9-9-9 is no good. It’s bad. How do I know? 7-7-7.
Now…Herman Cain’s 9-9-9 tax reform proposal sounds good. The plan would scrap all federal taxes and replace them with a 9 percent personal-income tax, a 9 percent corporate-income tax, and a 9 percent federal sales tax. In the process, Cain would eliminate the payroll tax, the estate tax, and tax credits and deductions for everything from the production of wooden toy arrows to your home. This is all actually good. And again, the plan sounds good…meaning, it has an awesome sales pitch: 9-9-9.
But in truth, it’s bad. And not just a little bad. Bad like…we could look back on this moment and say 9-9-9 was a turning point in American history…a turning point in the wrong direction. Why? 7-7-7.
In 1913, the 16th Amendment to the Constitution made the income tax a permanent fixture in the U.S. tax system. It debuted that year with a top marginal tax rate of 7 percent. Within 7 years the top marginal tax rate had gone to 72 percent. Seven years to go from 7 percent to 72 percent. 7-7-7.
At a Fox News debate Chris Wallace asked Herman Cain if there wasn’t a danger that some future administration, after President Cain (I like the sound of that…), would raise three forms of taxation on the American people. Cain dismissed the question…
9-9-9 supporters suggest you could control the national sales tax rate through statutory or constitutional limitations. I think that’s wishful thinking. I don’t think you can give the federal government a completely new revenue source and expect that it will forever be kept at 9 percent. History and a look around the world suggests otherwise.
France has a national sales tax. It’s 20 percent. The UK has a national sales tax. It’s 20 percent. Italy has a national sales tax. It’s 21 percent. It’s completely realistic – likely even - that within seven years of its enactment, Herman Cain’s national sales tax would 20 percent.
Within seven years we could go from 9-9-9 to 39 (personal income tax)- 35(corporate tax) -20 (consumption tax). And with a brand new source of revenue in the national sales tax… do you think the federal government will spend more or less…what do you think the size of the government would resemble?
This isn’t an argument in defense of the current tax code. I’ve written that tax reform is one of the top issues in this election and one of the most important issues facing the country. But 9-9-9 is not the answer. The risks are too high. It’s bad.