Ramesh Ponnuru on Cain's imbecilic "9-9-9" tax plan

[Puppycow]

Ramesh Ponnuru is a conservative commentator who writes for National Review. (BTW, the National Review editorial, Bold, Brash, and Wrong, on Cain's plan is equally critical.)

Here's Ramesh's column: Bad Math Hurts Herman Cain’s Good Tax Intentions: Ramesh Ponnuru

A couple highlights:

Oct. 18 (Bloomberg) -- If you think taxes are complicated now, wait until Herman Cain simplifies them. The former chief executive officer of Godfather’s Pizza Inc., now running for the Republican presidential nomination and selling a book, has been rising in the polls partly because of the appeal of his “9-9-9” plan to reform taxes. At the Bloomberg/Washington Post debate at Dartmouth College last week, he argued that a great virtue of the plan is that it is “simple” and “transparent.”

In truth, the complexity of Cain’s proposal would impress Rube Goldberg.

Poor People Lose

At last week’s debate, Cain claimed that poor people would come out ahead under his plan (Stage Two of it, that is) because they would pay a 9 percent income tax, but the standard 15.3 percent payroll levy would be eliminated. On this point he is deeply mistaken. The earned-income tax credit currently offsets some of that 15.3 percent, and he would abolish that credit. Poor people would also pay the 9 percent sales tax every time they buy groceries or get a medical bill.

Here's the good news though:

An Impossible Plan

Not to worry: There’s also no reason to think the federal government would ever enact Cain’s plan. Even if, per impossibile, Cain were elected president, Congress isn’t going to tell senior citizens that, after having paid taxes on income all their lives, they will now incur extra sales taxes when they spend the money. It’s not going to raise taxes on millions of poor and middle-class people.

This tax would ensure that poor people pay higher tax rates than rich people. Also hurt would be the elderly and folks with young children to raise. Investors would see their taxes go down, way down, because capital gains taxes would be eliminated.

 

[Juniversal]

From the sounds of it there are tons of holes in this policy. Another big problem I foresee (if theoretically Cain was elected and attempted to pass the legislation) is tons of gridlock due to the ambitious and transformative nature of the legislation. It would be political kryptonite since it's unproven as well as being uncharted territory, so I don't see it getting much support from Republicans or Democrats. We would be stuck with Cain without him even having the ability to institute the legislation he was elected on. I imagine at that point the non-economic consequences of electing him would become clear (i.e. a socially regressive, highly partisan and inexperienced President).

EDIT: I see your post addressed the fact it wouldn't pass. Kinda glossed over the first few quotes.

 

[Bikewer]

Every pundit I've heard with an analysis of the plan on my various NPR shows has pooh-pooh'ed it. Taxes raised substantially on the poor and middle classes, and reduced on the rich. Cain was on "Meet The Press" Sunday and hemmed and hawed on these questions. "They'll only pay higher sales taxes on new goods!" says he, "poor people should buy more used stuff."
Oh, that's rich. So Mr. Just-scraping-by needs to go out and buy a used washing machine to avoid the big sales-tax hit, which then shoots craps a year in and has no warranty so....
Cain seems utterly dismissive of the lot of the poor and unemployed. Seems he thinks that since he yanked firmly on his own bootstraps that anybody can.

 

[Cleon]

Every pundit I've heard with an analysis of the plan on my various NPR shows has pooh-pooh'ed it. Taxes raised substantially on the poor and middle classes, and reduced on the rich. Cain was on "Meet The Press" Sunday and hemmed and hawed on these questions. "They'll only pay higher sales taxes on new goods!" says he, "poor people should buy more used stuff."
Oh, that's rich. So Mr. Just-scraping-by needs to go out and buy a used washing machine to avoid the big sales-tax hit, which then shoots craps a year in and has no warranty so....
Cain seems utterly dismissive of the lot of the poor and unemployed. Seems he thinks that since he yanked firmly on his own bootstraps that anybody can.

Then there's the question of what happens to the manufacturing sector when poor people are all buying used stuff....

 

[excaza]

The entire thing is absolute garbage.

My favorite line so far has been the "poor people should buy used stuff" line, as apparently supply & demand doesn't apply to used goods.

 

[mhaze]

Ramesh Ponnuru is a conservative commentator who writes for National Review. (BTW, the National Review editorial, Bold, Brash, and Wrong, on Cain's plan is equally critical.)

Here's Ramesh's column: Bad Math Hurts Herman Cain’s Good Tax Intentions: Ramesh Ponnuru
.....This tax would ensure that poor people pay higher tax rates than rich people. Also hurt would be the elderly and folks with young children to raise. Investors would see their taxes go down, way down, because capital gains taxes would be eliminated.

The main problem with this kind of "static analysis" is that various market factors quickly adjust the differentials. For example, SS payments are indexed for actual cost of living. Assume that Cain's plan was implemented with no changes, then there are numerous items which might show a price change. SS is adjusted for those changes. Well, that's the end of that subject.

Any static analysis is doomed to not reflect reality, as reality is comprised of intelligent adversarial relationships and competition between price and suppliers for buyers.

Color me unimpressed by his analysis.

Also note, that liberals were ALL FOR tax code changes such as were associated with Obamacare. They only talked about the "supposed positive effects".

Now, the effort is to only talk about the "supposed negative effects".

