The Fuzzy Math of 9-9-9
Maiello, Michael, Newsweek
Byline: Michael Maiello; Michael Maiello is a writer and journalist in New York.
Back in the '90s, Steve Forbes ran for president with the promise of tax returns that would fit on a postcard. Herman Cain's 9-9-9 plan revels in the same simplicity: a 9 percent flat tax, a 9 percent national sales tax, and a 9 percent corporate tax. No deductions. No taxes on investment income.
There's something to be said for simplicity and elegance. This is why the flat tax, fair taxes, and consumption taxes are always part of the debate around campaign time. It's hard not to look at all the hours and dollars spent by individuals and businesses in preparation for April 15 and see them as a massive waste. But the reason Americans keep choosing waste and complexity over elegance becomes clear when you look at the winners and losers in these scenarios.
The big losers under 9-9-9 are the 47 percent of Americans who, because of the effects of the recession, didn't make enough money to have a federal-income-tax liability last year. Their income taxes would go up to 9 percent.
The winners, meanwhile, live in Greenwich, Conn. Today, a hedge-fund manager who takes home 20 percent of his firm's profits pays a 15 percent capital-gains tax. Under Cain, that hedgie pays nothing.
The sales tax favors richer Americans, too. It takes money to save money, after all. Poorer people have to spend a greater percentage of their incomes, and anything spent is taxed. According to Gallup, self-reported consumer spending is just over $23,000 a year. Cain's 9-9-9 adds $2,000 to that bill. …