A plan to remodel the tax system

Republican candidate Herman Cain’s tax plan would eventually eliminate the current income tax system in three phases. The second phase would create a “9-9-9” plan of 9 percent rates, which some analysts say would increase taxes on the working poor and the middle class.

A plan to remodel the tax system
Note: The example in this graphic was calculated by Edward D. Kleinbard of the University of Southern California Gould School of Law. Here is a modified footnote from his report that explains how he handled the proposed business flat tax: In standard analyses of the distribution of federal tax burdens prepared by the Staff of the Joint Committee on Taxation or the Congressional Budget Office, current law’s corporate income tax is either ignored or treated as burdening capital income. The calculations here include the “business flat tax” as burdening labor income, but this reflects the fact that the “business flat tax” does not directly burden capital income at all, and is imposed on the value of labor inputs to the firm. For this reason, it is appropriate to treat the proposed “business flat tax,” like current law’s employer half of payroll taxes, as burdening the wage income of the family described in the text. Sources: Herman Cain campaign; Edward D. Kleinbard, University of Southern California Gould School of Law’s Center in Law, Economics and Organization. The Washington Post. Published on October 13, 2011, 8:30 p.m.
 
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