Wes Moss: Would you pay more taxes under ‘999′ plan?

Certified financial planner Wes Moss provides personal finance advice and accessible investment strategies. His guest post appears here weekly.

Wes-Moss-032011-USE-THIS-VERSION

Wes Moss hosts 'Money Matters' Sunday mornings on AM750 and 95.5FM News/Talk WSB

How about Herman Cain. The Republican presidential candidate is suddenly drawing tons of media attention after winning a GOP straw poll in Florida. One thing the pundits are buzzing about is Cain’s proposed “999″ tax policy, the most straightforward, logical plan currently offered to voters.

Under the 999 plan Americans would pay:

  • 9 percent personal income tax on paychecks
  • 9 percent consumption tax on everything we buy – basically a federal sales tax
  • 9 percent corporate tax or business profits

Where did Cain come up with 9 percent? One of his campaign slogans is, “If 10 is good enough for God, then nine is good enough for Washington.” That’s great marketing, but there’s more to the explanation, and my bet is that is has roots in “Hauser’s Law.”

Economist William Hauser discovered that no matter what the top tax rate is, the federal government’s tax revenues equal roughly 19.5 percent of the Gross Domestic Product. When top rates were 92 percent in 1952, the U.S. collected roughly 19 percent of GDP. When top rates were 28 percent in 1988, the U.S. collected roughly 18 percent — almost the same amount despite drastically different rates.

By my calculations, Cain’s plan would generate $2.19 trillion in tax revenue in 2011.

Is that enough to run the country? The U.S. treasury had 2010 tax revenues of $2.16 trillion. So if Washington could get its deficit spending under control and sop up some of its debt, the government could function well on the revenue generated by the 999 plan. Plus — and this is a big plus — the new policy would prompt economic growth.

Under the 999 plan, the most heavily taxed families would see their rates go down. This would put more money in their pockets and make them feel wealthier and more confident. Those attitudes often lead to increased spending, which in turn prompts business to increase its capital spending and hire more workers to meet the new demand.

Increased business profits would result in increased tax revenues that (if wisely managed) could be used to get our debt and deficits under control.

Whether or not Cain makes it to the White House, the “999″ plan deserves consideration. Do you think you would pay more or less in taxes if this plan were to go into effect?

– By Wes Moss, for Atlanta Bargain Hunter

Follow Wes Moss: Twitter | Facebook | Email

92 comments Add your comment

Jay

October 3rd, 2011
6:01 am

Given the fiscal discipline of Congress and the President, 9 – 9 – 9 would soon be 9.9 – 9.9 – 9.9. Then 19 – 19 – 19, and so on. Cain favored the TARP bail-outs, now he wants a new sales tax without getting rid of any existing tax. He is another tax and spender.

Alex

October 3rd, 2011
6:21 am

I would pay less, and the explanation of how the system works and why I would pay less is right on Mr. Cain’s webpage. www(dot)hermancain.com

Steve

October 3rd, 2011
6:35 am

Jay

Under 9-9-9 all present taxes would go away.

brad

October 3rd, 2011
6:42 am

Maybe you should go back to selling IRAs.

Guy Incognito

October 3rd, 2011
7:27 am

Yes We Cain! Yes We Cain! Yes We Cain!

Me

October 3rd, 2011
7:30 am

Our taxes would definitely go down under the 9-9-9 plan. I don’t foresee such an idea becoming realistic but I’m all for it.

John

October 3rd, 2011
7:31 am

People are fed up with hidden taxes, so in order for 9-9-9 to work, we would have to see the hidden taxes taken away. If that were to happen, I would enthusiastically endorse Herman and his 9-9-9 plan.

A businessman is what we need and Herman is the only businessman I see.

David

October 3rd, 2011
7:33 am

Jay, I agree that the temptation for Congress will be to raise the rates over time.

