Wes Moss: Cain’s ‘999′ plan — a breakdown

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

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

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

I have some bad news for the Occupy Wall Street crowd. Americans are angrier with the politicians in Washington D.C. than they are with Wall Street fat cats who are supposedly destroying the middle class. This was evidenced by the lively discussion on my recent post explaining Herman Cain’s ‘999′ tax plan, while my warning about excessive mutual fund fees prompted a whopping three responses.

So I dug deeper to determine what Cain’s plan would mean for you. My team of accounting and finance experts compared the likely tax burdens for various taxpayers under the current system and the “999″ proposal. We used the following assumptions:

  • Retirees would pay no tax on Social Security under the plan.
  • Retirees who pay their taxes as single filers were assumed to have $22,000 in annual Social Security. Retired couples filing jointly were assumed to have $36,000 in Social Security payments.
  • Under the “999″ plan, workers would pay no “payroll tax,” also known as FICA or Social Security tax.

Based on our number crunching, the Cain plan would benefit the majority of working people. Most single-filers earning $25,000 or more would pay fewer federal taxes under the plan. Most working families would also pay less. The exception: low-income households that currently pay little or no federal tax. If you currently don’t pay taxes… even one dollar classifies as more.

Here’s how it breaks down by household income level, assuming you are working with one dependent:

  • $1 million: 15-17 percent under “999,” compared to 32 percent now.
  • $500,000: 15-17 percent under “999,” compared to about 30 percent now.
  • $100k,000: 14-16 percent under “999,” compared to 18.6 percent now.
  • $50,000: 13.5-16 percent under “999″ compared to 12.5 percent now — for a family. Single-filers with no dependents pay 20.3 percent now.
  • $30,000: 13.9 percent under “999,” compared to 11.5 percent now (again, this is married, filing jointly with one dependent).  Single-filers with no dependents pay more than 16 percent now.

For retirees, Cain’s plan is a mixed bag. Single filers with less than $57,000 in annual income (including Social Security) would likely pay more tax under “999.” Same thing for married retirees whose income is less than $91,000. If you have income above those levels, you would pay less.

So even though there is no tax on social security under Cain’s plan, it still may not be advantageous for some low-income retirees due to the 9 percent on consumption of “new goods.” Most retirees are in a lower tax bracket than they may think. For instance, a retired couple living on $50,000 (of which $20,000 comes from Social Security) is currently taxed at a 2.6 percent federal rate. The same couple earning $74,200 pays 5.4 percent. Under the 999 plan, these rates would rise to approximately 10.5 percent and 9.6 percent, respectively.

Herman Cain’s tax plan is like any other –- it has winners and losers. If you are a working person with a good income, you should be rooting for “999.” If you’re a retiree of moderate means, maybe not so much. (As of last Friday, Cain’s camp intended to adjust the plan to make it more palatable for retirees and very low income households.)

I’ll keep you up-to-date if significant changes unfold. But for now, where do you stand on “999?”

– By Wes Moss, for Atlanta Bargain Hunter

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41 comments Add your comment


October 24th, 2011
7:48 am

Why am I not surprised that a Republican backed revision of the tax code is overwhelmingly beneficial to the wealthiest at the expense of the poor?


October 24th, 2011
7:58 am

As i continue to say, I will vote for the person who lies to me the best. People in (office, or your next door neighbor) only cares about themselves. In life as it seems, all people care about is money and how to keep it. Hermann Cain cares nothing about people, only what to say to get him elected! Still the rich get richer and the poor people struggle at their expense.


October 24th, 2011
8:34 am

Kee. . . I am in the financial services business and most of the time poor people struggle financially because of their decision making and not because of Wall Street. The tax code NOR catastrophic events are the MAIN reasons people struggle financially. Poor decision making and misplaced values are two of the biggest culprits. A LOT of people struggle financially because of the houses they live in and the cars they drive and I have been one of those people in times past so I am speaking from personal experience and almost 20 years of professional training.


