Putting aside the fact that 9-9-9 does sound suspiciously like a pizza slogan from our Godfather’s Pizza candidate, it has several big problems in my mind.
First, I don’t even count the Bloomberg projection of lost revenue. I would be willing to concede the plan has the potential to create growth, which over 2-3 years, would aggregate past the needed 10% growth to cover the discrepancy in revenue creation. Plus, I don’t really trust Bloomberg projections to begin with.
Lowering the corporate tax rate is a no-brainer. I’m not sure 9% is the optimal number, nor that it’s not. Cain has not made that case though. It’s more likely 9% was chosen though because when paired with 9% sales tax and 9% income tax, he’s got a catchy slogan.
The 9% sales tax is unconstitutional. The commerce clause of the Constitution gives the federal government only that authority to regulate those parts of commerce with sufficient interstate impact. Conservatives have long tried to put the brakes on liberal expansion of government and regulation into areas of the market by defending this limit on federal power. Cain’s plan obliterates this line of defense by seeking to tax all manners of commerce and spending.
The 9% sales tax is also going to be rather unpopular in practice. Again, I do not ascribe to the liberal criticism that food and medicine would go up 9%. It’s understood that as business taxes go down, that hidden cost passed along to consumers goes down. Even after a 9% sales tax, the end price of products, such as food and medicine, may go down. But people will still dislike it for two reasons. One, every time they pay that 9%, they will identify it as a Republican tax or Cain tax. Two, where market competition is insufficient to optimize prices, product costs will actually increase 9% thereby lending credence and leaving popular belief with the liberal criticism of the plan.
Finally, the 9% income tax is problematic. Gone is the child tax credit. Gone is the home mortgage interest deduction. Gone is the charitable giving deduction. This is a significant tax increase on the poor and middle class. For those making under X, they will be worse off. And “X” probably includes more than 50% of voters.
Some of Cain’s defenses of the plan are bogus.
One fair criticism is that 9-9-9 can become 10-10-10. Or 12-12-12. Liberals love to spend and as they seek more revenues, these rates may climb. Cain’s retort was in the last debate that he’d require a 2/3 vote to increase the rate from 9-9-9, that he would veto an increase. Short of a presidential veto (which is only good while he’s in office), the only way to have such a prohibition on increasing the 9-9-9 rate is to amend the Constitution. Why? Because it’s, again, unconstitutional to try to alter the legislative requirements for enacting, modifying or repealing laws away from the majoritarian rule under the Constitution without a Constitutional amendment.
Cain selling the plan as simple and bold is really a non-seller to me. The economy is not simple, so why should simple be an optimal approach? The economy is incredibly complex. When Cain criticized Romney for having a complex approach to dealing with the economy, I thought that incredibly naive. First off, as Romney rightly pointed out, Cain’s 9-9-9 is not an economics plan. It’s a tax reform plan. That may be an important piece of an economic plan, but there are literally hundreds of issues other than tax reform. Second, “bold” does not buy any more points with me than “hope and change.” I don’t care if its “change” or “bold change.” How about whether it’s effective change. Obamacare was “bold” too, but that boldness does not make it good policy.
I like the pro-growth aspects of the proposal, but not any pro-growth plan will suffice. I wish more folks who wanted health care would have ascribed to not any health care reform plan would suffice. As always, the devil is in the details.
At this point, there’s a lot to like about Cain, but his plan has some serious flaws that need further development. Besides 9-9-9, his dubious regulatory repeal plan, and his interesting “Chilean” model for social security reform, Cain does not have a lot of plans on the table. As a candidate, he needs to articulate clear positions on a host of other issues before I could support him.