Herman Cain is an attractive candidate, but his economics are pretty iffy.
18 thoughts on “Nein, Nein, Nein!”
This article was one of the Funniest and smart Godwin Law invocation in a long time.
What is even worse with Cain plan is that It will add a Nation sales tax … a permanent one and no reform.
Mr Cain seems to attract puns. I like that in a presidential candidate.
I’ve been very skeptical of a National Sales Tax/VAT/”Fair” tax. It seems to me that it simply jacks up the price of everything multiple times…if a company buys raw materials do they pay the tax? When they sell the finished product to me do I pay the tax? And will their price include the tax they had to pay for the raw materials (I think, yes).
So it seems like a monstrous price hike goods and services.
There are good aspects – everyone pays. And some conservatives seem to like the idea.
While, on the face of it, it seems like a very bad idea – I really want to hear the case for it – I have an open mind.
The way it works where I live is that companies can deduct the VAT they’ve paid to their suppliers from the VAT they’ve charged to their clients. Hence the name Value Added Tax. Still a price hike of course. A price hike of 19%!
@MPM: As if businesses don’t have enough paperwork.
I have a friend, who is generally strongly conservative, who supports a VAT. That makes my head explode.
Having an intermediate step before the Fairtax is definitely something I’m a bit skeptical of, as I think the chances of pulling off serious tax reform twice in a row are even less likely than the chances of passing off serious tax reform once. Better to just go straight to the Fairtax.
Gregg: The Fairtax and the VAT are very different. The VAT taxes everything along the way, the Fairtax only taxes goods and services at the retail level – where they meet the individual consumer, so it’s not bundling increased taxes along the way. Not only that, but since corporate taxes are already inefficiently included in the price of goods, and the Fairtax abolishes corporate taxes, prices of goods would remain pretty close to what they are today.
I’ve done quite a few explanations of various aspects of the Fairtax on my blog, and would happily do more, or answer any questions that you do have regarding the proposal.
I am a firm believer in incrementalism. The economy is a feedback loop. Ultimately, it will settle out. However taxes are structured, at the end of the day, the only important variable is the dc gain – i.e., what percentage of income does the government skim off?
But, the more you change it, the greater the transient effects, and transients are painful. Make the transitions smooth, tune it so that the government’s take is the historical ~22%, and then leave it alone.
I’ve always liked the flat tax proposal Iheard years (okay, decades) ago: One rate of about 17%, with one single personal deduction of around $25,000, indexed for inflation. Everyone has to file, but you’re only charged the percentage on income over $25,000. If companies still did the witholding at 17%, come filing time a lot of people would get a ginormous refund. I think it would go over great if someone described it like that. Of course, the actual numbers would need to be determined to make it “revenue neutral” for the current amount of revenue, since we still want to “starve the beast”.
If companies still did the witholding at 17%, come filing time a lot of people would get a ginormous refund. I think it would go over great if someone described it like that.
Anyone who thinks getting a big refund at tax time is a good idea is seriously mistaken. All you’re doing is giving the government an interest free loan of your money. The best thing is to adjust your withholding so that you get to keep more of your income every payday. Ideally, you’d get no refund but not owe anything, either. It’s better economically to have to write a small check (say a few hundred dollars) than to get a multi-thousand dollar refund.
This is the problem with somebody going straight from business to high level politics (they should spend some time in the junior varsity first.) A CEO is more like a king than a president and the worry that once a consumption tax is added you will never be able to get rid of it or the other taxes is a real danger.
Brookings Institution economist William Gale has estimated that to replace current federal tax revenues, the tax rate would have to be 44 percent [for the fair tax to be revenue neutral.]
I see this as a feature, not a bug. It’s time the American people knew exactly what the government takes from them in taxes no matter what the number. Let’s have a national debate that covers the issue rather than having thousands of papercuts killing us off.
Cain wants to go incrementally because he doesn’t see us going directly. This does seem naive and dangerous. He might get elected, then we will hear more of Winston… “Americans do the right thing after exhausting all other possibilities.”
Me, I would just do the fair tax or not. It’s hard not to like Cain though. He doesn’t have the practical political experience of Sarah. Cain’s advantage in business experience isn’t the safe bet.
The key is “marketing”, you have to sell people on the idea that they’re getting something, and most people I know love getting big refunds at tax time. Even people that know the government is getting the best deal by keeping more money love the idea of getting a big chunk back. A flat rate tax is fair, but most people won’t see it that way unless you sell them on a side effect that they already like.
ken,
I’m with you on people learning dollar for dollar just how high the taxes are right now. I’ve seen figures right around 45% for a number of years and that’s just too friggin’ high.
I think we need a flat tax, no loop holes and every corporation pays on every dollar of profit just like their employees pay on wages earned. AND we need a balanced budget amendment, with riders for wars only.
