Shockingly enough, a plan built around a catchy slogan turns out to be masking yet another massive distribution of wealth upward! The Tax Policy Center put out a distributional analysis of Herman Cain’s 9-9-9 plan, and as you can see, it would raise taxes for 84% of the population, cost those in the lowest quintile 20% of their income, and save millionaires something close to $300,000 a year.
As Howard Gleckman notes, under Cain’s plan, multi-millionaires making over $2.7 million a year would pay a smaller share of income in federal taxes than someone making $18,000. Here’s the distributional analysis in number form:
Jared Bernstein put this into the world’s largest chart using raw dollars, while this chart with the percentage change in post-tax income really tells the story of what’s going on here. [click to enlarge]
In last night’s debate, Cain mumbled something about “empowerment zones,” which would rebate some level of tax if you live in a poor neighborhood. This would be a developer’s dream, to force poor people out of their own neighborhoods, suddenly desirable because of the tax benefits. There’s simply no way to make that work. The idea that “used goods” would have no sales tax does little for people trying to buy food, unless the idea is literally to have people eat shit, for the tax break.
The first thing to say is that this is the logical outcome of any flat tax. Right now our system is progressive at the federal level, and flattening it out will invariably mean that the poor pay more and the rich pay less. Flat taxers often make their appeal on the basis of fairness, but it’s a completely unfair plan relative to current law.
The second thing to say is that this is the goal of all Republican tax policy. There’s a flat-taxer in every single Republican Presidential primary, from Kemp to Forbes to Huckabee to Cain. They may always lose; the other candidates last night jumped all over Cain, with Santorum actually using the TPC numbers.
But Michele Bachmann, for example, criticized Cain’s plan because it could lead to HIGHER taxes in the future, basically arguing to Cain’s right. And the other Republican tax plans just don’t dress up the wealth redistribution with a pretty name. If anything, they’re more DIRECT. They would eliminate the corporate tax altogether or drop the top marginal tax rate way down or do any number of other things that basically lower the tax burden on the wealthy. Heck, every Republican in America would make the Bush tax cuts permanent, which doesn’t have an altogether different distributional analysis than 9-9-9. The goal is to achieve even more inequality than we have now, the most unequal period since the 1920s.
So Cain’s plan may be grossly unfair, but not much more so than that of every Republican with a plan of their own. The maldistribution is a feature, not a bug.






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Don’t be so negative. Even centrist NYT columnist David Brooks luvs 9-9-9:
Of course, anybody with a working knowledge of 4th grade arithmetic could figure out that any plan that requires the lowest income Americans, who currently (a) pay no income tax and
(b) pay no national sales tax, to pay both might see their incomes go down by 18% under 9-9-9.
And Brooks is the Village’s `thinking man’s conservative’.
I am so glad to see Cain put this out. It is so ridiculous and overt in its consequences that more people can understand just how pernicious these flat tax, fair tax, and consumer taxes, VATs etc. are. I am glad to see the discussions and hope for more. Those who defend them IMO will come to regret it. Maybe even Brooks.
Wealth shifting to the wealthy, been going on at least 4 decades just repackaging with new memes.
Revolting development…”I owe my soul to the company store”.
The rightwing media, most notably the WSJ (even before Murdoch bought it), has propounded the “lucky ducky” meme very thoroughly. That is, that some percentage – perhaps 47% – of the populace are insanely “lucky” bc they don’t pay any fed income tax. What’s left out of this “story” is the fact that most citizens who are “exempt” from fed inc tax are usually: a) seniors on fixed incomes, b) students making very little money, or c) the really low-wage earning citizens barely scrounging to get by. Of course, the way that the MSM puts (and that Rush Limbaugh yells it) is that somehow every single one of these “no fed inc tax” citizens are lazy cadillac welfare queens expecting a hand-out. In fact, that’s not true. Try living on their “income” for a while and see what it’s like.
The other thing that’s left out of the “lucky ducky” story is that these low income citizens ARE disproportionately with other fees and taxes, such as sales and use taxes, various fees at the local and state level, etc. These taxes are incredibly regressive in that their impact on low-income earners is much greater than on those of us who make a decent wage and have enough to go around.
A Flat Tax has been proposed for decades, and while it “sounds good” (to some) *in theory,* in fact, it’s incredibly regressive. Once again, the mega rich make out like the bandits they are, whilst the middle/working classes take the hit much harder.
