Herman Cain’s Peculiar 999 Plan

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:

 – individual;
 – 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!)

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30 Responses to “Herman Cain’s Peculiar 999 Plan”

  1. Money Beagle says:

    Most middle class, lower class, and seniors would pay more under the program. It’s nutty that people are actually embracing him. I think that Obama is praying that he gets the Republican nomination, because once it really gets out what he is proposing, there’s no way the majority of Americans would vote for him, so Cain’s nomination pretty much would ensure Obama’s re-election.
    Money Beagle recently posted..How To Always Know What’s Going On In Your OfficeMy Profile

    • aloysa says:

      I think no matter who gets nominated, that nominee would benefit Obama in this election. ;)

      • Stephen says:

        Not if it was Ron Paul. He could point out Obama’s blatant hypocrisy on the wars and economy while highlighting his record on both. And how about abolishing the income tax and replacing it with nothing? And abolish the Federal Reserve while we’re at it. After all, both of those institutions are planks of the Communist Manifesto. They don’t belong in America.
        Stephen recently posted..Hard Money Lending RatesMy Profile

  2. Point number 3 is huge. I have no idea why so many people are in favor of this plan – especially those with low incomes. These people must not realize that this would cost them thousands of dollars per year. If nothing else, this is a sure sign of how money-dumb some people are.
    Jeremy @ Personal Finance Whiz recently posted..How To Grocery Shop On A BudgetMy Profile

    • aloysa says:

      Those people who are in favor of his plan don’t really understand what is behind his proposal. They should take a closer look, do some research and run some numbers. They would be outraged.

  3. PKamp3 says:

    You’re poking a hornet’s nest, which is awesome. Add a fourth bullet: why doesn’t Cain stress the fact that he was the Deputy Chairman of the Board at the Federal Reserve Bank of Kansas City? Perhaps with all the ‘End the Fed’ talk from the Tea Party, he’d rather not mention his involvement.

    The plan itself definitely has some strong backing, with Arthur Laffer (a Conservative hero and architect of the Reagan tax plan) lining up behind it. The problem would be creeping sales tax rates – most countries that enact a national sales tax (read: VAT) end up increasing it over time. The VAT is a sneaky way to raise revenues, since the price is built into everything you buy. The odds of a sales tax staying at 9% are low – plus sales taxes are regressive. Even though ‘the rich’ spend more money in aggregate on goods than ‘the not-so-rich’, the ‘not-so-rich’ spend a higher percentage of their income. Makes one wonder about those 9+% sales taxes in Progressive California, no doubt!

    As far as the business taxes, they are a sneaky way to tax the investor class, which is “Politically Okay”. Since investors usually have a decent amount of money, this probably even helps the plan. Most people don’t understand that these taxes will be passed on to either the business owners (or shareholders), or passed through to the products. Fine – at least it’s better than the crazy loophole-ridden 35% tax now, that allows some companies to pay 0% while small companies can’t get that sort of break.

    A flat tax has it’s benefits – it is strictly progressive, (for people that are into that sort of thing) and hits people with more income with a higher percentage. It’s all about the size of the deduction in this case… someone making $1,000,000 will be paying almost the full percentage with a deduction of $50,000, while someone making $50,000 will pay nothing with that deduction. You’ve got to choose wisely though – the amount of the deduction will make a huge difference in the revenue numbers.

    It’s interesting to see flat taxes on both sides of the aisle – I’d prefer one that didn’t add a whole new sales tax to the United States, although in theory whatever you tax you will reduce (Tax income? People will have less incentive to earn more. Tax consumption? Less incentive to buy things. Which is better?). It’s too hard to get there from here, so something like what Jerry Brown ran on in 1992 (a flat tax of 13% as a Democrat!) would probably be better – and I think Rick Perry’s plan is closer to the Jerry Brown standard.

    I look forward to the other responses!
    PKamp3 recently posted..Mortgages vs. Inflation: The Real Mortgage Rate is Historically Low…My Profile

    • aloysa says:

      Very interesting. Somehow I missed the fact that Cain was the Deputy Chairman of the Board at the Federal Reserve Bank of Kansas City. This fact alone makes his situation so much more… entertaining. :)

  4. […] is Yourself.  I’ve found this especially true on several occasions.My Broken Coin looks at Herman Cain’s Peculiar 999 Plan.  If you’ve wondered what all the hype is about, read this.Finally, Punch Debt In The Face […]

