Taking a look at Herman Cain's 9-9-9 tax plan
GOP presidential candidate Herman Cain has surged to the top of recent polls. Behind his newfound momentum is his "9-9-9" plan to modernize America's tax code. Specifically, it would wipe out the current tax code and most of the deductions, exeptions, loopholes, and paperwork. In its place would be a 9% flat income tax, a 9% national sales tax, and a 9% flat corporate income tax. Promoters cite the plan's boldness and transparency, while opponents fear the plan's regressivity if enacted exactly as stated.
Why are we discussing the tax code on Friendorb? We're geared toward bloggers and small business owners, who are often in the startup phase of their ventures. Many are simply trying to earn some money in addition to their full-time work. Even after they grow larger, they don't typically have access to accountants and lawyers needed to comply with the rat's nest of rules, forms, and reporting requirements for their (possibly very) small business. The vast majority, in fact, would be perfectly content to pay their taxes if the rate were transparent and the paperwork burden reduced. Instead, they are forced to wade through innumerable IRS requirements just to file the paperwork to pay. With the government seeing record deficits and continued high unemployment, would it not make sense to make it easy for business owners to send their taxes to the government? Instead, the government's arcane methods of capturing the dues of a tiny fraction of tax evaders ends up hurting the other 99%.
For this reason, we think the concept of Herman Cain's plan is a long-overdue breath of fresh air. If small business owners could spend less time wading through paper and more time actually pursuing value-added activities for their business, most would be happy to send a check for a clearly-stated flat percentage of their profits. In addition, more consistent rates would solve the issue of larger businesses paying taxes at a 15% capital gains rate (or if you believe what's said about GE, 0%) while sole proprietors get stuck paying a marginal rate in the high 30's. This is a prime reason for ever-growing income inquality, and such a leveling of the playing field has long since been needed.
We do see some issues with it as-is, however. First, Mr. Cain has stated that the capital gains rate would be eliminated under his plan. Many wealthy individuals derive all or most of their income via capital gains from investments, and this would result in a disproportionate decrease of their tax burden. Similarly, it is widely understood that those with lower incomes spend (as opposed to save) a greater portion of their income, so a sales tax could be seen as inherently regressive. Still, with some adjustments, the plan could prove viable. The income tax rate could be defined to include all income, be it wages, capital gains, or anything else. In addition, a single deduction for, say, 110% of the published poverty level could be allowed to ease the burden of the income tax.
In short, while one can debate who bears the brunt of the current tax burden, America's small business owners often bear the brunt of the paperwork and complexity since they have neither an employer to help them nor the means to outsource it to a professional. With the issue of tax code reform at the forefront this election, we're anxious to see other ideas for overhauling this antiquated system, and Mr. Cain's is the most original thus far.