This post was featured as one of the Editor’s Picks in Carnival of Personal Finance #335: Get A Prenup Edition.
While some bloggers are engrossed with the Occupy Wall Street movement, I got pre-occupied with the former Godfather Pizza CEO Herman Cain. My curiosity is not based on Cain’s sexual harassment trouble, even though I think that this particular predicament is another peculiar point in Cain’s debacles.
What interests me the most in Cain’s case is the fact that having absolutely no experience in elected office, this man managed to capture the minds of conservative America, rising in the polls. His proposed 999 plan sounds like a pizza price promotion to me. Wasn’t there a Domino’s pizza promotion some time ago that offered a 5-5-5 slogan?
The reasons of my pre-occupation with Cain’s plan are much simpler than his plan:
- I am amazed how fast he got propelled to the front of GOP party;
- I am amazed how fast he got propelled to the front of GOP party, promoting a plan that doesn’t make any sense (at least to me);
- I am amazed how fast he got propelled to the front of GOP party, promoting a plan that doesn’t make any sense and fiercely sticking to it.
In my amazement with all of the above, I decided to take a closer look at the substance of Cain’s 999 plan. I wanted to understand if this plan is a showcase of Cain’s political naiveté or there is, after all, something significant behind his proposal.
The following three factors of Cain’s 999 methodology bother me the most:
1. Get rid of the entire federal tax code. I bet a lot of people are liking this idea. I even can hear some cheers. Not so fast, folks! Those of you who are cheering for virtual elimination of federal tax code, should realize that all those credits and deductions that you are using to reduce almost to zero your income taxes, would be eliminated as well. What it means for you and me is that the exemptions that keep our cost of living from being taxed will be eliminated. Still cheering?
2. Impose 9% tax on:
- corporate income;
- national sales tax.
What it means, according to Cain, is that the top tax rate for individuals and business would be reduced from 35% to 9%. I can hear the applause of those who believe that being liberated from these horrible 35% tax, corporations would immediately start creating jobs and increasing salaries. I can hear loud cheers again. And let me say it again. Not so fast, folks. What kind of job creation are we talking about? Somehow, I think we are not discussing high paying jobs for the average American. What would be the incentive for corporations to keep the jobs under Cain’s plan? None. Corporations more than anything are concerned with their bottom lines and not job creation. Would you and me benefit from any of it? I don‘t think so.
3. The plan ignores one big and important part of the US population. Cain’s 999 plan does not take into account those who are in the low tax bracket, those who live on a fixed income, those who live from one social security check to another. I am talking about our seniors. Their tax burden is low today. Many of them don’t pay federal income tax because their income is not high enough. However, under Cain’s plan, whatever income they receive (and some of our seniors do not receive much) would be taxed at 9%. But this is not all. They would go to stores, buy clothes or groceries and pay 9% in sales tax. Their purchasing power would diminish. Their standard of living will go down. Is that how our seniors who worked hard all their lives pictured their retirement? I really doubt it.
A lot of statements don’t make sense. So why does a former pizza executive and his plan get so much attention everywhere? (Including this blog!)