But isn't that because the plan is set forth by a relative conservative?

The point of Cain's plan, it seems to me, is that social programs should not be mixed in with the tax code. Does not mean that social programs don't have a place. Rather, it simply means that once we start monkeying with the code and giving out advantages for special groups, there is no end to that....and you wind up with a total mess such as we currently have.

 

[Bri]

mhaze, you seem to be defending the 9-9-9 plan. Do you think it's a good plan?

-Bri

 

[varwoche]

Supposedly 9-9-9 is "stage two", and it's replaced by "stage three" at some future point. From the article:

Then comes Stage Three, when Cain would throw away the new income tax and the value added tax he created and institute the Fair Tax. That’s a proposal for a retail sales tax of 30 percent that some conservatives have been promoting for years.

However I can't find anything about stage three on Cain's website.

Add: Though Cain does vaguely mention an eventual "Fair Tax" that is apparently the stage three mentioned in the article. He omits details, but repealing the 16th amendment is part of the plan.

 

[Spindrift]

The main problem with this kind of "static analysis" is that various market factors quickly adjust the differentials. For example, SS payments are indexed for actual cost of living. Assume that Cain's plan was implemented with no changes, then there are numerous items which might show a price change. SS is adjusted for those changes. Well, that's the end of that subject.

Any static analysis is doomed to not reflect reality, as reality is comprised of intelligent adversarial relationships and competition between price and suppliers for buyers.

Color me unimpressed by his analysis.

Also note, that liberals were ALL FOR tax code changes such as were associated with Obamacare. They only talked about the "supposed positive effects".

Now, the effort is to only talk about the "supposed negative effects".

But isn't that because the plan is set forth by a relative conservative?

The point of Cain's plan, it seems to me, is that social programs should not be mixed in with the tax code. Does not mean that social programs don't have a place. Rather, it simply means that once we start monkeying with the code and giving out advantages for special groups, there is no end to that....and you wind up with a total mess such as we currently have.

The point of Cain's plan is to increase taxes on the poor and decrease taxes on the rich.

 

[Newtons Bit]

The point of Cain's plan is to increase taxes on the poor and decrease taxes on the rich.

I've seen no evidence of him suggesting that (even if it is the almost certainty of the plan). It seems to me that the point of Cain's plan is to get Cain elected.

 

[Bri]

I've seen no evidence of him suggesting that (even if it is the almost certainty of the plan). It seems to me that the point of Cain's plan is to get Cain elected.

I agree. I've seen no indication that Cain understands the implications of his plan.

-Bri

 

[Unabogie]

I agree. I've seen no indication that Cain understands the implications of his plan.

-Bri

Herman Cain has a degree in mathematics. If his plan guts taxes on rich people (to the point where the Walton family would live tax free) and raises it on poor people, and everyone else can figure that out, it's a little ridiculous to assume he's the only guy in the room who hasn't caught on.

Math guy knows math is the simplest explanation. Cain intends to massively shift the tax burden onto the poor and middle class..

 

[Neally]

The point of Cain's plan is to increase taxes on the poor and decrease taxes on the rich.

Which is about time the poor start paying more for the government services that they use as much or more of.

 

[Spindrift]

Which is about time the poor start paying more for the government services that they use as much or more of.

Why?

 

[keale]

Herman Cain has a degree in mathematics. If his plan guts taxes on rich people (to the point where the Walton family would live tax free) and raises it on poor people, and everyone else can figure that out, it's a little ridiculous to assume he's the only guy in the room who hasn't caught on.

Math guy knows math is the simplest explanation. Cain intends to massively shift the tax burden onto the poor and middle class..

Good point

 

[Neally]

Why?

Because it's the fair thing to do. Everyone should help pay for the government services that we all enjoy.

 

[Spindrift]

Because it's the fair thing to do. Everyone should help pay for the government services that we all enjoy.

So farmers should pay more taxes because of the subsidies they receive?

 

[Neally]

So farmers should pay more taxes because of the subsidies they receive?

Ideally, yes. Parsing out taxes according to benefits and services received becomes unworkable though, so a good alternative is a flat tax like Cains proposal.

 

[Bri]

Math guy knows math is the simplest explanation. Cain intends to massively shift the tax burden onto the poor and middle class..

A mathematician isn't an economist. Neither is an accountant (the degree held by the guy who came up with the plan).

However, there has been enough analysis of the plan (by both conservatives and liberals) that Cain should know the implications by now. I'm not sure if politically he can admit that the plan is a bad idea at this point.

-Bri

 

[Unabogie]

Because it's the fair thing to do. Everyone should help pay for the government services that we all enjoy.

Some of the services are for people who would otherwise be destitute. How would people with nothing pay for services that keep them alive?

Jon Stewart described it pretty well here.

http://www.huffingtonpost.com/2011/08/19/jon-stewart-rips-fox-news_n_931177.html

The most eye-opening part of the Stewart's bit occurs when, like the pundits he's mocking, takes out pen and paper and devises a plan he assumes Fox News would enjoy: The bottom 50% -- which controls 2.5% of our national wealth -- has $1.45 trillion. To raise $700 billion we just take half of everything they own! It's that simple.

So yeah, you could take HALF of everything the bottom 50% has, or you could raise taxes back up the the levels under Bill Clinton. Which seems more fair to you?