Herman Cain's 9-9-9 scam will be the death knell for The FairTax. Cain can promise the moon to voters but Congress could very well decide not to reintroduce The FairTax as a bill after enacting his hybrid federal income tax/national sales tax phase one because they will want to keep the additional tax stream in his hybrid phase one that would otherwise be eliminated in his phase two with The FairTax.
The sales tax portion of Cain's hybrid phase one will become a VAT due to the income tax portion. Companies will pass on the cost of paying their income taxes and compliance costs to consumers at each stage of production just as they do with the current federal income tax code. The tax people pay on consumption will be far higher than 9% but they won't they won't realize it just as they don't currently.
Cain has stolen elements of The FairTax, that he supported for years as the only alternative to the federal income tax prior to declaring his candidacy, and led people to believe they are his own ideas. He couldn't be more disingenuous and deceptive to the people.
It is truly stunning to see FairTax supporters so willing to buy the bill of goods Cain is selling with his 9-9-9 scam.
As Dan Hunt just wrote, it is very difficult to understand why Fair Taxers would be willing to substitute an unproven, untested theory in place of the well studied Fair Tax. Cain has yet to release a detailed written version of his proposal. So answers are not even available to the many questions that many of us have about his proposal.
If you've followed the national sales tax movement for any length of time, you would have come to the conclusion that major changes in the tax system are almost non-existent. The Cain plan wants to make major changes two times. I do not think that it has ever happened before and there is no reason to believe that it will happen in the future. Even if it passes and Cain is a good guy who manages this new tax system with fiscal responsibility, there will be a time when he is no longer President. At that time, the new Obama 2 will use every possible revenue source that is at his disposal.
If a sales tax is approved on top of an income tax, we will be stuck with both. That is why the Fair Tax Bill has a provision that requires the banishment of the 16th Amendment within seven years after Fair Tax begins.
I saw a press release where Cain said that the way to compensate for the poor people who will have increased taxes will be to let them have a 3-3-3. He does not make it clear who will decide the criteria to get the 3-3-3. All of a sudden, the tax is no longer a flat tax. Lobbyists will have a field day with this complexity.
The flat income tax portion is not as simple as it sounds. The Gross income flat tax would be unworkable for a business. For example, if a business sells a computer for $500, they would have to pay a 9% gross income tax on the $500 gross ($45). In addition, they might have paid 70% (or $350) to buy the computer for resale. Then it might have costed them another 25% ($125) for expenses to open the doors to his business. The business would lose $20 on each computer sale (70% + 25% + 9% = 104%). It would pay 104% for every 100% received. It does not work.
Or, maybe Cain is taxing the net ($25) and not the gross ($500)? In that case, the complexity of determining what to deduct and what not to deduct, in addition to the bookkeeping expenses, would not be of any advantage to most small businesses.
Now - the sales tax. Cain has already implied that 9-9-9 is a sliding number, based on the poverty level of the taxpayer. And he is already talking about exemptions for certain new retail items that should not have a sales tax. Who gets to determine these exempt items? More work for lobbyists? That means that it will still be necessary to measure and audit income to ascertain a persons poverty level.
This does not sound simple to me. It is a complicated mess.
The 9-9-9 plan is a marketing ploy that does not add up. It is untested, unproven, and does not have the years of studies that led to the current Fair Tax. Nor are there any sponsors in Congress for 9-9-9, although Fair Tax is becoming well known.
I have an idea. Is there someone from Fair Tax who can contact Cain and ask him to write an article on FairTaxNation to explain his system in detail and why he does not start with his phase 2 (Fair Tax) immediately?
I guess it boils down to whether or not we can blindly trust Herman Cain. I met him (almost) years ago at a Norfolk Talkfest while I worked the FairTax booth in the lobby. Perhaps I give him more credit than I should, especially since I agree with Neal Boortz, that Cain can most likely beat Obama (unless maybe if Obama names Hillary as VP).
At least his 999 plan is having people talk about sales tax, which might get them thinking about having a sales tax alone.
There's also talk about the likelihood of jumping to the FairTax in just one step. It might take longer to jump to it in one step, than to take an intermediary step.
I agree with your assessment of the 9-9-9 plan.
For everyone who is negative on the plan ask yourself this; Is it better than the current tax code? Of course, it is magnitudes better.
A 9% corporate tax is of course going to be passed on to the consumer, but thats better than the current 25%. And that is not like a VAT, a VAT is much more insidious. Its included to make it possible to pass the congress. Obviously many people are anti-corporation and will not support it without some sort of corporate tax include (even if they are misinformed).
I believe the FairTax is the best solution, but its time to get honest. Despite all the work, the FairTax is no closer being passed than it was 5 years ago. 9-9-9 has a much easier path (although difficult), and it does blaze the way to the FairTax. After 9-9-9 causes an economic boom, it will be much easier to sell the FairTax outside of the media spin (as they would no longer have any arguments).
The FairTax is far closer to becoming law than Cain's 9-9-9 scam. There is no guarantee scrapping his already existing phase two, in order to implement his phase one from scratch only to reintroduce phase tow from scratch is far less likely than continuing with The FairTax.
Add to that fact, it has been 98 years since the last fundamental change in the tax code. Cain expects people to believe he can influence Congress to make two fundamental changes in no more than eight years, assuming he serves two terms. That reduces the chance for The FairTax ever being passed through his scam to near zero.