“Right now, we have a strongly progressive income tax. High-income people are paying a higher share of income in taxes than lower-income people,” said Alan D. Viard, a former Federal Reserve Bank economist and a resident scholar at the right-leaning American Enterprise Institute. “That is a pattern that would be disrupted by adoption of the Cain plan.”
The 9-9-9 plan has helped define Cain’s candidacy. Coupled with his buoyant, plain-spoken style, it has helped transform the former long shot into a front-runner. Cain has touted the proposal’s apparent simplicity and fairness, but he rarely delves into details. His campaign Web site shows that the plan is only a step toward achieving his ultimate goal: to eliminate the Internal Revenue Service after replacing all federal taxes with a national sales tax.
Meanwhile, analysts said the 9-9-9 part of Cain’s vision would place a further burden on those hit hardest by the nation’s economic problems.
Roberton Williams, a senior fellow at the nonpartisan Tax Policy Center, is working on an analysis of Cain’s signature policy proposal. Although the plan’s details remain sketchy, Williams said that it would increase taxes for the poor and middle class, despite Cain’s statements to the contrary.
For starters, about 30 million of the poorest households pay neither income taxes nor Social Security or Medicare levies. “So for them, doing away with the payroll tax doesn’t save anything. And you are adding both a 9 percent sales tax and 9 percent income tax. So we know they will be worse off,” Williams said.
At the top end of the income scale, meanwhile, the opposite would occur, he said. The top 1 percent of earners would get a tax cut under Cain’s plan, Williams said.
The nation’s top income earners have reaped the vast majority of the nation’s income growth over the past quarter century, pushing income inequality in the country to levels not seen since the Depression. The tax plan would exacerbate that gap, Williams said.
“People at the top end pay 20 or 21 percent in income and payroll taxes now,” he said. “This plan zeroes out their payroll tax and suddenly their tax is down to 9 percent. Then, like everyone else, they pay 9 percent on what they spend. But the rich don’t spend everything they earn.”
Many conservatives are leery of creating a national sales tax that could be increased in the future.
“[I am] extremely uncomfortable with the idea of letting the crowd in Washington have an extra source of revenue,”wrote Dan Mitchell, a senior fellow at the Cato Institute, a libertarian think tank.