On the other hand, the temptation for many cynics is to automatically “nay-say” every idea that is advanced to try and reform the current miserable tax system. Take a little time to research Cain’s plan, you’ll see that it calls for the elimination of all other taxes and replacing them with 999.

Something has to be done with the mess we’re in. If you like the current system, keep trashing new ideas and nothing will every change.

letsfly

October 3rd, 2011
7:40 am

Wes Moss and Herman Cain worked together at WSB radio and Now 95.5 FM. I think there needs to be full disclosure here. Herman Cain’s daughter is married to Wes Moss. I don’t think anything else needs to be said about Wes’s feelings on the 999 tax plan. Hold a piece of paper with 999 written on it and see what it says. 666. The sign of the Devil. Typical Republican crap

letsfly

October 3rd, 2011
7:43 am

hold it up to a mirror

Concerned

October 3rd, 2011
7:44 am

Though it sounded like a great plan at first. After spending a few minutes to compare what I spend, how much I make, how much I paid in taxes last year. This new plan would definetly tax me significantly more. I would be a representative of the middle class with children. This sounds like the tax burden will be shifted to the low and middle class. I support tax reform and will listen to any idea but then will do my research to see who it really helps.

I Don't Know

October 3rd, 2011
7:44 am

People spend less when they see that money being spent at the cash register. A $1.00 McDouble cheeseburger in the city of Atlanta with sales tax added is $1.08. Add a 9% national sales tax to that and it becomes $1.17. That’s when the average consumer would scoff. People will buy less.

mystery poster

October 3rd, 2011
7:49 am

According to the AJC’s truth-o-meter, Cain had a whole bunch of “:Not True” and “Pants on Fire” ratings. I don’t trust anything he says.

Reality

October 3rd, 2011
7:49 am

This is the worst thing that could happen to America from many different perspectives….

Think about it: an ADDITIONAL 9% sales tax (consumption tax) on everything. That is on top of the State and Local sales tax. So, if you live in Atlanta, that would be 9 + 7 = 16% sales tax!!!!!! So, if I were to purchase an inexpensive car around $20,000, that would make the cost of the car increase by $3800. That would put the car out of reach for many.

And, on TOP of the 9% sales tax, the individual must ALSO pay a 9% income tax!! That is like double-dipping for Uncle Sam. He taxes us on income first, and THEN also taxes us on sales tax.

Regarding the 9% corporate tax… Does anyone with any sense really think that this will happen? The corporate world is so far into Washington’s pockets, there will be some loop hole that allows coporations to pay 0%. First, it will be the small businesses whinning that 9% is too high, so the politicans will make some exception. Then, the giant corporations will get their lawyers on it to find a loop hole. And, if all else fails, these corporations will just pay the politicans millions in campaign funds to allow such a loop hole.

Yes, something needs to change – but jumping from the frying pan into the fire is not the change needed!

Donna Lynn

October 3rd, 2011
7:50 am

About letsfly’s comment: Typical liberal. Turn a good, solid idea upside down and then call it crap. (FYI, letsfly…any religious or patriotic symbol turned upside down takes on negativity.)

Jason

October 3rd, 2011
8:15 am

@Reality – You don’t understand the plan. He’s not advocating 9% on top of the current tax code. He’s advocating throwing away the current tax code and replacing it with a 9% income + 9% sales + 9% corporate tax. If you are middle class, you are currently paying anywhere from 20 to 35 percent income tax. With Cain’s plan, you’d only pay 9% plus 9% on the spending level that you chose for yourself.

A Conservative Voice

October 3rd, 2011
8:23 am

Being a retiree, I would actually pay more, i. e., I now pay about 10% FIT, no SS Taxes and NO consumption tax. Under the 9-9-9 Plan I would have to pay the 9% Consumption Tax on top of the 7-8% State/County Sales Tax I now pay and pay 1% less FIT. However, I think this is a great idea because it collects taxes from those 47% of Americans that presently pay nothing and it also would tax what some experts say is a Trillion Dollar Underground Economy. I wish Herman Cain all the luck in the world because he is one of the truly nice guys in America and we need a person like that leading our country.

