Zakaria: Why Herman Cain’s “9-9-9” plan is less crazy than you might think
Supporters of 2012 Republican presidential contender Herman Cain, including Dee Dombrowski, from left, Vera Godleski and Olga Mitchell hold up '9-9-9' hands, a reference to Cain's proposed tax overhaul, during a book signing in The Villages, Florida, Wednesday, October 5, 2011. (Getty Images)
October 20th, 2011
12:11 PM ET

Zakaria: Why Herman Cain’s “9-9-9” plan is less crazy than you might think

By Fareed Zakaria

Herman Cain’s campaign promise - the “9-9-9” tax-reform plan - has invited universal scorn from pundits in a way I have rarely seen. “Dial 9-9-9 for Nonsense,” sniffed the Economist. “Ill-considered, hand-waving improvisation,” said the conservative National Review. But Cain’s idea has caught the public’s attention, and for good reason.

I am going to defend not Cain’s specific policy proposals but their general thrust. His plan is sloppy and, in parts, bizarre. But the impetus behind it - tax simplification and reform - is not. The first 9 is a 9% income tax to replace the current tax code. Most Americans believe that the federal tax code is highly complex and fundamentally corrupt. They are right. The federal code (plus IRS rulings) is now 72,536 pages in total. The code itself is 16,000 pages. The statist French have a tax code of 1,909 pages, only 12% as long as ours. Countries like Russia, the Czech Republic and Estonia have innovated and moved to a flat tax, with considerable success.

Complexity equals corruption. When John McCain was still a raging reformer, he pointed to the tax code as the foundation for the corruption of American politics. Special interests pay politicians vast amounts of cash for their campaigns, and in return they get favorable exemptions or credits in the tax code. In other countries, this sort of bribery takes place underneath bridges and with cash in brown envelopes. In America it is institutionalized and legal, but it is the same - cash for politicians in return for favorable treatment from the government. The U.S. tax system is not simply corrupt; it is corrupt in a deceptive manner that has degraded the entire system of American government. Congress is able to funnel vast sums of money to its favored funders through the tax code - without anyone realizing it. The simplest way to get the corruption out of Washington is to remove the prize that members of Congress give away: preferential tax treatment. A flatter tax code with almost no exemptions does that.

Read more at TIME.

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Topics: Economy • From Fareed • Jobs

soundoff (35 Responses)
  1. John E

    Keep in mind that 999 wipes out the Capital Gains tax. Many of the ultra rich gain much of their of income from investments. If a billionaire's income is 50% earned & 50% investments, the tax is 4.5%. If the income is 2/3 income, the annual liability is 3% The Washington Post provided this table on annual Tax Liability under 999 (copy and paste): http://www.washingtonpost.com/blogs/ezra-klein/post/the-9-9-9-plan-in-one-very-long-graph/2011/08/25/gIQAgq8WxL_blog.html

    October 20, 2011 at 12:59 pm | Reply
    • hacimo

      In Cains plan the capital gains tax is not needed because the holder of stock pays tax on the top line revenues of their company not on the bottom line as in present law. This is essentially an much increased tax on persons who own capital of any kind (i.e. the rich). In any rate since Cain does not increase taxes on the poor and middle and since total revenue stays constant or decreases, it means that upper income people take up the slack.

      October 20, 2011 at 2:05 pm | Reply
    • KenTheSailor

      Also keep in mind that the "ultra rich" who pay no income taxes because they now longer have to because they are rich enough that they do not need to, will suddenly be taxed on purchased and the "ultra rich" love new, shiny, expensive toys. Another thing to consider is that because of the down economy, tax revenue from capital gains is not as much as it used to be because stocks are not paying off for most. Another reason our revenue dropped was because nobody on Wall Street has made nuch money in 3-4 years. Removing the Capital Gains tax will encourage people to invest again.

      October 20, 2011 at 2:11 pm | Reply
      • Vote Loud

        AND drug dealers and black market cons will FINALLY be taxed...

        Ohhhhh Now I understand the opposition!!!!!!

