Thursday, November 17, 2011

The Silly 9-9-9 Tax Plan

For a Tea Party Nation member, Robert E. Kelly writes some surprisingly sensible things about the tax code. Kelly also is honest enough to point out that Herman Cain's 9-9-9 plan is flawed. Sadly, Kelly' solutions are not realistic.

I regard the Cain proposal as an incomplete idea that should be mixed with others to produce a tax system that will restore America to good government and to prosperity.

A better alternative would be to abolish all existing taxes, to close the IRS as we know it, to eliminate Amendment XVI (the power to tax incomes), to impose the so-called Fair Tax (a national sales tax), and to pursue a constitutional amendment that requires a balanced budget (with an allowance for wars and recessions) and a cap on spending of twenty percent of GDP.

Getting the United States Senate and 2/3 of the states to pass a constitutional amendment is nearly impossible. Congress , the CBO and the Office of Budget and Management would not have any idea what would constitute 20 percent of GDP spending. Estimates on the federal budget to the GDP aren't crunched by economists until after the fiscal year. Economist Bruce Bartlett called this idea the "Dopiest Constitutional Amendment of All Time."

I won't repeat all of my previous criticisms of the balanced budget amendment that can be found in the links. But let me discuss one other thing. The gross domestic product is not a concept defined in law and is revised constantly; from time to time, the Bureau of Economic Analysis revises the GDP data all the way back to 1929. And of course, the 18 percent figure is totally arbitrary; the proposal effectively assumes that all federal outlays consist of funds that are appropriated annually, rather than consisting primarily of mandatory programs such as Social Security, Medicare and interest on the debt. Even if Congress was willing to cut mandatory spending, it is practically impossible to do so quickly unless it is willing to reduce the monthly checks going to current retirees and other actions difficult to contemplate.

In short, this is quite possibly the stupidest constitutional amendment I think I have ever seen. It looks like it was drafted by a couple of interns on the back of a napkin. Every senator cosponsoring this POS should be ashamed of themselves.

Kelly does bring up the point that Cain's 9-9-9 plan is tilted toward the rich.

Again we have the same question: Will a lower tax rate applied to a higher base, plus the elimination of some income, yield a lower tax burden than higher tax rates applied to the existing base?

Cain must be more explicit in his presentation if he expects to sell this plan. I appreciate the dumping of the tax code, but I’m skeptical about his claim that his plan will be beneficial, and to whom? The tilt seems to be toward those with large capital gains and dividend income, and those with large estates. The lure to lower income groups is the elimination of the payroll tax.

Cain’s plan does not speak to those who currently pay no tax because their income is too low.

Good luck on having Cain explain his plan. The truth is Cain 9-9-9 plan is a campaign talking point gimmick just like Rick Scott's 6-6-6 jobs plan. Cain and Scott never had economic experts draw up plans. Cain and Scott put a bunch of political consultants in a room to come up with an easy to remember catch phrase.

As far as Cain's plan being geared to the rich, Cain's campaign is filled with people that have worked for the Koch brothers. The incompetent Chief of Staff Mark Block has never won a presidential campaign. Block has worked for the Koch brothers' funded Prosperity USA. The Koch brothers are using Cain to be a spokesman for their tax agenda. It doesn't matter to them if Cain's tax policies won't fly in the general election. The Koch brothers and the rest of the GOP establishment knows Cain will never get the nomination.

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