Leave it to a pizza guy to come up with the $9.99 deal. Wait, sorry, that’s the 9-9-9 deal. And former Godfather’s Pizza CEO Herman Cain has made the proposal the centerpiece of his 2012 campaign for president.
Simply put (wait, sorry again, it is simple), the plan calls for setting the personal income tax, including Social Security and Medicare, at 9 percent for everyone; reducing corporate taxes to 9 percent; and establishing a new national sales tax of 9 percent.
That way, says the self-made millionaire and son of a cleaner mother and janitor father, “everybody gets some skin in the game.”
Now, before we crunch Mr. Cain’s numbers, or check that skin quotient, let’s take a look at the current tax situation.
President Obama wants to target “millionaires and billionaires” (although there are only 235,000 of them — and FYI, that’s a lot less than there were before the junior Illinois senator took office). But here’s the problem with that: The top 1 percent of income earners already pay roughly 40 percent of all federal income taxes - the top 5 percent pay some 70 percent (See The Bible: turnip, blood from a).
Meanwhile, the bottom 50 percent of earners pay just 3 percent. About 47 percent of American households pay no federal income tax at all.
According to the Tax Policy Center, the breakdown works like this: The bottom 20 percent pay -3.8 percent (that’s minus 3.8). That means they actually get money from the federal government. The second 20 percent gets even more — they pay -4.3 percent. Thus, the bottom 40 percent not only pay nothing, they get cash back (your cash).
The middle quintile — that 40 to 60 percent zone, which has an average income of $44,000 — pays 3.9 percent of the total federal income-tax revenue. The fourth quintile, with incomes up to $102,000, pays 15.1 percent.
So, 80 percent of American taxpayers combine to pay 10.9 percent of federal income taxes, according to the TPC — about $1 in every $9 of income taxes paid.
Now to those pesky millionaires and billionaires. The highest 0.1 percent of all income-earners (not 1 percent, zero-point-one percent), pay 16.4 percent of all federal income taxes — $1 in every $6 paid. Thus, the top 0.1 percent pay more than the bottom 80 percent, even though that much larger group made more than six times (that’s “6 times”) what the tiny top group makes.
Back to Mr. Cain’s numbers, it’s possible to quantify what his plan would bring in. A flat income tax of 9 percent would bring in about $1.12 trillion. Corporate taxes at 9 percent — about $270 billion. A national 9 percent sales tax, about $378 billion.
That’s only (only!) $1.768 trillion, well short of what this year’s tax revenue of $2.16 trillion. But wait. With some hefty growth (and using a projection not far above the Obama administration’s own estimates), the 9 percent income tax would bring in about $1.4 trillion, corporate taxes an estimated $321 billion, and the national sales tax about $450 billion. Boom — $2.17 trillion.
Sure, that’s well short of the $3.8 trillion Mr. Obama wants to spend, but it does at least match up with current revenue. And, hmm, maybe America should spend less, and, this is crazy, try to match its expenditures with its revenues.
With Mr. Cain’s win at the Florida straw poll this weekend, his plans will likely garner much more attention in the coming days. So, he’ll have a chance to explain how the U.S. would be able to dig itself out of a $14 trillion debt while bringing the same amount of revenue as today.View Entire Story
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