  5. Charles says:

    I don’t think the plan will go anywhere. It’s too much change all at once. But we’ll see. Interesting ideas though.
    Charles recently posted..Older People are Wealthier Than Younger PeopleMy Profile

  6. What bothers me is that his plan ignores state and local taxes. In California, my sales tax rate would go up to almost 18% with his plan. Talk about killing consumption. He is basically shifting the tax burden, not really changing or fixing the spending problem.
    Robert @ The College Investor recently posted..November Reading Round-UpMy Profile

  7. Agree with Robert on the sales tax side of things. Local and state government would be forced to find other tax options to minimize it’s sales tax. Where I’m from, Chicago, sales tax is already at 9.75%. Toss another 9% on there and the low to middle income earners couldn’t afford to buy groceries let alone shop for anything else. Tax on $100/week in groceries would add up to $975 a year. Insanity.

    As far as the other two 9s, I’m all for a flat tax and redoing an overly complicated tax system, maybe at the 15% area to alleviate the sales tax burden. But for now it’s just a catchy campaign slogan.
    JP @ Novel Investor recently posted..401k Contribution Limits Finally Increased For 2012My Profile

  8. We already have a 9% state income tax here so we’ll get 9-9-9-9. Yeah, not good.
    There is no way he would get the nomination. Now that people are taking a closer look at him, the seams are coming apart.
    retirebyforty recently posted..October 2011 Cash FlowMy Profile

  9. Running a company vs running a nation is so different. See this country’s income sheet. 30% can become 25% with a drastic cut, but it can’t be 9%..although I haven’t read him in detail yet.
    SB @ One Cent At A Time recently posted..Living Well on Less Than $10,000 a Year: Habits of Skilled Visa WorkersMy Profile

  10. I’ve spent years with people debating how best to run the tax system. You know what? I don’t know of a way to make taxes good. That’s really the problem with coming up with any of these schemes.

    For informational purposes, the first part has been proposed by democrats as well. Also democrats have called for VAT taxes, which aren’t all that different than a national sales tax.
    Shaun @ Smart Family Finance recently posted..Comment on 50 Words on Taking a Trip to Vermont by 20’s FinancesMy Profile

  11. Thanks for laying out the details. I haven’t even had a chance to really dig into what he was proposing. It sounds like a bad idea. Let’s just do away with all tax and government! lol
    Financial Success for Young Adults recently posted..CEOs With Golden ParachutesMy Profile

  12. Buck Inspire says:

    Great post, do we get a pizza with that? Perhaps he is tapping into his marketing expertise from back in the day, but what does that say about the general public who pushed him to the top? Does eye catching slogans beat sound tax policy reform?
    Buck Inspire recently posted..BlogWorld Business Card Challenge ResultsMy Profile

    • aloysa says:

      I think those who support him, don’t really understand how the numbers work. All they see is a flat tax, reduced rates and a catchy slogan.

  13. 101 Centavos says:

    Cain is one candidate that would me write in another name on the ballot. His $9.99 is economically asinine.
    101 Centavos recently posted..Does Herbalife Have a Deal for You!My Profile

  14. Carnival of Personal Finance #335: Get A Prenup Edition says:

    […] from My Broken Coin presents Herman Cain’s Peculiar 999 Plan. Aloysa – “Read more about how someone with absolutely no experience in elected office […]

  15. […] My Broken Coin: Herman Cain’s Peculiar 999 Plan […]

  16. Generally speaking, big bold brash plans almost never get political approval — it’s hard for the President to get Congressional approval for such a game-changer — but they’re great for sparking the conversation. I think that’s what he’s trying to do; spark conversation.
    Paula @ Afford Anything recently posted..Travel the World for the Price of a HondaMy Profile

    • aloysa says:

      Well, he sparked a lot of different conversations all right. :) We will see if those conversations will have any meaningful conclusions.

  17. […] for some strict legislation on tax reform. After the recent issue with the debt ceiling and now Cain’s 999 plan, Americans are left wondering how we as a country are going to get out of this financial burden. […]

  18. What the nation needs is the Fair Tax. Check it out at Fairtax.org. It’s a consumption tax but is incorporated in the final price of goods and services.

  19. […] see? Then you may want to subscribe to my RSS feed. Thank you for visiting!Herman Cain proposed his peculiar 9-9-9 tax plan with a flat 9 percent tax on personal income and businesses. Rick Perry tried to push his […]

  20. Weekend Roundup: November 11, 2011 – Baseball Free Agency Edition | Money Beagle says:

    […] My Broken Coin – Herman Cain’s Peculiar 9-9-9 Plan […]

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