Mr. Obvious

October 3rd, 2011
8:24 am

The AJC would do ANYTHING to keep a Republican, of ANY ethnicity, from being elected President.

Ever had a blog comment of yours deleted for say something detrimental about 0bama?

Did your AJC blog comment ever get deleted when the previous President was in office?

Browncoat

October 3rd, 2011
8:25 am

Reality, you don’t get it. Under the current system, we pay federal and state taxes. Basically under this tax plan, the federal tax loopholes for the wealthy and corporations would be removed (which should make lefties happy) and the income taxes would be reduced with the consumption tax replacing the lost income tax revenue. (making righties happy). It is a plan worth consideration as a fair compromise between the flat tax and the current system.

Mr. Obvious

October 3rd, 2011
8:26 am

Anti-Bush comments on the AJC site rarely get deleted, but Anti-0bama comments don’t.

Can you guess who the AJC site editors worship?

(Don’t expect this statement of the obvious to be up here too long.)

Reality

October 3rd, 2011
8:28 am

@Jason – I do understand what he is saying. And, what I wrote in my initial post is true.

The federal government cannot stop the States from taxing. GA currently has an income tax and a sales tax. Even if Cain could “trhow away the current tax code” it would only be the FEDERAL tax code and have nothing to do with individual State’s rights to tax.

Cain’s 9% federal sales tax would be in ADDITION to Georgia’s sales tax.

DHD

October 3rd, 2011
8:32 am

The key to the plan is throwing out the IRS code. It is killing us.

As for the state tax being in addition….it’s a moot point. You are ALREADY paying that.

atlmom

October 3rd, 2011
8:43 am

if the companies are paying that much less in taxes – *and* don’t have to pay the 8% or so of their 1/2 of the payroll taxes *and* aren’t paying so much to lawyers and accountants to figure out our arcane tax code…either they would expand or they would let the saving trickle down to the consumer (or they’d pay their employees more).
SO…y’all will say: but they’re not doing that now, they have plenty of money. Yes, they have money, but what they also have is uncertainty. And if this type of tax was passed, uncertainty would be minimized – with regards to the companies being demonized, etc…
As for the idea that it would just increase…I suspect that Mr. Cain would only sign such legislation if it put in there something like would be in a fair tax bill (if the 16th amendment isn’t repealed, this legislation goes away) to avoid that. It is definitely a very big possibility that we would end up with both the sales tax and the income tax, but I think it could be avoided.

Reality

October 3rd, 2011
8:43 am

@Browncoat – If you think that corporations that donate billions to politicans will sit by and see their tax loop holes disappear, then I have a bridge to sell you!

This plan will be “sold” as a way to get rid of those loop holes. But, the reality is that big money will find a way to not pay their fair share….. and by big money I mean big corporations and also big individuals. Otherwise, won’t it be simplest to just stop these loop holes now?

This 9-9-9 plan is nothing but…
1. A marketing scheme that sounds to easy to be true – because it is.
2. A way to squeeze more money from the middle class – because the upper class and the big corporations are way too deep into Washington’s pockets. If you think that it will stop at the number “9″ then I not only have a bridge to sell you, but I can also sell you the Empire State Building!

commoncents

October 3rd, 2011
8:49 am

Reality- The idea is supposed to be simplistic. 999, no ifs, ands or buts. No loopholes, no other taxes, no other way to dodge it. Every person pays it, every corporation pays it. No other deductions or credits.

Browncoat

October 3rd, 2011
8:49 am

Whether it is a good plan is not dependent on whether corporations will accept it. Corporations do not vote. In the end, we as voters exercise far more power than corporations , if we are willing to use that power. If 999 comes in and then loopholes are added, remove the policians who did it.