October 24th, 2011
8:47 am

Whether 9-9-9 ever gets enacted, it’s already accomplished something that hasn’t happened in decades. We’re talking about “how” to change the tax code – not if it needs to be changed.

Bravo Herman!


October 24th, 2011
10:09 am

What happens if your city has passed a “SPLOST” – an additional extra penny tax on local spending? Would this now be a 10% tax on all goods- 9% mandated by Cain, plus Splost?. Can someone address this? Taxes are getting out of hand here.


October 24th, 2011
10:24 am

There is a zero or two missing from you calculations. According to Mr. Cain, the 999-plan is tax revenue neutral—meaning the new plan will bring in the same amount of revenue as the current system. However, the 999-plan offers massive tax breaks for those who account for the largest portion of current tax revenue. This huge hole must be filled to hold to a revenue neutral claim. Who will fill it? Middle income and low income wage earners. Simple plan, simple math.


October 24th, 2011
10:39 am

Cain’s plan proves one thing….OUR CURRENT SYSTEM IS FINE.

This is just the FAIR TAX under a different name.

He wants to tranfers the tax burden fron the wealthy to the poor and retired….Wow, what a man of the people.

I wonder when all of the those poor and retired Republicans are going start voting in their own best interest and stop chasing the illegal aliens. The Rich bring in the aliens and now what to shift the tax burden on you….Wow and you still vote for them.


October 24th, 2011
10:45 am

SSgreen (SPLOST Question) – SPLOST is a STATE Tax not a FEDERAL Tax. The 9-9-9 Tax Plan has absolutely nothing to do with State taxes so the SPLOST would be 1% more on the state sales tax we already pay. With the 9-9-9 there would be a seperate 9% Federal sales tax on top of it. So at the end of the day we would pay 9% Federal Income Tax, 9% Federal Sales Tax, and Corporations/Businesses would pay 9% Income tax as well. We already pay a 7-8% Sales Tax in the state of GA and the SPLOST Would add 1% on top of that. The good news is with the 9-9-9 tax plan you would only have 9% taken out of your paycheck for Federal Income Tax instead of anywhere between 18-35% that’s taken out now.


October 24th, 2011
10:47 am

@IntelligentVoice…great post

These Republicans need to go back to 5th grade math, so they can figure out how many ppl making less than 25,000 a year it takes to make up the 15-17% for the guy making over 1mil a year.


October 24th, 2011
10:49 am

I’m tired of hearing people say “it means the middle and lower classes will have to pay more”. They hardly pay anything now! I’ve not had a democrat/liberal yet give a half intelligent answer to the question “What is fair about having some folks pay a lot of taxes and some people paying little or no taxes”. Their is no 2 ways to cut it. If fairness is what we are looking for then our current code is absurdly unfair. And just for the record I’m in the lower/middle class.


October 24th, 2011
11:00 am

What makes wealthy people evil? I’m not wealthy but I’d like to be and I go to work everyday with the intent on trying to make money and gain wealth. Even under the 9-9-9 plan someone making $1 million a year would still pay $90,000 in Income tax. Do you think they are actually receiving $90k in benefits from the goverment? Don’t blame rich people because you aren’t rich yourself. It just makes you look bad.

John OTC

October 24th, 2011
11:02 am

Does it come with one free pizza per year? Is tip and delivery included?


October 24th, 2011
11:05 am

Life isn’t Fair…

WE NEED A SYSTEM THAT WORKS!!! It worked well enough to make Herman Cain a millionaire and now he wants change it, so it will be harder for my children to reach his financial status….IS THAT FAIR?

How will it make it harder for children….

This system allows the wealthy to SUCK more money out of the system(Because you don’t get rich by spending money), creating fewer chances for ppl to have acces to that money…JUST LIKE WE DO NOW, BUT WORSE.

