The 9, 9, 9 plan is simple, but both political and economic danger lurks in that simplicity. The plan calls for 9% flat corporate and personal income taxes with a national sales tax at the same 9% rate.
First the political issues. While more than half of all taxpayers do not pay any income tax, all workers do pay 7.65% payroll taxes for Social Security (FICA) and Medicare combined on the first $110,100 of wages.
Employers match these payments adding a total of 7.65% in additional tax. Self-employed workers pay 16.3%. The Cain Plan eliminates the Social Security and Medicare taxes replacing them with a 9% flat income tax.
Thus people who currently pay no income tax will see an increase of 1.35% (9% - 7.65%), plus a 9% sales tax on all purchases of new goods.
Middle and lower income seniors do worse. They currently do not pay payroll taxes on withdrawals from tax deferred retirement accounts and many do not pay income taxes either.
Under the 9, 9, 9 plan, they would face a new 9% income tax on retirement account withdrawals.
Worse, all senior spending will be subject to the 9% sales tax. The big winners are the upper income folks who currently face federal income tax rates of 35%.
So our current president and class warfare inciter in chief must be salivating at the prospect of running against Mr. Cain. Can't you hear Obama now yelling "Millionaire and billionaires should be paying more in taxes, Herman Cain wants to give them a 26% tax cut!" Now the economics.
Despite outliers like GE, most corporations pay taxes at a rate much higher than 9%. So they get cuts and also stop matching Social Security and Medicare withholding.
Mr. Cain claims that the elimination of these and other taxes will result in prices being lowered so we won't actually pay more by adding the 9% sales tax.
I don't believe it, but assume it's true which means no new net revenue will be realized from the sales tax.
A slight increase in the net taxes paid by about half of wage earners and big cuts for everyone else cannot be offset by clobbering seniors' retirement plan withdrawals.
The 9, 9, 9 plan may be simple, but it isn't viable - either politically or economically.