In reading that article I thought it was interesting that the writer thinks Cain has a ‘problem’ with some Constitutionality aspects of his plan. That sure as hell hasn’t stopped the Marxist-in Chief! And damned few people have called him on it.
If you dump the income tax, you also have a way to dump the huge database of individual data held by the US Government which no government of a free country has any right to hold in the first place.
So yes, I would go with the national sales tax if it totally replaced income tax and all personal tax reporting.
I join those who object to mixing a federal income and sales tax. It opens the door to new abuses, and helps hide how much the government is taking.
I also favor a zero corporate income tax. Corporate income ends up as wages, dividends, benefits, and reinvestment. The last shouldn’t be taxed. Wages and dividends are taxable. As should be benefits to close a loophole, at a rate equivalent to personal income.
But low flat rate taxes are good.
I like Herman Cain but I doubt that anything like 9-9-9 could ever make it through Congress. For starters, flattening out the tax code would amount to a tax increase for most Americans. It’s been said that half of all American adults pay zero federal income tax, and 80% pay under 9.3% after all deductions are tallied (IIRC.)
It may be healthier for our nation if everybody’s required to put some “skin in the game” and pay 9% on their income. But Congress is only interested in raising the marginal rates for the wealthy minority, and not everybody else, because it ensures their electoral defeat.
The best near-term hope for the flat taxers is to accept the existence of tax brackets, and work to reduce the marginal rates while eliminating deductions.
I the right could demagogue the fair tax as a tax on the rich? But the left would then morph it into a VAT which I am strongly opposed to. Politicians like VAT because, again, it hides the true rate.
I’ve seen figures right around 45%
I suspect that’s right with some areas over half. I just have to vote for visibility and truth.
I the right? Now I’ve forgotten what the missing word was. Damned swiss cheese brain.
Taoist:
Yes I know they are different – that’s why I listed them all. I’ve heard different variations on the theme from different people. None of the tax ideas that are attached to purchases seem reasonable to me.
After all, here in Massachusetts, even out own Dear Leader Gov. Patrick (Obama’s bussy) grudgingly allowed the sales tax free day…
why?
Why to boost sales of course!
So it therefore seems to me that sales taxes depress economic activity. Raise them to much higher rates and people will think twice before buying something. That makes revenue rates unpredictable.
I like the Flat tax. It’s not perfect but much better than the thousands of pages tax code monstrosity we have now.
But again…I’m open to hearing a reasonable defense of the Fair tax.
This article was one of the Funniest and smart Godwin Law invocation in a long time.
What is even worse with Cain plan is that It will add a Nation sales tax … a permanent one and no reform.
Mr Cain seems to attract puns. I like that in a presidential candidate.
I’ve been very skeptical of a National Sales Tax/VAT/”Fair” tax. It seems to me that it simply jacks up the price of everything multiple times…if a company buys raw materials do they pay the tax? When they sell the finished product to me do I pay the tax? And will their price include the tax they had to pay for the raw materials (I think, yes).
So it seems like a monstrous price hike goods and services.
There are good aspects – everyone pays. And some conservatives seem to like the idea.
While, on the face of it, it seems like a very bad idea – I really want to hear the case for it – I have an open mind.
The way it works where I live is that companies can deduct the VAT they’ve paid to their suppliers from the VAT they’ve charged to their clients. Hence the name Value Added Tax. Still a price hike of course. A price hike of 19%!
@MPM: As if businesses don’t have enough paperwork.
I have a friend, who is generally strongly conservative, who supports a VAT. That makes my head explode.
Having an intermediate step before the Fairtax is definitely something I’m a bit skeptical of, as I think the chances of pulling off serious tax reform twice in a row are even less likely than the chances of passing off serious tax reform once. Better to just go straight to the Fairtax.
Gregg: The Fairtax and the VAT are very different. The VAT taxes everything along the way, the Fairtax only taxes goods and services at the retail level – where they meet the individual consumer, so it’s not bundling increased taxes along the way. Not only that, but since corporate taxes are already inefficiently included in the price of goods, and the Fairtax abolishes corporate taxes, prices of goods would remain pretty close to what they are today.
I’ve done quite a few explanations of various aspects of the Fairtax on my blog, and would happily do more, or answer any questions that you do have regarding the proposal.
I am a firm believer in incrementalism. The economy is a feedback loop. Ultimately, it will settle out. However taxes are structured, at the end of the day, the only important variable is the dc gain – i.e., what percentage of income does the government skim off?
But, the more you change it, the greater the transient effects, and transients are painful. Make the transitions smooth, tune it so that the government’s take is the historical ~22%, and then leave it alone.