Remember the word FAIR when unemployment goes 20% because you wanted FAIRNESS, instead of a system that works…. Go back to the Reagan/Bush/ Clinton taxes


October 24th, 2011
11:07 am

@JP…Have you ever been to 3rd world country…Yes, they get 90,000 worth of benefits from the Gov. and a lot more.

[...] or for federal revenues. Beginning with how this plan would impact specific income levels, the Atlantic Journal Constitution reports the following impact on taxpayers, assuming one [...]

j nes

October 24th, 2011
11:12 am

This is the best analysis I have seen so far on the 999 plan. I like the plan, but I do worry that Bachman had a point (for once) when she mentioned how, overtime, the government would likely raise the 9-9-9 to the 10-10-10 and so on.


October 24th, 2011
11:14 am

“The United States of America is not a third world country by any measure; except, perhaps income inequality, where we rank….worse than The Ivory Coast… worse than Cameron…64th! In your face, Uruguay, Jamaica, and Uganda!”

Jimmie C.

October 24th, 2011
11:28 am

$90,000 in income taxes on 1 million sounds fair. How much are they paying now for 1 million of income under todays tax rate


October 24th, 2011
11:28 am

What is so bad about making the poor pair their fair share of taxes? do they not use the roads? Do they not send their kids to public schools? etc… EVERYONE should have to pay their fair share, I’m sick of covering the cost to put your kids through school, while you don’t pay taxes. This plan looks to me like it will balance out the cost.

Not a dufus1

October 24th, 2011
11:31 am

Anyone that voted for the current president is part of the problem whether they voted for him for racist reasons or out of ignorance. Those that would vote for this America destroyer in the next election would be voting for racist reasons or out of stupidity. If you are a racist then your thinking will not be changed and you will still vote for the color of the skin but if you voted out of ignorance then theere is no excuse for you if you vote for him again. You are plain stupid and have no loyalty to this country. Make the tax changes fair to all and do not punish either class (poor or wealthy) just to obtain more income to be wasted by politicians. I do not agree that social security or military retirement should be taxed but be exempt from further taxation of any kind. Have a nice day.


October 24th, 2011
11:31 am

There is no ‘magic’ in finance just like Bush’s plan to further exempt the rich and maintain the same rate of taxes for all others and in some cases lowering them while also spending in record amounts to finance his Wars failed ……….

so will Cains 999,

taxes are how we as people pay our share of the cost whether we like the program we are paying for or not… So the money still has to come from somewhere or we will continue to borrow and go further in debt. So any politician promising reduced Taxes and also saying we aren’t going to borrow is either a fool or a liar

Not a dufus1

October 24th, 2011
11:32 am

correction then there is no

Not a dufus1

October 24th, 2011
12:01 pm

mrlucky7— Obama’s plan to turn this country into a socialist state is on track and as soon as he has destroyed the economy his and maybe your yours? mission will be accomplished. The wars now are no longer Bush wars but are the responsibility of the current president. He and other democrats like to pass the blame on others instead of stepping up and being accountable. But that is not the way of this wimpy teleprompter reader. I believe our leader if off on another campaign tour at our expense to seek support for his failed policies. Old saying is fool me once then shame on you but fool me twice then same on me. Anyone voting for this socialist is a loser and dim witted..


October 24th, 2011
12:02 pm

@not a dufus1

Did I offend you? or are embarrassed?

You sound like a guy that voted the for the 2nd Bush…10 trillion dollar war, Current tax rate, high as hell gas prices, collapse of the economy, devaluing the dollar and the start of this high unemployment….PLEASE DEFEND THAT!

(Remember how low GAS PRICES were when Clinton was in office, life was Good)

We do need fair…we need a system works for American.
know it is hard for a person that never votes in their best interest to understand, but “FAIR” tax system will destroy American….JUST LIKE THE CURRENT TAX SYSTEM IS STARTING TO DO!