Why this is so hard for citizens to figure out remains one of the most annoying facts of life. And why Stockholm syndrome enablers in the 99% continue to WANT the mega-rich to NOT pay their “fair share” remains yet another very annoying mystery to me.
Disclaimer: I am fortunate to earn enough to be in the 2d highest tax bracket, and I would *agree to* my bracket being made a little higher as long as the highest bracket was increased and the Bush/Obama wealth tax cuts were stopped. I think that there should be TWO brackets above the one I’m in, frankly. Let the wealthy pay their *fair share* for a change, rather than constantly sticking it to the middle/working class to PAY for the mega-rich 1% WAR, Inc., etc.
Quibble: It’s only the federal income tax that’s modestly progressive. “Payroll” taxes are horridly regressive, and so is the taxing of capital gains & carried interest. So when you combine them all, as Buffet sez, I’m not so sure the USG tax structure isn’t net regressive.
I agree with how slow the average person is to see what a scam these flat type taxes are. It is a complete failure of education in math and proportion. I have been preaching, writing letters to the ed and blogging every chance I get to educate. Some actually do catch on. That’s why I am glad to see this Cain thing out in the arena. I hope enough will eventually.
The payroll taxes for SS and Medicare are indeed regressive but that is a part of the justification for what amounts to separating these programs from ordinary welfare. It makes them an entitlement. Roughly getting back a fair return on what you have paid for.
Per eCAHNomics:
–“Payroll” taxes are horridly regressive, and so is the taxing of capital gains & carried interest. So when you combine them all, as Buffet sez, I’m not so sure the USG tax structure isn’t net regressive.–
Correct. A flat tax, if applied to ALL income, with elimination of loopholes, might actually be fairer than what we have now. Not that that’s saying much.
There is nothing fair about a flat tax. It is grossly unfair to tax income the super-wealthy at the same rate as those in poverty. Using variations of this via loopholes is how all the wealth has been transferred to the already wealthy. This is Buffet’s point. IMO, and I think most Americans’, the rich should pay a higher percentage of income. That is why we call it “progressive.”
There is a huge distinction between earmarked payroll taxes for Medicare and SS and taxation for the general fund. The most fair treatment of this is to remove the cap altogether. If you do that however you remove the cap on how much retired rich may receive.
You are correct, I was referring mostly to income there. Gas taxes, payroll, etc., are flat or regressive. And most state taxes, particularly states with a sales tax, are regressive.
I’ve found the best way to explain these type of things is to provide examples. Usually when you break the numbers down for people the lights go on.
I’m simply amazed that our friend, even when presented with compelling visual evidence, refuses to accept the unfairness which is intrinsic to any “Fair” tax. The poorest Americans, those in the bottom three quintiles, would see a serious increase in taxation.
In 2009, the cutoff points for various percentiles, rounded to the nearest thousand, were:
The bottom 10 percent or 10th percentile: $12,000
The bottom 20 percent or 20th percentile: $20,000
The bottom 50 percent or 50th percentile: $50,000
The top 20 percent or 80th percentile: $100,000
The top 10 percent or 90th percentile: $138,000
The top five percent or 95th percentile: $180,000
h/t,
The State of the USA
While I agree that the present Tax Code must be modernized, I just can’t understand why anyone could imagine that taking 18.7% of the income of the lowest quintile can be “fair”…
The 47 % includes disabled people in nursing homes and infants. IOW, people who don’t work and aren’t expected to work. So what? These guys think that babies should be putting in their 8 hours for the greater good of the banksters too?
It also includes housespouses and those who choose not to do paid labor. Ergo, I would think that the corresponding 53 % number who righttards tell us “do all the work” actually be *smaller* the 1950s when single-earner households were more the norm.
Of course, we could also raise that 53 % number by something like, er, a permanent WPA.
-stewartm
I think that the problem with the US Federal Income tax is twofold:
1) the standard deduction and personal exemption are laughably lowball estimates of the real cost of living. In fact, they don’t even reach the poverty line. Double them.
2) After that, the personal tax code is fine up to the current top rate. But instead of a flat tax at the top rate, tax each incremental $250,000 after that with another 5 % until a 90 % top rate is reached.
-stewartm
I think it is a defect in understanding proportionality or that thingy we studied in high school psychology where very young children and primitives will say a tall thin glass holds more than a short fat glass. They determine “fairness” on the basis of one component only..