I disagree that the middle class will pay more under this plan. I am middle class, and if this plan were enacted, I would pay a little less.

Republicans Are Idiots

October 3rd, 2011
8:50 am

Funny how Republicans say the AJC is a ‘lefty’ paper, but Cox Enterprises also owns WSB Radio which people used to think was ‘fair’. If you listen even to their news reports, you would think their owners were the Koch Brothers with all of their right-wing garbage talking-points. They even have a Neo-Con Republican posing as a Libertarian.

Bill

October 3rd, 2011
8:51 am

“the most heavily taxed families would see their rates go down.” That is a clever way of saying the rich will get another tax break.
“This would put more money in their pockets and make them feel wealthier and more confident.” Sorry, there is no reason to think they will spend this money. They may invest it, save it, or put it in a mattress, they have lots of choices. On the other hand, you could put money in the hands of people who have no choice but to spend it.
“Those attitudes often lead to increased spending, which in turn prompts business to increase its capital spending and hire more workers to meet the new demand.” It is difficult to see how a 9% tax on spending will lead to increased spending. Most people will have much less money to spend, and 80% of our economy is consumer spending. For everyone reading this: Look at your last tax return. Was your federal tax liability more than 9% of you gross income? After deductions, for most people it was not.

Mr. Obvious

October 3rd, 2011
8:56 am

“Liberals are Name Callers.” – Herman Cain

Cookie Monster...

October 3rd, 2011
8:57 am

@letsfly….Herman Cain’s daughter is married to Wes Moss???? Where the heck did you get that one from? Already, your facts are wrong….

Mr. Obvious

October 3rd, 2011
8:58 am

“The political strategy of the liberals in this country is to S.I.N.

They *S*hift away from the topic when challenged, they then *I*gnore the facts set before them and they then *N*ame call.”

– Herman Cain

lulu

October 3rd, 2011
9:02 am

@commoncents – *supposed to be* simplistic. Key words: supposed to be.

Do any of you actually believe that Herman Cain, if he actually makes it to Washington, is somehow going to get Congress to pass his 999 plan? If by some miracle he gets elected and some version of it does pass, there is absolutely no way it’s going to pass as is. Herman Cain may not be so swayed by big business since, you know, he *is* big business (rather than being *owned by* big business like most of Congress), but the rest of the legislators are. The 999 plan will NEVER pass without being very interestingly edited by special interests.

As is, sure, it decreases taxes for some people – and also increases taxes for many. Once it gets through Congress, it will most likely mean higher taxes for everybody except the very wealthy and big businesses.

Browncoat

October 3rd, 2011
9:05 am

Lulu, you are right, we need a revolution.

Reality Check

October 3rd, 2011
9:08 am

@Reality, I am with you, I believe the 9% sales tax will be in addition to state and local taxes, where I disagree is that it will increase your personal taxes. The part you failed to take into consideration is that you would only be paying 9% income tax. So even if you spent 100% of your income in a given year on goods and services you would pay 9% (Income Tax) + 9% (Sales Tax) + Local Taxes (for this example lets put that at 7%) which equals a maximum possible tax rate (in my area) of 25%.

Due to my income bracket I am currently paying 35% in Federal Income taxes + 7% in local sales tax. So using the same example above, were I to spend 100% of my income this year, 42% of my income would go to taxes vs 25% under Herman’s plan.

Of course since the current tax system is so convoluted, I did not take into consideration all of the loopholes such as 401K, mortgage, standard deduction etc.

MiltonMan

October 3rd, 2011
9:10 am

Reps are idiots: Anne Cox Chambers – Pres Peanut Butter Carter appointment as US Amb to Belgium; heacy supporter of the democratic party. Yes pal, she is a real Republican heavy hitter there chief.

Road Scholar

October 3rd, 2011
9:20 am

Do you realize this does away with ALL deductions, including the mortgage deduction? What affect will this have on the housing industry? Many rely on that tax break to justify their housing purchase. I realize the housing industry is in bad shape, but what is the affect?