October 24th, 2011
12:03 pm

Is there a way to subscribe to your updates on 999?


October 24th, 2011
12:11 pm

KBP – you speak of your personal experience. The statement you made is still your experience, and EVERYONE has different situations. I read that you are a professional trainer. Would you be willing to share your experiences with US? Maybe schedule a workshop? Please email me to assist alot people out of this way of thinking.


October 24th, 2011
12:14 pm

I still am baffled at people’s ignorance around the defintion of the word “socialism”. Take political parties out of it. At its root, the word means an economic system in which the means of production are commonly owned and controlled cooperatively; or a political philosophy advocating such a system. Do you see the governemnt controlling everything that’s produced? No! We don’t produce much here anyway. Most things produced for the US are made in China where they have Communism..government controlled production!! So who is the socialist here? Is it the liberals or the GOP backed big businesses that send jobs overseas to countries that have produciton run by the government?


October 24th, 2011
12:33 pm

The reality is that the currently $1 million plus pay people to play a shell game with their money and hide a large %. Under this plan they would truly pay their pair share


October 24th, 2011
12:36 pm

The numbers for Cain’s bill just don’t add up. First of all, in terms of overall federal revenue, the Cain plan would reduce the total amount of tax money available, at a time when we are struggling to meet our obligations. Second of all, at least right now, the tax is very regressive, hitting the poorest people much harder (in terms of relationship to total income) than the wealthy. (If you are barely making it as it is, even a 3% increase in yearly costs can have devastating results, as many people know.)

I agree that we need to curtail wasteful spending in government. However, when you look at the social outcomes of European states versus the United States, the US comes out far worse in terms of standard of living, security, and health for the vast majority of inhabitants. Of course, if your idea of a good society is the Gilded Age of the late nineteenth century, with crushing poverty for most, a struggling middle class, and vast wealth for a tiny few … well, then we’re almost there, and Cain’s plan will help us get there even faster.


October 24th, 2011
2:29 pm

We are retired and pay no state of federal income tax BECAUSE we watch every penny we spend. We have social security plus our IRA accounts. We know exactly the amount we can withdraw from our IRA accounts in order to not pay taxes. We have all we need or want. So why would I vote for a person who is going to change the tax code where I have to pay more in taxes?

Mary Poppins

October 24th, 2011
2:36 pm

I like the 999 plan. Comparing our current tax situation to the 999 plan, we would pay a little more in direct taxes under the 999 plan. If you include the current indirect or embedded taxes in that comparison, we would probably pay less. However, I am willing to pay more so that the funding of the government is shared by more people. Also, people need to realize that their income and tax situations are most likely not static. It will change from year to year. In our situation, we have college aged children who will soon be independent, and we will lose those tax exemptions, thus increasing our taxable income. Also, our youngest child will be over 16 years old soon so we will lose that tax credit. I expect these factors to increase our federal income taxes quite a bit.


October 25th, 2011
12:31 pm

To all the 999 DETRACTORS, you must either be sucking off the government benefit programs OR you cannot learn OR you love to be controlled by the government. The 999 plan is not perfect. However, it is exponentially better in every way than the current corporate and personal tax systems that the national government has forced upon us.

The 999 plan ELIMINATES the payroll tax that is over 15% of your income (that is, if you work and pay FICA taxes). It also ELIMINATES the current tax code entirely! The plan cuts the corporate tax RATE dramatically, but also eliminates many of the tax loopholes that many of those EVIL corporations use to escape paying any taxes. The 999 plan paves the way for a move to a pure, RETAIL national consumption tax which will eliminate ALL personal income taxes, so no more political control of your life through the tax system.

The benefits go on and on for American People who love liberty, freedom, personal responsibility, AND HATE government control of their lives. For the rest of you, please get over your emotional, social-guilt selves and start using your brain for thinking instead of memorizing liberal, statist sound-bites. Of course, that loops back to being able to both learn and reason. To you whining, government-loving, socialist-democrat sycophants, good luck with that.


