Understanding Herman Cain's 9-9-9 Plan

Recently, a friend of mine asked me my thoughts about Herman Cain's 9-9-9 Plan, expressing concern about the addition of a 9% sales tax to he already pays, a total 8% sales tax in Upstate New York between state and local. He was concerned about seeing his sales tax increased to 17%.  I understand the concern, however, when the plan is explained more clearly, basically everybody is looking at a cut in their overall tax burden.

Before we proceed, it is important to understand that Cain does not intend 9-9-9 to be the permanent tax plan.  Rather it is Phase 1 of a two phase plan to institute the Fair Tax as the new tax system of the nation and completely erradicate our current system.  To read the entirety of the plan, visit Herman Cain's Website or Click Here to see the plan in PDF form.

One must remember that if you are paying taxes, you are paying not just your current income taxes but an additional 6.2% in payroll taxes.  So if we use the current Median Household Income of approximately $50,000 per year, let's look at what they would be paying in taxes under the current system vs the 9-9-9 Plan.

Under our current system, the family making $50,000 per year would be paying 25% Federal Income Tax and 6.2% Payroll Tax, for a total of a 31.2% tax burden.  Let's break that down:

$ 4166.66   Income Before Taxes

-  1041.68  Federal Income Tax (25%)
$ 3124.98 After Federal Income Tax

$  3124.98 After Federal Income Tax

$ 3124.98 After Federal Income Tax
-     258.33  Federal Payroll Tax (6.2%)

$    2866.65 After All federal Taxes

So under the current system:

Total Taxes paid: $1300.01 Monthly
Total Spendable Income: 2866.65 Monthly

Now under Cain's 9-9-9 Plan, all that would be replaced with a 9% income tax and a 9% sales tax.

$ 4166.66 Income Before Taxes

-    374.99 Income Tax (9% Rate)
$ 3791.67 After Income Tax   

$ 3261.67 Total Money After Paycheck

$ 3261.67 Total Money After Paycheck
-    327.30 Total Sales Tax (If 100% of Paycheck Spent)
$ 2934.37 Income After Taxes

So under the 9-9-9 Plan the median American family would have:

Total Taxes paid $702.29 Monthly

Total Spendable Income: $ 3498.12 Monthly

$597.72 LESS taxes paid each month.  That's $597.72 MORE MONEY in your pocket, every month! What would an extra nearly $600 per month do for you?  If the Median American family had $600 extra each month to spend, what do you think that would do for the economy?  I'll tell you what it'd do:  A whole lot.  You want to talk stimulus?  How about an extra $600 in the pockets of the average American family. 

You want to talk about fundamentally changing the American tax system to one that's fair?  How about a plan that taxes on what you buy, not on what you earn.  Also, remember that there are no taxes on used items, like a used car or purchasing an existing home.  By the numbers, the 9-9-9 Plan as written is good for America.

Now look,  I recognize the need for some very heavy safeguards in the program.  Requirement of a super-majority within the plan to raise the tax rates is one of them.  Without the safeguards, a lot can go wrong.  However, overall, I think if properly implemented it's a good plan.

Here Comes Herman Cain

Well, friends, it looks like I was wrong about Herman Cain. As of the last debate, I was continuing to say that, while I like Cain as a candidate and I think he'd make a good President, I also did not think he was going to get the nomination. Now Mr. Cain is making me wrong. I'm very happy to be wrong about this by the way, and it is neither the first time I've been wrong nor will it be the last time I am wrong.

All of a sudden, here comes Herman Cain! He's filling the grassroots Tea Party void that Michelle Bachmann has unfortunately left. Last time I wrote about the candidates I considered Cain at best a Vice Presidential nominee. Now I'd have to say he's at worst the VP. Just think about this: Cain has the frankness and the moxie to say it like it is and have people listen. Combine the frankness of Chris Christie with the conservative credentials of Sarah Palin and wrap it up in the experience of a man who has lived the American dream and you've got one heck of a great candidate.

I'd have to say, right now, if my state's primary were today he'd get my vote. Let me tell you why:

• Cain has real business executive experience. He has run Burger King Corporation and Godfather's Pizza under the banner of the Pillsbury Corporation.
  
• Cain's 9-9-9 Plan combines two common sense conservative tax principles, the Flat Tax and the Fair Tax. I find this idea intriguing, actually. Most people who speak of a flat tax talk about a flat rate of 10-17% (depending on who you ask), whilst the Fair Tax is generally expected to be about 23%. (Please note that the Fair Tax is intended to replace ALL Federal taxes whilst a Flat Tax would replace all income taxes, so it makes sense that the Fair Tax would be at a higher rate.)
  
  Cain's plan takes both these concepts and essentially takes the best of both. He creates a 9% personal income tax and a 9% sales tax would be a net 18% tax on individuals. That's just about the average of say a 15% Flat Tax and a 23% Fair Tax. It would create two tax bases: One income based and one that is consumption based. The net result of the consumption end would be a significant amount of fresh money in the economy that would be spread out into further purchase, which by the way would create a new tax base. The 9% flat income tax rate will provide for the necessities of government that cannot ebb and flow with the economy. It's a good plan.
  
  For those of you concerned about the 9-9-9 plan's impact on your personal income, please note that if you are in the 15% tax bracket or higher, you are looking at a tax CUT, because your current 15% rate plus 6.2% in payroll taxes for a total tax of 21.2%. Cain's cut would put you at 19% total, and actually a bit less because the 9% sales tax would not include food.
  
• Cain tells it like it is, but he does it in a way that is loving and grandfatherly. He doesn't talk down to people like Obama does, but he doesn't talk above people the way someone like a Newt Gingrich tends to do. My point is not "Cain is a good speaker, elect him" (we've learned how that doesn't help the country at all), but rather that Cain has the rhetorical tools to effectively communicate conservatism.
  
• Cain is a real, dyed in the wool conservative. He believes in freedom, he believes in America. Even though he was born into the segregated South, he doesn't walk around expecting to be given constant repayment for this wrong, rather he appreciates this nation's ability to change away from the mistakes of our past and to constantly strive toward a more perfect union.
  
• Cain is a shining example of how the opportunities of America can take a man from rags to riches through the sweat of his brow and his own hard work. Cain has shared that his American dream started with making a lower middle class salary. He felt when he hit a modest middle class salary "His American Dream had come true." However he didn't satisfy himself there, but rather he then set a new goal. He went from so poor that he felt poor didn't describe it to becoming a very wealthy man. He earned it, and he understands that you can make whatever you want out of yourself in this country with hard work and sacrifice.

Herman Cain is taking the field by storm. There's still a long way to go, but Mr. Cain has made a believer out of me. In a Gallup Poll released on Monday, he's trailing Mitt Romney by a mere 2%, which is within the margin of error, aand is beating Rick Perry by 3% (1). He's the frontrunner for my vote, and I think he can be the man to beat out Perry or Romney in 2012 for the nomination. Game on.

1. Cain Surges, Nearly Ties Romney for Lead in GOP Preferences