government not to raise the sales tax once implemented. I do not trust them to make NST raises transparent; I expect they will do everything they can to make it as opaque as possible.

I do not trust the feds to make the new tax scheme "revenue neutral;" I don't see how they could possibly resist tossing in a percent here and there to raise it.

In my opinion, the only tax plan that would work would be a straight-up reduction in corporate and income-tax rates, coupled with a Paul Ryan-like slashing of spending.

No entirely new way of taxing Americans until we first reduce taxes, because I do not trust our government. Remember what happened the last time Republicans were in charge of the whole shebang?

Let them first demonstrate that they have learnt from the horsewhipping they got in 2006 and 2008... and then maybe I'll support some radical change to taxing us.

Dafydd

Dafydd, I'm dead certain that most people never notice line 50. The only line that matters is the one that tells you what to mail in, and what to wait for. I've filled out forms in every possible way; by hand, by PDF, by software, and via professional; but I've never really noticed the moment of decision (line 50), because it's not a decision I EVER get to make. It's just another number on another form.

I notice my paychecks; I sometimes have to re-compute my yearly salary and/or takehome; and I know my local sales tax (and one or two neighboring ones). I have NO idea how much income tax I'll owe, even in general; and I'm fairly sure that the only people who bother knowing are people who are gaming the withholding system (long life and prosperity to them).

OTOH, I agree entirely that I don't trust the 9-9-9 proposal. It's a MORE complex system, with more opportunities to finesse. I love Cain for trying, but I don't think he came up with a good idea.

-Wm

Oh, I forgot to mention: "In my opinion, the only tax plan that would work would be a straight-up reduction in corporate and income-tax rates, coupled with a Paul Ryan-like slashing of spending."

What is needed is a total replacement of our current system with a system that works on principle, rather than on a complex system of exceptions. Roll ALL of the government programs into a single bill (no more separate programs for Social Security and so on); and tax on that. The principle involved should ideally be that we tax consumption; even if we use an income tax that's possible (see TheMoneyIllusion blog), even though a sales tax is obviously a MUCH more natural choice.

Implementing something like this, as wonkish as it is, will reduce the cost of compliance enormously, putting a ton of tax preparers and enforcers out of business. That's a sector of the economy that could stand to lose some weight.

-Wm

Let's just presume for a moment that as a policy matter, Mr. Cain is correct, and that we should abandon our current revenue-raising system in favor of his 9-9-9 plan. Let's leave aside our objections over such matters as whether sales taxes/VATs are regressive, or whether they make it too easy for the government to raise taxes in the future. Let's join in Mr. Cain's optimistic assumptions about how the economy's better performance would make up any revenue gaps between his plan and what's currently in place. Just assume with me for a moment, in other words, that we all want the kind of reform Cain proposes, where we go to a flat tax on businesses, a flat tax on individuals, and a flat national sales tax.

And assume we set out to figure out the optimum rates for each of those three kinds of flat-rate taxes, to accomplish a Goldilocks ("just right") combination of those three.

What are the odds that the optimum number for each of these three types of taxation -- each very different from one another -- would happen to be the very same single-digit integer?

This isn't economics. It's a gimmick. This is national economic "plan" that was obviously reverse-engineered from a catchy slogan.

Mr. Cain can't tell you why 9-9-9 would be better or worse than 8.311 - 12.897 - 5.135. No one's ever run the numbers on anything except 9-9-9 because those are the numbers that had to be accepted in order for the name to be catchy.

I'm in favor of big, bold reforms. I'm very wary of either a national sales tax or a national business VAT for the same sorts of reasons Dafydd has mentioned. But I'm not going to bother taking seriously something this gimmicky; it's not serious enough to trigger a discussion on any of the policy pros and cons of these kinds of taxation in general, because this plan is tied to rates that can be easily chanted by a crowd/mob.

Should have ended with "because this plan is tied to rates that were picked specifically and solely because they can be easily chanted by a crowd/mob."

Beldar:

This is bizarre: Your point is so obvious -- the absolute best possible rate for income, corporate, and sales tax just happens to be 9% in each case by sheer coincidence! -- yet I swear it never even occurred to me until I read your comment.

I never cease to be amazed by how focusing on point A can completely blind one to equally obvious point B. Yeesh.

So... what Beldar said!

Dafydd

Ping: "Beldar on Herman Cain's 9-9-9 plan."

The Harvard Business School study estimated that about 30% of the cost of items is due to the taxes and the avoidance of taxes. A $1 loaf of bread would cost $0.70 without the taxes already built into the price. 7% state plus 9% federal is still less than the current cost. Throw in the cancellation of the 15% fica and ss taxes plus the reduction to 9% income tax, and you are making major money on the project.
Please stop confusing a RETAIL tax with a VAT. They are totally different.
The receipt you get at checkout shows the sales tax. It could easily show the state sales tax as one amount and the federal tax as a separate amount. People would notice.

I see that I am late to the party, but I want to reinforce Wm's comment in re Line 60 on the 1040. As a financial planner, I can tell you that most people are unable to tell you how much total tax they paid. However, they can tell you to a penny how much of a REFUND they received! (Or, much less common) how much more they had to pay.) The insidious effect of the withholding system is to blind people to their total tax bill. Other than that minor quibble, however, I think Dafydd is right on the mark in his assessment of the 9-9-9 idea.

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