October 25th, 2011
9:46 pm

People……………C’mon. Dont pay so much attention to this 999 plan. Pay attention to the fact that someone is brave enough to tackle the old tax code problem we have in America. If Herman makes it to the WH, this plan will have changed so many times it may be called something totally different by then.

I just hope that if he does make it, he dont do what Bush did and give some half a** try……I was really looking forward to someone trying to change SS :0(

Mark Mason

October 25th, 2011
9:54 pm

I have a plan that reduces everyone’s taxes who currently pay taxes. I call it the 5, 10, 15 plan. All deductions will be eliminated and replaced with a 20% of Adjusted Gross Income. 70% of taxpayers would be in the 5% tax bracket, the next 20% would fall into the 10% tax bracket, and the top 10% of taxpayers would fall into the top 15% bracket. The brackets would adjust yearly based on the previous year tax statistics. All income will be taxed at the same rate. There will be no filing for married, head of household, or single as every taxpayer will pay taxes based on his or her income. Corporations will not pay any taxes on dividends to shareholders as the shareholders will pay taxes on that income. Corporations will not pay taxes on salaries, benefits, and employment taxes. They also will not be able to deduct, airplanes, yachts, automobiles, trucks, interest, advertising expenses, training vacations, travel expenses, and executive salaries above one million dollars. The first million dollars per employee is deductible. This will force billion dollar corporations who currently pay no taxes to be in the 15% bracket and penalize corporations who pay absorbent salaries at the expense of shareholders. There will be no caps on employment taxes and employment taxes will be expanded to capital gains, dividends, rents, royalties, and all other income except retirement income. This will bolster the social security system and may even reduce the rate. No need to file a separate state income tax as states can only charge a tax of not exceeding 100% of the Federal tax. Greedy states like California will probably charge the max while others may not tax their residents at all as they do now. Under this system, most taxpayers will fill out a postcard with their total income, deduct 20% for standard deduction and calculate their taxes. Corporations and businesses will be able to deduct cost of goods sold in addition to deducting dividends paid out to shareholders & employee costs. Retailers will be easy – Total sales less cost of merchandise equals net sales. They then deduct their dividends paid to shareholders and employee costs which leaves Adjusted gross income. Then they deduct 20% as their standard deduction. Manufacturing concerns will calculate their cost of goods sold by adding raw materials, energy to produce product (no deduction for air conditioning for office spaces), depreciation of machinery. Only banks, leasing companies, and commercial and qualified apartment buildings may deduct interest expense. There would be no interest deduction for single family homes even if rented out. This system would be progressive while not being confiscatory and everyone is on a level playing field. If this does no generate enough income, the federal government could consider a national sales tax. However, this tax will be on all services and products including home sales, leases, rentals, investments of all kinds including stocks, purchases of businesses. No public or private businesses can do business in this country which try to move exchanges overseas. There will also be an immediate 15% tax on the retail value of products and services imported into this country. This fee can be used as a tax credit toward taxes due and all companies will have the same tax year from January 1 – December 31. What do you think.

Jim Kalin

October 26th, 2011
9:32 am

Let’s take a look at the claims here. The Cain people say it’s revenue neutral. They sat it will reduce the price of goods because the corporate taxes will be less and at the same margins that results in lower prices. They say that the taxes will be vastly reduced on people that everyone making above $100,000 will get a substantial decrease in overall taxes. And everyone else will pay a little more. Really? People that make over $100,000/year pay 80% of the taxes now. We are to believe that a few percent more paid by the lowest 80% will result in revenue neutrality? The numbers above indicate about a 15% increase on the bottom 80%. So, multiply 15% times the 20% the lower income brackets pay and that gives about a 3% increase in net government revenues. Now lets take a look at the top end: 25% are in the $100,000 plus category (2010 data). Source: http://www.census.gov/compendia/statab/2012/tables/12s0696.pdf They get somewhere where between an average of 6-50% tax cut. Cain’s people have claimed a 20% overall reduction in this category of taxpayers. Since they pay 80% now, and get a 20% reduction, the net revenue reduction is 16% in government revenues. 16%-3% does not equal zero. Revenue is not “neutral”. Even if the tax cuts on the top 75% are only 10%, then there is still a shortfall of 7%. Resultant increases in the deficit are in the hundreds of billions/year either way.

