When CTJ analyzed Herman Cain’s 9-9-9 tax plan last year, we concluded it would cut taxes for the richest one percent by $210,000 on average and raise taxes for the bottom three-fifths of Americans by $2,000, on average if in effect in 2011. This did not surprise us, since the 9-9-9 plan incorporates elements of a “flat tax” and a national sales tax (often misleadingly called a “Fair Tax”) which are both far more regressive than our current tax system. We also concluded that the 9-9-9 plan would collect $340 billion less than our existing tax system in 2011 alone. What does surprise us is that people are still talking about the former pizza CEO’s tax plan, which is the focus of a two-day “Patriot Summit” that Cain is hosting today in Washington.
Today, Cain’s Revolution on the Hill will roll out “the 9-9-9 educational campaign that will sweep the country in the Summer of 2012.”
Flat tax and national sales tax plans vary, but they all would leave investment income – most of which goes to the richest Americans – untaxed. The “flat tax,” which is promoted by Dick Armey’s FreedomWorks, does not consist of one flat tax rate but actually two tax rates when you include the zero percent rate for investment income.
The national sales tax, which is promoted by the organization FairTax.org, is a straight-forward consumption tax, and this is likely to have the greatest impact on lower-income families who have no choice but to put all of their income towards consumption. (The other national, broad-based consumption tax you hear a lot about is a value-added tax, or VAT).
Cain is not the only presidential candidate to propose these types of radical changes to our tax system. Texas Governor Rick Perry flirted with both the flat tax and a national sales tax. Both Perry and Newt Gingrich eventually settled on a “flat tax” that would, like other flat tax proposals, exempt investment income from tax.
Watch this space for a look at other flat or fair tax proposals that surface during this election year.