        October 24, 2011 at 12:25 am |
    • hacimo

      You obviously know nothing about capital gains tax. There are so many loop holes in this that sort of tax that it is pathetic. First of all there is the fact that you get to subtract losses from past transaction and you get to carry forward losses from long ago into the present. Some people are like Buffet make a lot on money in the market and own tax, but most people loose money and they get a tax cut. Second is the matter of accelerated depreciation (which i cant go into). Third is the question of reporting. How many people who sell a house or a boat are going to tell the government about this fact and pay a capital gains tax. The transaction is usually done in cash or the record is buried under such a pile of paper that it is impossible to find.

      October 20, 2011 at 8:57 pm | Reply
      • Youngster

        That only applies to Long term gains & losses. Yes, you could offset long term losses, but as we know, there are tons of short term trades going on, which is more like gambling, if you ask me. I think getting rid of the long term gains entirely is not feasible, but reducing it from 15% to 7.5%, while raising the short term gains from 35% to 45% will have dual postive effects. 1) It'll encourage long term investment which stock trading is really there for, to provide capital to companies to be invested. 2) It'll reduce maddening voilatility in the stock market by significantly reducing short-term tradings. Yes, short term trading does have it's place. But by raising the tax by 10%, it'll give traders a pause before they click on the button to trade.

        October 21, 2011 at 9:36 am |
      • Vote Loud

        What did Immelt and Soros pay last year?

        Liberals believe that today's tax structure is "progressive"???

        In the eyes of Soros, IT IS VERY PROGRESSVE..................... IN HIS FAVOR!!!!!

        October 24, 2011 at 12:23 am |
  2. hacimo

    I just saw a report by Lawrence O'Donell of msnbc that compared the taxes that would be paid by a family of 4 making $50,000/year under current law and under the 999 plan. You can watch it yourself at this link;

    http://www.realclearpolitics.com/video/2011/10/20/capehart_its_all_going_to_crumble_eventually_for_cain.html

    They said the family would pay $8,400 currently and that under 999 they would pay 13,600. I don't know how they got the figure for current tax (it is really complex), but the figure given for Cain's plan is totally bogus. This is because the absolute maximum effective rate on personal income if you combine the payroll tax and the sales tax is 17.2%. This is derived by summing the 9% on payroll with the 9% sales tax on what is left. The 17.2% maximum rate could only be reached in the very worst case. The number assumes that the payer has no state and local taxes, saves nothing for a rainy day, makes no 401K pension contributions, has no debt payments, no charity contributions and that they spent every dime on services and unused consumer goods. In any case, even taking the worst case one can easily calculate then the family of the msnbc example pays only $8,600. in taxes. This is a mere 200$ more than what they pay currently. Talk about a pile of total spin and lies.

    October 20, 2011 at 1:54 pm | Reply
    • KenTheSailor

      All you had to do was say Lawrence O'Donell and I knew it would be BS.

      October 20, 2011 at 2:13 pm | Reply
    • Vote Loud

      That is hilarious!!!!!

      I would prefer to listen to Mick Mouse for economic advise!!!

      October 24, 2011 at 12:19 am | Reply
  3. Ringer

    9-9-9 is honestly getting a bad rap and even the economic analysis done by the Tax Policy Center is flawed. It insists that the 9% Corporate tax is a VAT tax which will be layered into the cost of goods. This simply isn't true. Same as the insistence that the sales tax plus income tax equates to an 18% tax on an individuals income. Again simply untrue. At most you cannot get more than 17.2% as the above poster said.

    This is why Cain has consistently said, "They are running on assumptions we simply do not make".

    If you consider how much each company has to pay in payroll tax and corporate tax and that those taxes ARE included in the costs of production... 9% flat rate will reduce prices DRAMATICALLY.

    October 20, 2011 at 2:09 pm | Reply
    • Vote Loud

      Obviously you did not learn Economic Theory from late night comedians!

      Thank you... well stated!