Jim Kalin

October 26th, 2011
9:49 am

Now lets take a look at retired folks. The article is disingenuous. Social Security in the above examples is already tax free. BUT under 999 the retires will have to pay 9% on the money spent. Note, that this has already taxed at their the top income bracket when they were “contributing”, because FICA was taken after the persons income tax was calculated. That being said, let’s take a closer look at a realistic situation. Let’s say a retired person gets $20,000/year in Social Security payments. I use that figure rather than the authors because it is much closer to what average retirees will be getting. Let’s say that they supplement that with savings of $30,000/year. Now they pay zero taxes. Under Cain, the national sales tax will cause them to be taxes at 9% X $50,000 = $4,500 increase of their taxes. Note again that these people have already been taxed on this money. I could go on for quite awhile about how aggregate demand is lowered. How wealth would be accumulated at the very top end of .1% (that’s point 1%). That group has the highest percentage of wealth in the USA since 1929. Note the people making $500,000 are, in most part, the good guys. Providing jobs. I like the idea that they would keep more to expand their businesses. But the government needs to spend LESS. Not raise the taxes on struggling middle class families and retired people. Cains 999 is a set up for government to spend more. Those taxes can be raised easily as national sales taxes and VAT’s in Europe have.


October 26th, 2011
2:31 pm

Where can I find a comprehensive, detailed explanations of cains 999 tax plan? So far I can only find bits and pieces.

Josie Wheaton

October 27th, 2011
2:53 pm

I would like to see a copy of the 999 plan. What I’ve learned about it so far I like. The part That I especially like is that everyone would pay something. I am retired with a part time job so I would put myself in the lower class income bracket. Our men and woman have died for our freedom and to here people complain about paying the tax on new purchases is a disgrace. We should all pay something for our freedom. The 999 plan does not tax used items so low income people can purchase used items, this plan gives us a choice. We need Herman Cain in the White House. God Bless America.


October 28th, 2011
9:31 am

For those of you who find fault with the plan (liberals), what would YOU suggest? At least it is a beginning for conversation on an area where CHANGE is truly needed. Yes, we can! As for the conservative comments–we worked long and hard to make our money, making wise choices (for the most part) along the way. It should be our decision as to how WE spread the wealth–not the government’s. And I’ll go you one better–the plan needs to add another 9–if you receive welfare, ADC, or any type of government money and are able to work, you should have to give 9 hours or more a week of community service. You would “feel better about yourself” and would actually be earning your keep!


October 30th, 2011
9:04 am

I think it is comical how some people believe that all low-income/poor people are in that situation due to their choices. Yes, there are plenty of people who make very poor choices with their money, but you can’t lump them all together. My family pays very little in taxes because of deductions. Deductions for medical expenses. We didn’t choose for myself to be diagnosed with a neuromuscular disorder that is slowly paralyzing me forcing me to stop working. We didn’t choose for our daughter to be born with congenital heart defects, and require three open heart surgeries so far…and she is only three years old. We live in a small home BECAUSE we chose to. We won’t be having more kids, because it is isn’t financially responsible. No one has the right to sit on judgement of my family and our financial situation. If we lost the ability to deduct medical expenses, we would no doubt also lose the ability to put food on the table. Don’t lump all low-income together saying it is their choice to be low-income.


October 30th, 2011
11:54 am

why can’t there just be ONE tax rate for all and we just learn to live with it.