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Defying the Odds

Defying the Odds
New book about the 2016 election.

Thursday, October 13, 2011

9-9-9

Herman Cain is getting a great deal of attention for his 9-9-9 tax plan. Trip Gabriel and Susan Saulny write at The New York Times:

But although the specifics of the 9-9-9 plan were developed only in the last few months, it is only the latest incarnation of two ideas popular among some supply-side conservatives for decades.

Mr. Cain was a co-chairman in 1996 of the presidential campaign of Steve Forbes, who advocated a flat tax — a single rate on income for all payers. Mr. Cain later supported a “fair tax,” one that would replace all other taxes with a national sales tax.

The 9-9-9 plan combines elements of both ideas. But it is little more than a sketch of what would be a radical and complex overhaul of the tax system. In developing it, Mr. Cain relied heavily on Rich Lowrie, whom he calls his lead economist. Mr. Lowrie is an investment adviser at a Wells Fargo office in Pepper Pike, Ohio. Although he is an unpaid member of an advisory board of the American Conservative Union, he has never worked for a policy research group or an academic institution, or made a name through economic analysis.

In an interview, Mr. Lowrie said he had a bachelor of science degree in accountancy from Case Western Reserve University. On his Facebook page, he describes his political views as “free markets.” Mr. Lowrie said he had been inspired by two well-known proponents of supply-side thinking: Arthur Laffer, often considered the father of the concept that lower tax rates help pay for themselves by generating additional economic growth, and Jude Wanniski, who promoted the idea among politicians. Mr. Lowrie became involved with the Ohio chapter of Americans for Prosperity, the conservative organization supported by the billionaire Koch brothers.

At The Washington Post, Jennifer Rubin notes that the calculations behind the plan are deeply flawed.

Moreover, there is new criticism of his sales tax from the conservative base, whose support is essential to his winning early primary states. Gary Bauer, among the most prominent of Christian conservatives and a former presidential candidate himself, writes in his daily e-mail (sent to a huge conservative audience): “Rick Santorum and Michele Bachmann both pointed out the most obvious concern many have with Cain’s plan: It gives the government another revenue stream. While many conservatives like the idea of a national sales tax, they want it to replace the income tax. While Cain is calling for a radically reduced tax structure, it is undeniable that he is also calling for a new tax on top of the income tax. Moreover, seniors and retirees on fixed incomes are not too keen about paying a new tax on food and medicine either.” If that sentiment is widespread among evangelical voters and/or retirees (who are prominent in Iowa), Cain will be in trouble.

At The Daily Caller, Matt Lewis describes Grover Norquist's take:

But while a flatter and more transparent tax might be a good thing, Norquist warned that “there are very, very real dangers in creating new taxes that can grow.” (Cain’s plan would replace the current tax code with a 9 percent corporate tax, a 9 percent income tax — and add a new 9 percent national sales tax.)

Norquist cited New Jersey’s tax system as a warning against adding a new national tax. “In New Jersey, they had property taxes [which were] very high — and no income tax,” he said. New Jersey then sought to correct this by adding an income tax. “And so you went from New Jersey having the highest property taxes in the country — to New Jersey having the highest property taxes and income taxes,” he explained.

“You know, you can drain out more blood with two needles than with one,” he said.

Norquist’s theory is that government tends to push any tax available to the breaking point. “That’s why states with no income tax have lower overall taxes,” he said.

...

“If this bill was before Congress, I would say, vote ‘no’,” But since it’s not before Congress — and what we’re doing is having a conversation about flatter tax reform — Norquist hopes this will lead to a healthy debate over tax reform.