Will the minimum wage be adjusted since for those who allegedly don’t pay income taxes (even though they pay sales tax on purchases and property taxes on renting, and on home mortgages) will have their bottom line cut by the fed gas tax?

For the overly religeous, do you realize if you hold 999 upside down it is 666! Tee Hee!

Eddie

October 3rd, 2011
9:21 am

Every plan that purports to lower tax rates, and broaden the base, is a wealth redistribution plan in favor of those at the top levels, at the expense of the poor and middle class. That is specifically by design.

Ronin

October 3rd, 2011
9:23 am

It’s a pretty simple concept. A flat 9% income tax (the flat tax) combined with a 9% consumption tax (the fair tax) linked with a 9% corporate tax. Many have posted that it’s going to cost more due to there is a state income tax, 999 and state income tax are not linked. Some states have income tax, some don’t. If you want to live in a no income tax state, you’re free to move there.
The 999 plan would require ALL Americans to have some “skin in the game”. What I find curious is that some people would attack a plan that replaces the current tax code. It’s an abomination, almost any tax collection program would be an improvement.

Cyril

October 3rd, 2011
9:26 am

Without doing the math, I’d have to guess that I would be paying slightly more. It would be significantly more though, if this plan wouldn’t cause me to alter my spending habits. (City of Atlanta sales tax rate of 8% + 9% federal = 17%…not about to pay nearly 20% more for anything that is not absolutely a necessity for life.)

If this plan were to come into effect, I will drive my car into the ground and get it repaired well beyond the normal time of ownership…which for me has been 7-8 years. I will also begin considering letting my house go back to the bank. It’s value is probably just slightly below the mortgage amount now, but since this plan would eliminate the tax benefits of homeownership, then I no longer want to deal with the upkeep. So, I’ll move into an apartment instead.

Ronin

October 3rd, 2011
9:38 am

@Road Sholar, your comment: “Do you realize this does away with ALL deductions, including the mortgage deduction? What affect will this have on the housing industry? Many rely on that tax break to justify their housing purchase. I realize the housing industry is in bad shape, but what is the affect?

Answer: the decision to purchase a house should be based on a need for shelter and long term equity building, not because of a government incentive to reduce your taxes for being in debt.

@Eddie: your comment: “Every plan that purports to lower tax rates, and broaden the base, is a wealth redistribution plan in favor of those at the top levels, at the expense of the poor and middle class.” How does one “redistribute wealth” from people with lower income levels to upper income levels? They don’t have any wealth. We have created a moocher class that believes that the evil rich should carry the load. At school or in life, there is NO FREE LUNCH, somebody pays.

If you retire and don’t want to pay federal income tax, subject to AMT, buy federal government treasury notes.

Republicans Are Idiots

October 3rd, 2011
9:46 am

@MiltonMan Obviously you can’t read. I said that Republicans complain about the AJC being a so-called ‘liberal’ newspaper, but they don’t mention that WSB Radio is a parade of right-wing talking-points including in their news reports. They even have a Neo-Con Republican posing as a Libertarian. I never said that Anne Cox Chambers was a Republican ‘heavy-hitter’, skippy.

Lauren Davidson

October 3rd, 2011
9:55 am

Moderator’s comment: The AJC encourages political discussion on its blogs, but will remove racial slurs or other offensive content. If you have a question about what is acceptable, please click here: http://blogs.ajc.com/atlanta-bargain-hunter/about/. If you see a comment you think should be removed, please click on the “report this comment” link under the comment.

Fools... the whole lot of you!

October 3rd, 2011
10:43 am

The point of this plan is that we will all be in the same boat! The tax burden will be shared by all! No if’s, and’s or but’s! To fix the mess we have in D.C. we will ALL have to be inconvienenced! Get over yourselves! Why should certain groups of people have the benefits of loopholes and others don’t? We all have to take our LUMPS!