      October 24, 2011 at 12:17 am | Reply
  4. Michael

    According to a different source, the plan would cost middle and lower income earners more and would benefit the wealthier earners by lowering their taxes. Sounds like a typical Republican plan if you ask me. Worthless!

    http://www.truth-out.org/cains-9-9-9-plan-would-give-thousands-back-millionaires/1319030207

    October 20, 2011 at 3:00 pm | Reply
    • Vote Loud

      Conservatives believe in creating wealth (which creates jobs and moves people up the economic ladder).

      Liberals believe in Social programs that inadvertently condemn people to lives of poverty and crime.

      I'll take the growth and job path, thank you!

      October 24, 2011 at 12:15 am | Reply
  5. GOPisGreedOverPeople

    Sales tax is a regressive tax on the poor.

    October 20, 2011 at 4:28 pm | Reply
    • hacimo

      How can cutting taxes for poor people be regressive? As indicated above the maximum possible personal tax under the 999 plan is 17.2% of total income (you can subtract the amount you put in a 401K and the amount you pay for health insurance). Now look at your last years W2 form and at your tax return and if the sum of social security, medicare, income tax and federal excise tax is more than 17.2% then you will benefit from Cains plan. Almost everyone who does the numbers will find that they benefit which is why Cain's popularity is taking off. It is simpler, you keep more of your money, the government gets the same amount as presently. Naturally there is no free lunch but in this case the savings is achieved in three ways. First people currently who have massive tax shelters are forced to pay their fair share. Second the corporations and small business will not be able to play games with their business expense accounts. Finally, illegal workers who are payed in cash and criminals like drug dealers will have to pay at least some tax on their profits.

      October 20, 2011 at 8:39 pm | Reply
      • ender342

        Please explain how drug dealers or their customers will be compelled to pay sales tax on their transactions - unless of course drugs are legalized in which case only drug companies will sell drugs because they would undersell the gangs whose exorbitant profits depend entirely on their products' illegality.

        October 24, 2011 at 10:38 am |
    • Vote Loud

      Not when the embedded taxes on manufactured products are removed and prices drop, with a net annual reduction of cost of living to the poor and middle class...

      Oh yes... to a Liberal, it is not the net net savings to the poor... it is the impression of "FAIRNESS" (buying votes)!

      October 24, 2011 at 12:12 am | Reply
  6. Jim Thomas

    Thanks for wiping out my message.

    October 20, 2011 at 5:08 pm | Reply
  7. David

    I dont like the idea of using 999 in tax plan. what is Herman Cain thinking anyway? But it was fortelled in the bible, there will be one world goverment coming soon I dont want any 666 labeled on me.

    October 20, 2011 at 5:36 pm | Reply
  8. j. von hettlingen

    While the country is in a dire shape, the current tax system safeguards an ambitious sacrifice of the many to the aggrandizement of the few, sparing the few at the expense of the many.

    October 21, 2011 at 9:13 am | Reply
  9. Loveitall

    Herman Cain doesn't stand a chance against Obama.........................just sayin!!!!

    October 21, 2011 at 12:16 pm | Reply
    • curtisy

      Yes we CAIN.

      October 21, 2011 at 12:56 pm | Reply
    • Vote Loud

      What is the bet?????

      October 24, 2011 at 12:08 am | Reply
  10. Roland James

    Fareed Zakaria (10/31 'Complexity Equals Corruption') jumps to the
    conclusion that "the American tax system is more progressive than
    those in Europe" based on getting more tax revenue from the income
    tax and a study that shows that the top 10% in the USA pay a larger
    share of total taxes than do the top 10% in any of the European
    countries examined.
    Maybe the latter is true because the the top 10% in the USA have
    a much larger share of the national income than do the top 10% in
    Europe. The USA does have the biggest income disparity of the
    industrial democracies.*
    Also, the VAT and environmental taxes in Europe have the purpose
    of discouraging "bads" like excess energy use and carbon emissions
    and encouraging "goods" like work income and and personal fitness.
    (One doesn't see nearly as much obesity in Europe.)
    In Denmark, for example, VAT and environmental taxes on a new
    vehicles will increase the total cost two to three times, depending on
    the fuel efficiency efficiency of the vehicle** –plus a ~$5 per gallon
    petrol tax. Denmark has excellent bus, train, and subway systems,
    and a very large percentage of Danes commute by bicycle to work
    and store. Many Danish families don't have a private vehicle because
    they don't need a vehicle. This is very different from regressive state
    and local taxation without the public infrastructure that so often is the
    case in the U.S.
    The European tax system also does a much better job of addressing
    global oil depletion and the Global Climate Crisis than the U.S. system.

