Herman Cain is running on three numbers: 9-9-9.
“Nine percent corporate business flat tax, nine percent income flat tax and a nine percent national sales tax,” he said, explaining the plan once again during Tuesday night’s Republican presidential debate.
The former Godfather’s Pizza CEO’s campaign is surging, partly thanks to 9-9-9, and one sure sign that his candidacy has taken off is that during the debate other candidates spent most of their time attacking his tax plan.
“When you take the 9-9-9 plan and you turn it upside down, I think the devil is in the details,” said Rep. Michele Bachmann, R-Minn.
“I think it’s a catchy phrase,” said Jon Huntsman. “In fact, I thought it was the price of a pizza when I first heard about it.”
The first and most appealing part of Cain’s plan is that it completely scraps the current tax system. Social Security taxes would be eliminated, as well as estate taxes and capital gains taxes. Deductions and corporate loopholes would be gone too.
The old system would be replaced by the nines:
- A flat 9 percent income tax for everyone – no more, no less
- A 9 percent tax on corporations
- A 9 percent national sales tax
Cain developed the plan with the help of a little known accountant from Cleveland named Rich Lowrie. And there are other financial experts who like it.
“Relative to the current system, it is a big improvement,” William McBride, an economist with the Tax Foundation, told ABC News. “9-9-9 is fundamentally scrapping the tax code and starting over, and there is very good reason to do that.”
However, a much longer list of economists say Cain’s plan would be a tax hike for the lower middle class and a tax windfall for the wealthy.
If you have a family of four with an income of just under $50,000, they could end up paying more under the Cain plan. Currently, they are taxed around $3,850 in income tax. Under Cain’s plan, they would be taxed at 9 percent or pay $4,500.
That’s $650 more.
Although the family would save almost $4,000 in Social Security taxes, it would have to give up the child tax credit worth the same amount. Furthermore, it would pay an additional national sales tax of 9 percent on everything purchased, including groceries and clothes, which totals about $2,000.
That means under the Cain plan that family could end up paying $2,725 more.
“It’s going to raise the price of just about everything by about 9 percent,” said former George W. Bush economic policy adviser Bruce Bartlett. “We know from experience and analysis that that tends to hurt people with low incomes.”
The Cain campaign says that his plan will not hurt people with lower incomes because under his plan employers would save $4,000 in social security taxes. That money could then be passed along to the employees creating a system in which everyone benefits.