Cain’s simplified tax plan is step in right direction
As GOP candidates try to distinguish themselves in their bid for the presidential nomination, Herman Cain and his 999 tax plan stand out. While many agree that our tax system is exceptionally complicated and in need of reform and simplification, few act on these beliefs; Cain actually proposes to do something radical and innovative about it.
Cain wants to scrap the current system, eliminate all taxes and loopholes, and replace them with a 9 percent tax on personal income, a 9 percent corporate tax, and a 9 percent national sales tax. These taxes would gradually shift toward what Cain calls the “Fair Tax,” a 30 percent national sales tax.
Many criticize this plan as having two problems. The first is that it may not raise enough revenue. According to political blogger Axel D. Whiteman, under current economic conditions, the plan would decrease revenue by $387 billion. But this doesn’t account for economic growth. Though there is no way to know how much this plan would stimulate the economy, some think that it would incentivize corporate spending, which would then create growth. With this growth, many believe the GDP would increase, resulting in more taxable transactions. It’s disputable, but many people think that once growth is accounted for, the plan would be revenue neutral.
The other problem with this system is that it is comprised of two personal flat taxes, which do nothing to redistribute income. Because of this, people believe these taxes will hit low-income earners much harder than high-income earners and will allow the rich to get richer. Others argue that the flat income tax and the added sales tax affect the wealthy more because the wealthy spend more.
This plan’s redeeming qualities, however, cannot be overlooked. I believe that shifting from production taxation to consumption taxation under the 999 plan is beneficial for society. Taking the tax burden away from production incentivizes innovation, corporate growth, hiring, and small business creation — all of which benefit society.
The second redeeming quality of this plan is its innovative and radical thinking about tax reform. Right now our tax system is difficult to understand and creates complications.
Simplifying the tax system — whether it’s a fair tax, a 999 plan, an elimination of loopholes, or a reduced rates bill — is a step toward making taxes simple and easy for small businesses and individuals.