    Roland James

    *Reductio ad absurdum: If the top 10% in USA had 99% of the income, shouldn't they pay, at least, 99% of the income tax?
    **www.skm.dk/foreign/english/taxindemark2008/6649

    October 23, 2011 at 8:52 pm | Reply
  11. Vote Loud

    A farmer owns 500 acres and dies.

    His kids have to come up with 50% of the value of the land to pay for Fareed's tax proposal!

    250 acres is not a viable farm, so ANOTHER family farm is SOLD to a major farming corporation!

    NOW THAT IS THE LIBERAL DREAM!!!!!

    Liiberal's blind hatred for those that earned their wealth distort the true view of America.

    All the while. their darling, Soros, can shield his wealth, all the while pulling their chain in his obscure funding of his move for world domination via a socialist utopia.

    Perhaps we should create an idiot tax and CONFISCATE 50% of ALL liberal fools wealth TODAY!

    Read more: http://dailycaller.com/2011/10/23/fareed-zakaria-america-should-give-half-of-what-they-inherit-to-government/#ixzz1bfTGLEgG

    October 24, 2011 at 12:08 am | Reply
  12. Ian M

    I dont get it. EVERYONE agrees the tax code needs reform but this article has nothing to do with Cain's plan. In fact, it cites several credible sources discrediting the plan. Waste of everyone's time.

    October 24, 2011 at 2:12 am | Reply
  13. Dave

    Thank you vote loud!

    October 24, 2011 at 10:41 am | Reply
  14. voiceofreasoningness

    Fareed is typical of the people that think they should control others. So far removed from the original intention of the individual freedoms that America was founded upon, he proposes a plan to impose on others his ideas for how to manipulate their money. What a display of massive ignorance on his part, to the true understanding of the meaning of personal liberty.

    October 24, 2011 at 1:34 pm | Reply
  15. Mark Brodsky

    An Invisible Tax. An Untried FTT or the Expanded Tobin

    I understand Mr Zakaria’s measured enthusiasm for Herman Kane’s 999 tax. The current system is a disaster, and it seems we need some better replacement

    The problem may be that an income based system is obsolete. Pencil and paper are so 20th century. Should not taxation be as invisible as bank, and brokerage charges?

    A better solution is a painless small fee on all monetary transactions processed and collected automatically. SMALL fee on ALL transactions is the key.

    The Swedish experience with an FTT/Tobin tax on stock transactions shows activity changes are directly proportional to the relationship to the tax it replaces. Thus even a small FTT can help end the wild swings in the computer driven marketplace.

    No form, no filing, no pain. Just a tiny percent of every transaction picked off and processed by the same groups that automatically take their cut today. Brokers, Banks, credit and debit cards, and check cashers all take a piece of transactions. A limit may be set at 1 percent of all transactions, with some exceptions (ie 0.1% for home purchases, and 0.2% for index arbitrage and stock sales). Maybe 1% on all international transfers out of the country and 0% for those coming in. As long as this tax is never is raised over 1% it remains basically painless

    And it is not regressive. The poor only move their money once while businesses turn their dollars many times over the years. Savers don’t get penalized and lobbyists can still get congress to offer more pro-active (non-tax) plums for their masters.

    SMALL & ALL FTT eliminates all the need for tax planning and the grey area of defining what really is a business expense.

    And it can be started at the lowest levels immediately While generating funds in the background it allows for a more orderly shut down of the current tax code .

    Please look into this option for what would be the most painless way to reform and replace the current tax code system

    January 21, 2012 at 6:33 pm | Reply
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