13 October 2011

Simple Math

A lot of people are talking about Herman Cain's elegantly simple '9-9-9' plan. For the uninitiated, '9-9-9' refers to an easy, straightforward taxation plan to replace the current, extremely complex US tax code, with a flat 9% tax on corporate earnings, personal income and sales. Republicans love it. And well they should: it would constitute a huge shift in the tax burden from their constituency (the rich) to everyone else (the other 90% of America). When asked about this fact on NPR today, Cain dismissed such questions as 'playing the class warfare card'. How is math playing any kind of card? If you lower the tax rate on the wealthiest Americans and partially fund that with a sales tax, that is a huge tax cut for the rich and a huge tax hike for everyone else. Why? Because everyone else has to spend a far greater share of their income on everyday needs that are (wait for it)...subject to the new sales tax. If you are wealthy, only a small portion of your income goes to things like food, shelter, clothing, dining, etc., so a sales tax doesn't hurt you as much. Most of your money goes into investments, real estate, savings, etc. And if you have a taste for something really expensive and want to duck the 9% sales tax, you could always get it overseas.

What frustrates me so much is that Americans have such short memories. Steve Forbes and the late Jack Kemp were always droning on about a flat income tax in the 1990s. It was the whole basis for Forbes's failed bid for the Republican presidential nomination in 1996, and Kemp picked up the banner soon thereafter. A scant 15 years later, we all act like this is some radical new idea and have completely forgotten why we rejected it to begin with. And it makes even less sense today, with the middle class squeezed even harder and poverty on the rise. The last thing we need in a country that is already seething with mass protests over inequality, is a mechanism to transfer even more wealth from the lower 90% to the upper 10%.

I concede our current personal income tax code is overly complex and in need of reform. And I have said before that we'd be better off completely getting rid of corporate taxes. But 9-9-9 is not the answer. Its a recipe for an even more unequal America.

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