Original Post
October 18, 2011
by Maggie Astor
Under Herman Cain's "9-9-9" plan, the bottom 60 percent of taxpayers would pay $2,000 more in taxes on average than they do now, while the top 1 percent would pay $210,000 less than they do now, according to an analysis released Monday by Citizens for Tax Justice, a liberal think tank.
Compared to current tax burdens, which were calculated based on a tax model from the nonprofit Institute on Taxation and Economic Policy, the analysis found that the poorest 20 percent of Americans would pay $2,073 more on average, the second-poorest 20 percent $2,524 more on average and the middle 20 percent $1,635 more on average per year under the "9-9-9" plan.
The plan was basically a wash for the second-richest 20 percent, who would pay $20 more in taxes on average each year. But 80th through the 95th percentiles would pay $4,507 less on average, the 96th through 99th percentiles would pay $20,983 less on average, and the top 1 percent would pay $210,129 less on average under Cain's plan.
For perspective, the amount of money that members of the wealthiest 1 percent would save each year under the "9-9-9" plan is more than four times the gross annual income of the average American, which was $49,445 (median) in 2010, according to the U.S. Census Bureau.
9-9-9: Only Top 20 Percent of Filers Would Benefit
Cain has been able to say that his plan would "reduce taxes" because, on average, it would: by $2,354, according to the Citizens for Tax Justice study. But averages (means) are skewed by outliers like that $210,129 figure, making it seem like the majority of people will pay less in taxes when in reality, it is only the top 20 percent of taxpayers that will benefit.
According to the study, the actual impact of the "9-9-9" plan on the majority of Americans -- the bottom 60 percent -- would be a $2,077 tax increase.
A separate analysis by Edward D. Kleinbard, a law professor at the University of Southern California, found that a family earning $120,000 in wages in 2010 would have paid $541 less in taxes under the "9-9-9" plan, while a family earning $50,000 would have paid $4,800 more: an increase of nearly 10 percent of their income.
Cain has brushed off these criticisms by saying that the disproportionate impact of a 9 percent national sales tax on the poor would be offset by the elimination of the payroll tax.
But the 9 percent corporate tax Cain proposes would apply only to revenue after investments, purchases and dividends paid to shareholders, meaning "there would be nothing left of a business's revenue to tax other than the revenue going toward wages," the Citizens for Tax Justice analysis concluded. "In other words, the 9 percent 'business flat tax' under Cain's plan actually seems to be a payroll tax." Meanwhile, low-income Americans would also pay more because of the elimination of the Earned Income Tax Credit and the Child Tax Credit.
"Businesses will tax all wages, because wages don't seem to be deductible," Roberton Williams, a senior fellow in the nonpartisan Urban Institute's tax policy center, told the International Business Times. "People, when they receive those wages, will pay another 9 percent tax on it, and then when they spend it, another 9 percent. That's a pretty big tax rate compared to what's currently seen for most of the population, and the obvious winners are the big guys who get a lot of their income from capital gains, which would not be taxed at all."
Whether the "9-9-9" plan would stimulate economic growth is a separate question, and many experts argue that it would. But when it comes to whether the plan is "regressive on the poor," as Cain denied, the answer is clearly yes.