Herman Cain’s “9-9-9” tax plan has been attacked and denigrated by his conservative opponents. Liberals are having a cow. The media is up in arms. It seems everyone is upset. But the reality is, it was a great start. The only way you know something works in Washington is when all sides are angry.
The 9-9-9 plan is simple, it’s memorable, it opened the conversation and it reminds me of Ronald Reagan’s plan to cut the tax rate from 70 percent to 28 percent. That, too, was laughed at and denigrated as “too simple.” No one believed it could ever work. Yet Reagan got it passed and, in record time, the worst economy since 1929 was turned into the greatest economic boom in world history.
All it took was unleashing the power and motivation of people who start, invest and run small businesses. That’s the group that needs to be inspired, rewarded and energized to get America going again. That’s the group Reagan inspired.
Mr. Cain’s 9-9-9 plan is creative, daring and interesting: a 9 percent business tax, a 9 percent individual tax and a 9 percent national sales tax. But the last 9 represents a dangerous precedent. It’s not a good idea to introduce a national sales tax. Having said that, it is a great start and Mr. Cain is to be applauded. He is headed in the right direction. We need to inspire and reward the job creators, flatten the tax code, eliminate the capital gains tax to encourage investment and financial risk-taking, and make it easier for Americans to keep more of their own money. Mr. Cain has inspired me to create an even better idea.
Let’s call it “0-15-0.” It keeps the best ideas of Mr. Cain’s plan, but eliminates the worst - the national sales tax. It starts with a supercharged attention-getter that will create jobs like no tax plan in U.S. history. We are in so much trouble the only way to get us out of this economic Armageddon is to shock the economy. We must supercharge the heroes of the business world - small-business owners and investors. This plan is Reagan squared.
Start with zero taxes. I propose a one-year national income tax vacation. It’s fair, it’s flat and we spread the good news to everyone. If you earn money for the next year, you get to keep it all - 100 percent. You earned it - it’s yours. Rich, poor or in-between, it doesn’t matter. This idea will inspire the greatest explosion of good-will, jubilation, job creation, small-business startups and expansions, and stock and real estate investment in world history.
Whatever you make in the next year, you keep. Period. Simple. Exciting. Exhilarating. The American Dream on steroids. Why should the poor, union members, government employees or lawyers complain? They get to keep their money, too. Everyone does. That is how you kick-start a recovery and motivate a nation. That is how you get business owners to agree to finally add jobs. That is how you save millions of homes from foreclosure. That is how you save businesses just barely hanging by a thread. It’s right from the script of “The Pursuit of Happyness.” Watch the economic miracle that happens when you give taxpayers a chance to keep the fruits of their labor.
Then welcome U.S. taxpayers back from their one-year tax vacation with the certainty of a 15 percent flat tax on personal and business income. This replicates the most successful model in the world - Hong Kong, with a booming economy and minuscule unemployment. Unlike Mr. Cain’s plan, we wouldn’t rely on any national sales tax. We just keep it completely flat and simple - 15 percent for everyone, individuals and business.
Also unlike the Cain tax plan, instead of a 9 percent rate, we lower income taxes to 15 percent, but allow two deductions - mortgage and charitable. America is at death’s door because real estate is the foundation of America. Without a housing recovery and stability there can be no recovery, there can be no healthy retirement for older Americans, and there can be no investment in small business. The equity in our homes fuels all of that.
We need to protect the biggest investment in almost every American’s life - their home. Take away the mortgage deduction and you destroy the economy. The deepest real estate collapse in U.S. history worsens. Homeowners who lose their mortgage deduction finally will give up and walk away from their homes. Without the mortgage deduction, most of the homes in America not already in foreclosure soon will be, which would deepen the banking mess.
The flat tax’s simplicity will be a boon to the economy as well. You can fill out your taxes on a postcard. As a bonus, this would save a trillion dollars a year in accounting and tax-attorney bills - freeing up that money for investment and job creation.
Now to the final zero of the simple 0-15-0 plan. That zero belongs to the elimination of taxes on capital gains, dividends and interest - just like Hong Kong. Eliminating cap gains taxes is how you motivate Americans to put their money where it best helps the economy - into stocks, real estate, small-business start-ups and other investments. China has a zero capital gains tax. To compete with China, so must America.
And the bonus of this last zero is that it is a wonderful reward for older Americans who have worked their whole lives. Now they can retire on half the savings and assets - knowing that their capital gains, dividends and bank interest are tax-free for the rest of their lives. We’ll see an explosion among those 65 and older in investing, charitable giving and paying for the college educations of their grandchildren.
There you have it - 0-15-0 is an economic miracle, retaining the best of Herman Cain’s plan and eliminating the worst. But a sincere thanks to Mr. Cain for starting the dialogue and providing the inspiration.
Wayne Allyn Root is a former Libertarian vice-presidential nominee and author of “The Conscience of a Libertarian: Empowering the Citizen Revolution with God, Guns, Gold, Gambling & Tax Cuts” (Wiley, 2009). He writes at RootforAmerica.com.