What’s the first thing that comes to mind at the mention of Herman Cain? For 42 percent of Americans, it’s “9-9-9,” according to a Pew Research Center poll.
Since the former Godfather’s Pizza CEO introduced his catchy economic plan, his popularity has skyrocketed from a second-tier candidate polling in fourth place to a GOP presidential front-runner challenging Mitt Romney for the No. 1 spot.
But the plan that Cain praises for being “simple” and “fair” is shaping up to be a bit more complicated and a bit less egalitarian.
Speaking to a crowd of supporters in Detroit today, Cain added another layer, which he calls “Opportunity Zones,” to his original plan for a 9 percent personal income tax, 9 percent corporate income tax and 9 percent national sales tax .
Under the Opportunity Zone aspect of his plan, which Cain said has “been in the analysis all along,” businesses that locate in “economically depressed” cities such as Detroit would qualify for “special deductions,” although the GOP candidate did not specify the kinds or size of those deductions.
Cain said his plan allows all businesses, not just those within the zones, to deduct net exports and capital investments.
Cain also added a provision to protect the low-income workers that, under the current tax code, pay no federal income tax. Cain’s provision allows families or individuals whose incomes put them at or below the poverty level, which for 2011 is $10,890 for a single person or $22,350 for a family of four, to pay zero income tax.
“If you are at or below the poverty level,” Cain said, “your plan isn’t 9-9-9, it’s 9-zero-9.”
A report released Tuesday by the Tax Policy Center showed that under Cain’s plan, households at the bottom end of the income scales, those earning between $10,000 and $20,000, would be strapped with the largest tax increases, a 950 percent hike, on average.
Dan Mitchell, a senior fellow at the libertarian Cato Institute, said Thursday that Cain would get “hammered” politically if he did not add the low-income family exemption, especially with his GOP rival Gov. Rick Perry set to introduce a flat tax, which excludes those at the bottom end of the income scale from the federal income tax rolls.
“The poor don’t pay tax now and the poor don’t pay tax under flat tax,” Mitchell said. “If the poor start paying tax under 9-9-9, it will be a big problem politically.”
Cain’s 9-9-9 plan has already been the bull’s-eye for darts thrown from both sides of the aisle, although the sharpest barbs have come from his fellow Republicans.
George W. Bush-era economic adviser Bruce Bartlett said the plan was a “distributional monstrosity” and “exceptionally ill- conceived.” Grover Norquist, president of the conservative Americans for Tax Reform, compared it to a “tapeworm” because the national sales tax, a brand new tax, could grow out of control.
Every GOP candidate has criticized the plan during the past two weeks, most of them chiding Cain for not acknowledging that his plan is more complex than just 9-9-9.
“There are much more complexities than Herman lets on,” GOP presidential candidate Newt Gingrich said at the Las Vegas debate.
Rick Santorum applauded Cain for his “boldness” in trying to completely overhaul the tax code, but said his plan would actually raise most Americans’ taxes.
“Herman’s well-meaning, and I love his boldness, and it’s great,” Santorum said at Tuesday’s debate. “But the fact of the matter is, I mean, reports are now out that 84 percent of Americans would pay more taxes under his plan. That’s the analysis.”
The Tax Policy Center’s report showed that more than three-fourths of Americans would see their taxes increased under 9-9-9. The center’s analysis did not take into account the poverty-level exemptions that Cain mentioned today.
Roberton Williams, a senior fellow at the Tax Policy Center, said Cain’s plan would give “big big big tax cuts” to people at the top of the income scale.
“You’re going to have big increases for everybody else to make up for the revenue loss,” Williams said. “The middle group is going to get clobbered because they are going to have to pay the bulk of taxes.”