Point Blank

October 3rd, 2011
11:11 am

I’m a voter … but I’m beginning to feel that I only vote because it’s a right/privilege to do so. Over my voting lifetime, I’ve never really been able to directly connect how a candidate I voted for (and won) benefited ME. The 1 thing that is common and should be abundantly clear to everyone is candidates propose “great things” ONLY to get our vote. Once it’s time for implementing the “great things” mentioned in their campaign run, the red tape crew emerges & these same candidates have 1,001 “great excuses”. At times I feel these candidates are nothing more than rich an/or highly educated SNAKE CHARMERS because they know the real truth on how this voting “machine” works and they spend a good amount of time winning over the hearts of the ignorant!

Is the 999 plan a good concept??? (SURE!). Would it see the light of day if Cain made it to office??? (HELL NO!) … and we all know why … a bunch of jacka***s in both parties on Capital Hill who can’t agree.

I will continue to vote but my concept on who I choose will be vastly different than how I decided in the past.

And folks … Please quit being suckers for the 1st articulate person with a book to sell and no practical political intentions!!!

PJ

October 3rd, 2011
11:29 am

Sorry, but Wes seems to be inferring that Cain’s 999 plan would adequately fund the government, which he quotes an economist as being 19.5% of GDP, and even Republicans quote 18% as a revenue target. But the $2.19T that 999 believes it will raise is still only 14.4% in our $15T economy, so we’d still have a huge deficit. And that number is quite an assumption, since almost all projections are overly optimistic.

I wish people would admit we have a revenue problem, too. Yes, spending is too high, but we need a plan to bring in at least 18% every year, and we’ll need closer to 20% to start paying down the debt. Of course, since spending has averaged over 20% for the last 30 years under both parties, we really need even more revenue or a willingness to cut defense and entitlements. Sadly, the politicians-for-life in Congress won’t compromise to save us. Our only hope is to vote out every one of them and change their perspective. Changing the party in charge every 4 years doesn’t help if most of the players stay the same.

Mr. Obvious

October 3rd, 2011
11:47 am

Oops!

CORRECTION:

Anti-Bush comments on the AJC site rarely get deleted, but Anti-0bama comments will USUALLY get removed post-haste.

Can you guess who the AJC site editors worship?

David Engage America

October 3rd, 2011
12:41 pm

The fact that Cain actually has a proposal for tax reform says a lot about him as a politician, but I don’t think his plan is the best way to overhaul our tax system.

The most sensible way for Congress to reform the tax code is to eliminate all tax breaks (except a standard deduction for living expenses), reduce the number of tax brackets, and lower the income tax rate.

Making these adjustments will create a flatter, yet still progressive income tax that cuts in-direct spending by eliminating tax expenditures (http://eng.am/pxo5XL) and raises revenue by increasing tax compliance. (http://eng.am/nz0KaJ

With more revenue and less spending the government will really have the opportunity to get our nation’s debt under control.

Nancy

October 3rd, 2011
1:55 pm

Earlier someone said that if you look at your last years tax return and take 9% of your gross the tax would be higher for most people because everyone is losing their deduction. However, under the 9 9 9 plan a person wouldn’t be losing 7.65% in social security tax on their wages. That 7.65% doesn’t show up on your income tax return!!!

Wes Moss

October 3rd, 2011
1:59 pm

For the record I didn’t even know Herman Cain had a daughter.

Ryan

October 4th, 2011
12:58 am

Overall I love the concept of the 9-9-9 proposal but would have to see some details to really evaluate. On The Tonight Show or Fox in the last day or so, Cain said that the national sales tax would not apply to used cars or homes. Did a web search and went to his web site though and could not find anything that I would begin to call a detail about the “plan”. I don’t think it stands a realistic chance of congress acting on it but without the who, what, when… details to back it up, not only would it not go anywhere, but if something happened, we (the public) would not be able to evaluate if it did or not.