Comparing Revenue: The Flat Tax vs. 9-9-9
In the interest of full disclosure, I like Cain’s moxie, but the idea of a national sales tax coupled with the income tax is a nonstarter. Perry is my first choice, followed by Newt, then Cain (if he drops that last 9).
The problem with 9-9-9 is that there are too many 9s, and 9+9 comes too close to 18% for many poor and retired individuals and families that consume a large portion of their income. I say get rid of the last 9 and then you got an awesome plan – raise the other numbers to 10 or 12 to make up for the revenue lost by dropping the sales tax and just call it a straight flat tax on business and individual income.
According to an analysis of Herman Cain’s 9-9-9 plan in the Washington Times, (*) the amount of revenue it (999) can generate (based on current economic numbers) is $1,768 trillion, but with the growth that is expected to result from this tax plan, it is estimated that revenue would rise to $2,170 trillion which is more than the revenue currently raised of $2.16 trillion
Here’s the numbers from the article:
- A flat income tax on individuals of 9 percent — brings about $1.12 trillion.
- A flat tax on businesses 9 percent — brings about $270 billion.
- A national 9 percent sales tax — brings about $378 billion.
=$1,768 trillion in total revenue
After anticipated growth 9-9-9 brings in $2.170 trillion in total revenue:
- A flat income tax on individuals of 9 percent — brings about $1.4 trillion.
- A flat tax on businesses taxes at 9 percent — brings about $321 billion.
- A national 9 percent sales tax — brings about $450 billion.
Using the same economic numbers in the Washington Times Analysis, you can estimate the amount of that would be raised by a 12% flat tax on businesses and individuals by simply not calculating the sales tax and doing the following:
- (1.12 trillion/.09)*.12=1.493 trillion — from individuals
- (270 billion/.09)*.12=360 billion — from businesses
A flat income tax of 12% on businesses and individuals will bring in about $1.853 trillion in total revenue.
But would the boost to the economy with a reduction to a 12% flat tax on income be the same as with a drop to 9%? I’d like to think that without the extra burden of the 9% sales tax, that it would be close, but even the Times article admitted that the anticipated growth projections were based on the Obama Administration’s projections.
If the expectation of growth from a 12% flat tax on individual and businesses (w/o the sales tax) is the same as from 9-9-9, then this would result in the flat tax raising $2.294 trillion in total revenue:
- (1.4 trillion/.09)*.12=1.866 trillion — from the flat tax on individuals
- (321 billion/.09)*.12=428 billion — from the flat tax on businesses