by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Byron York‘s latest Washington Examiner article takes aim at Republican presidential candidate Herman Cain’s tax plan, which would “throw out today’s tax structure and replace it with a 9 percent income tax, a 9 percent business tax, and a 9 percent national sales tax. Cain would eliminate capital gains taxes, the payroll tax and the estate tax.”
[I]s 9-9-9, for all its boldness, a good idea?
I talked with a number of conservative economic policy experts who don’t want to take sides in the campaign and thus asked to remain anonymous. They found some important things to like in 9-9-9. They favor its low rates, and they like its elimination of various types of double taxation. Most agree it would stimulate growth and create jobs, at least in the short run.
But they have two serious objections. The first is that 9-9-9 might not raise enough money to fund the government even if it creates growth and federal spending is reduced. Over the years, the government has taken in tax revenues equal to about 18 percent of gross domestic product. “I’d be surprised if 9-9-9 raises as much money as current policy,” says one expert. “I’d be really surprised if it raises 18 percent of GDP.”
Cain’s advisers have put together a detailed analysis, or score, to argue that 9-9-9 would be “revenue neutral,” that is, would raise the same amount as today’s system. “We used 2008 as our baseline, and not accounting for any growth effect, it would have generated to the penny the same revenue,” says Lowrie. So far, though, the numbers have not been crunched by many experts outside the campaign.
The second objection is that 9-9-9 would add a national sales tax on top of current income and business taxes, and would thus give Congress another tax to raise. Why couldn’t 9-9-9 become 12-12-12? Or 15-15-15? The rates would still seem fairly low. “In the long run it leaves the door open for politicians with the wrong motives to push it upwards, and then we’re stuck with something worse than what we had before,” says a second expert.