Just how awful would Herman Cain’s 9-9-9 plan be for your average American? Try doubling your overall tax burden while reducing taxes for the wealthiest Americans by over half.
Cain’s tax plan consists of three different 9 percent taxes — one on wage income (investment income is exempt), one on sales of goods and services (including food, housing, and medicine), and one on business income (investments and purchases from other businesses are deductible; wages, however, are not). But most Americans will end up paying all three of those taxes, for a combined tax rate of 27 percent of their income.
That’s because middle and low-income Americans get all, or nearly all, of their income from ordinary wages — all of which would be subject to Cain’s 9 percent wage tax — and then they spend all of their income, which means it would be taxed again by the 9 percent sales tax. Finally, the burden of the 9 percent business income tax would be passed on to them as well, either in the form of lower wages — since wages are not deductible — or in the form of higher prices for goods and services.
The bottom line is that most Americans will pay all three of Cain’s taxes, making their real federal tax rate 27 percent. Compare that to the current tax code, under which someone in the bottom quintile pays two percent of their income in federal taxes and someone in the middle quintile pays 15 percent. The fact is that pretty much everyone making up to around $100,000 a year would pay more under Cain’s plan than they do now.
So it will be a substantial tax increase for middle class Americans and a massive tax increase for the poorest Americans. And how will the rich fare? Guess.
