Republican Presidential candidate Herman Cain has been touting his 9-9-9 tax proposal as the solution to all of our economic ills . . . and possibly the cure to cancer as well. Sorry Herman, as we say down here, "That dog won't hunt."
Like many proposals that sound so good when first mentioned--and as Michele Bachmann so bizarrely put it with her "turn your 9-9-9 upside down" comment--the devil is in the details.
The problems begin with the question of constitutionality. Does it lie within the purview of the federal government to impose a national sales tax--something which traditionally has been the privilege of local and state governments. Some argue that it would require a constitutional amendment to make such a change in the way in which the federal government funds its activities. Some argue that imposing a sales tax would penalize states and make it more difficult for them to find sufficient revenue to fund their own projects.
In Houston, we pay an 8.5% total sales tax--that's state and local combined. Should Herman Cain's 9% tax be added to that, suddenly a lot of folks who live on fixed income will find themselves paying a whole lot more for their "daily bread."
And that leads us to a second problem--the fact that any sales tax proposal, whether it be Cain's 9-9-9 or the so-called "Fair Tax" that has been floating around for the last several years, is its regressive. Regressive taxes are not necessarily bad, it's just that laws must be carefully crafted to prevent undue penalties to the most vulnerable within our society, the elderly and infirm.
We must remember that all of those "seasoned citizens," as Rush Limbaugh calls them, folks who live on fixed incomes and, because of their age, pay lower overall tax rates would be hit very hard by any of those "regressive" tax proposals. Yes, their income tax will disappear completely, but many already pay little in income tax due to their age and their level of income.
Unlike the young and poor who live on welfare and food stamps, senior citizens--those on a fixed retirement income--cannot (most of them) go out and "get a job" to supplement their income. Unlike the young and able-bodied who have simply grown up dependent on government handouts, these retired folks have worked their whole lives, maybe putting a little aside to supplement their company's retirement plan or their 401k's and their social security, and now they have to live within those means.
Other than government authorized COLA's on their Social Security, they have no way to increase their resources. They see their monthly disposable income decrease with each point of inflation, or with each increase in user fees or co-payments required by their insurance coverage--or Medicare.
They are stuck with the money they saved and invested and they have to find a means of living off of it regardless of any sacrifice that may entail. Any "regressive" tax system will punish them far more than any other demographic group. You place a 9% sales tax on everything they buy, it hits them hardest. You raise a Medicare co-payment, it is they who are most severely impacted.
So in the case of Herman Cain's 9-9-9 plan (or the "Fair Tax") the question then becomes; will there be special set asides for those who live on fixed incomes, or do we simply penalize all of those folks?
If there are special provisions for some people, then how does this end up being any different or better than the morass of little special laws we already have? If Congress places an exception for this group, a set-aside for that group, a carve out for another interest, BAM! we're right back where we began . . . only this time we have added a new stream of revenue for government to tap.
And that leads me to the third and possibly most damning problem with candidate Cain's proposal; it adds a new stream of revenue for our ever-expanding government to tap. Do we really want to go there? Do we really want to give a body that has never shown any willingness to restrain itself from spending ever more money in the pursuit of "doing something for the benefit of the people" another means of taking money out of our pockets?
As I have said several times since Cain made his 9-9-9 proposal and even before with the "Fair Tax" movement--no Congress can, with any law they pass, constrain the actions of any future Congress. I don't care what sort of "protections" you place on any of these new revenue sources to prevent them from gradual inflation (Mr. Cain suggests a 2/3 majority vote requirement) they evaporate with the swearing in of the very next Congress--if they are not simply later ignored by the very same Congress.
A 9% sales tax will quickly become a 9.5% tax, then a 10% tax . . . It will always come with some plausible excuse--massive floods and emergency spending, military exigencies, Medicare shortfalls--the list of seemingly reasonable explanations is endless.
Only a fool would trust Congress to restrain their natural urges to spend ever greater amounts of money and if you are waiting for the people to react and stop congressional action, just remember that the voters have very short memories and a very high threshold of pain before they become willing to react--and act.
It is true that our tax laws need to be rewritten, simplified and many of the politically motivated carve-outs eliminated, but whatever we come up with, whatever proposal rises to the top to reign in government spending and lessen the burden on the individual tax-payer, it must not entail giving our federal government permission to create a new pathway into our wallets.
- Cut the capital gains tax, it discourages investment and job creation.
- Eliminate all corporate taxes, because corporations never pay taxes, they simply pass that expense on to the consumer and thus a corporate tax is nothing more than a hidden tax on the individual and therefore is as regressive as a sales tax.
- Broaden the base of those citizens who pay taxes--even if that required of some is a pittance. Every citizen should have some sort of buy in with our government--some small sacrifice so that they know the cost of an expanding government and expanding government services.
- Eliminate subsidies to all industries--including farm subsidies and oil and gas subsidies. Businesses should flourish or fail on their own merits and keeping prices artificially high for political reasons of maintaining family farms that can't survive in a competitive market penalizes all citizens for the benefit of a few.
- Remove all political pay-offs from the code. Taxes shouldn't be used to promote or penalize an industry or business over another. Free enterprise is based on the premise that a business rises or falls with its ability to provide customers what they desire at a price they are willing to pay--let the consumer make those decisions, not the government.
Like a lot of well intentioned proposals, Herman Cain's 9-9-9 sounds good, but once you go beyond the surface and begin to examine the impact of his proposal, it soon loses much of its appeal.
Long Live Our American Republic!!!