I’ve always liked the flat tax proposal Iheard years (okay, decades) ago: One rate of about 17%, with one single personal deduction of around $25,000, indexed for inflation. Everyone has to file, but you’re only charged the percentage on income over $25,000. If companies still did the witholding at 17%, come filing time a lot of people would get a ginormous refund. I think it would go over great if someone described it like that. Of course, the actual numbers would need to be determined to make it “revenue neutral” for the current amount of revenue, since we still want to “starve the beast”.
If companies still did the witholding at 17%, come filing time a lot of people would get a ginormous refund. I think it would go over great if someone described it like that.
Anyone who thinks getting a big refund at tax time is a good idea is seriously mistaken. All you’re doing is giving the government an interest free loan of your money. The best thing is to adjust your withholding so that you get to keep more of your income every payday. Ideally, you’d get no refund but not owe anything, either. It’s better economically to have to write a small check (say a few hundred dollars) than to get a multi-thousand dollar refund.
This is the problem with somebody going straight from business to high level politics (they should spend some time in the junior varsity first.) A CEO is more like a king than a president and the worry that once a consumption tax is added you will never be able to get rid of it or the other taxes is a real danger.
Brookings Institution economist William Gale has estimated that to replace current federal tax revenues, the tax rate would have to be 44 percent [for the fair tax to be revenue neutral.]
I see this as a feature, not a bug. It’s time the American people knew exactly what the government takes from them in taxes no matter what the number. Let’s have a national debate that covers the issue rather than having thousands of papercuts killing us off.
Cain wants to go incrementally because he doesn’t see us going directly. This does seem naive and dangerous. He might get elected, then we will hear more of Winston… “Americans do the right thing after exhausting all other possibilities.”
Me, I would just do the fair tax or not. It’s hard not to like Cain though. He doesn’t have the practical political experience of Sarah. Cain’s advantage in business experience isn’t the safe bet.
The key is “marketing”, you have to sell people on the idea that they’re getting something, and most people I know love getting big refunds at tax time. Even people that know the government is getting the best deal by keeping more money love the idea of getting a big chunk back. A flat rate tax is fair, but most people won’t see it that way unless you sell them on a side effect that they already like.
ken,
I’m with you on people learning dollar for dollar just how high the taxes are right now. I’ve seen figures right around 45% for a number of years and that’s just too friggin’ high.
I think we need a flat tax, no loop holes and every corporation pays on every dollar of profit just like their employees pay on wages earned. AND we need a balanced budget amendment, with riders for wars only.
In reading that article I thought it was interesting that the writer thinks Cain has a ‘problem’ with some Constitutionality aspects of his plan. That sure as hell hasn’t stopped the Marxist-in Chief! And damned few people have called him on it.
If you dump the income tax, you also have a way to dump the huge database of individual data held by the US Government which no government of a free country has any right to hold in the first place.
So yes, I would go with the national sales tax if it totally replaced income tax and all personal tax reporting.
I join those who object to mixing a federal income and sales tax. It opens the door to new abuses, and helps hide how much the government is taking.
I also favor a zero corporate income tax. Corporate income ends up as wages, dividends, benefits, and reinvestment. The last shouldn’t be taxed. Wages and dividends are taxable. As should be benefits to close a loophole, at a rate equivalent to personal income.
But low flat rate taxes are good.
I like Herman Cain but I doubt that anything like 9-9-9 could ever make it through Congress. For starters, flattening out the tax code would amount to a tax increase for most Americans. It’s been said that half of all American adults pay zero federal income tax, and 80% pay under 9.3% after all deductions are tallied (IIRC.)
It may be healthier for our nation if everybody’s required to put some “skin in the game” and pay 9% on their income. But Congress is only interested in raising the marginal rates for the wealthy minority, and not everybody else, because it ensures their electoral defeat.
The best near-term hope for the flat taxers is to accept the existence of tax brackets, and work to reduce the marginal rates while eliminating deductions.
I the right could demagogue the fair tax as a tax on the rich? But the left would then morph it into a VAT which I am strongly opposed to. Politicians like VAT because, again, it hides the true rate.
I’ve seen figures right around 45%
I suspect that’s right with some areas over half. I just have to vote for visibility and truth.
I the right? Now I’ve forgotten what the missing word was. Damned swiss cheese brain.
Taoist:
Yes I know they are different – that’s why I listed them all. I’ve heard different variations on the theme from different people. None of the tax ideas that are attached to purchases seem reasonable to me.
After all, here in Massachusetts, even out own Dear Leader Gov. Patrick (Obama’s bussy) grudgingly allowed the sales tax free day…
why?
Why to boost sales of course!
So it therefore seems to me that sales taxes depress economic activity. Raise them to much higher rates and people will think twice before buying something. That makes revenue rates unpredictable.
I like the Flat tax. It’s not perfect but much better than the thousands of pages tax code monstrosity we have now.
But again…I’m open to hearing a reasonable defense of the Fair tax.