"Cain Claims That His Tax Plan Is ‘Not Regressive On The Poor’ — Economists Disagree"
2012 GOP presidential hopeful Herman Cain appeared on ABC’s The View today, following his recent resurgence in national polls. Of course, Cain took a few moments to promote his “999” economic plan, which calls for the corporate income tax and personal income tax to be set at a flat rate of 9 percent, as well as the creation of a 9 percent national sales tax. During the interview, Cain said his plan would not be regressive for low-income Americans:
The first thing you do is you throw out the current tax code which creates too much uncertainty, and this is why I have proposed my “999” plan. Very quickly, it imposes a 9 percent business flat tax, a 9 percent personal income tax, and a 9 percent national sales tax. It expands the base so that everybody has a lower rate. And it is not regressive on the poor.
Cain seems to believe that, because his plan has a flat rate, it is not regressive. But sales taxes are hugely regressive on the poor. As the Institute on Taxation and Economic Policy explained, “because low-income families spend more of their income on items subject to the sales tax than do wealthier taxpayers, sales taxes inevitably take a larger share of income from low- and middle-income families than they take from the wealthy.” Cain’s imposition of a 9 percent sales tax would hammer low-income Americans much more than the wealthy.
Cain’s elimination of taxes on investment income like capital gains, meanwhile, would hugely benefit the very rich, driving down their taxes. “It would be the biggest tax shift from the wealthy to the middle-class in the history of taxation, ever, anywhere, and it would bankrupt the country,” said Center for American Progress Vice President for Economic Policy Michael Ettlinger when asked about Cain’s plan. Lawrence Mishel, president of the Economic Policy Institute, said the plan “would disproportionately tax lower and middle income earners.”
Without seeing all of the details, it’s impossible to put an exact price on Cain’s plan. But suffice to say, huge tax cuts for the rich (from 35 percent to 9 percent on income, alongside the elimination of investment taxes) paired with a new national sales tax will undoubtedly turn the tax code into a regressive mess.