Give credit to Herman Cain for throwing out an idea that has actually caused some debate in the presidential campaign about a real issue: taxes. Unfortunately, though, the criticism of his 9-9-9 plan is coming from the wrong direction. The complaints are coming from candidates and others who, at the end of the day, are secretly defending the status quo. They are trying to scare people in New Hampshire about the prospect of a 9% sales tax. They are pretending to protect the middle class by calling Cain’s plan regressive. In short, they are saying we need to reform taxes, but don’t go overboard. No surprise there; the existing tax code is the politician’s best friend.
The real problem with Herman Cain’s 9-9-9 plan is that it is an apologetic, timid step toward what America really needs in order to ignite our economic engine — replacing ALL federal taxes with one simple consumption tax, commonly known as the Fair Tax.
Ironically, it has been widely reported that even Herman Cain views 9-9-9 as some kind of transitional step toward the Fair Tax. As the only candidate for president who is an unapologetic advocate of the Fair Tax, I have to ask: Why does it make sense to settle for a “hybrid” notion like 9-9-9, if the real objective is something else? Does anyone really believe that Congress, after having gone through the tortuous and politically risky process of adopting a reform like 9-9-9, would then have the stomach to go through all that agony again to adopt the Fair Tax?
Nearly everyone agrees that our current tax system is a major obstacle to job creation and real economic growth. It is a confusing mess that not only stifles growth but has become Washington’s favorite weapon for managing our corporate and personal behavior.
In contrast, eliminating taxes on income and instead taxing dollars when they are spent, as with a Fair Tax, does all the right things for the economy. Federal taxes are eliminated from individual paychecks and business earnings, allowing both to make their own decisions about where their money goes. If it is spent, it is taxed at 23%; if it is saved or invested, no taxes. And for that money spent on necessities, regardless of income, the consumption tax is “prebated” to ensure that lower-income families are protected.
Mr. Cain’s plan, however, takes a small step toward doing the right thing, but doesn’t shed the aspects of the current system that are stifling growth. It simply adds an additional tax. The result is that a good idea becomes a bad idea. Rather than eliminating federal taxes on dollars until they are spent, 9-9-9 taxes each dollar three times: When it is earned by a business, when it is paid to an employee and again when it is spent. The whole idea of the Fair Tax, which Mr. Cain claims to support, is to only tax that dollar once — and do so in a way that rewards productivity, savings and investment. If reducing the income tax on corporations is a good idea that will make us more competitive and create jobs, eliminating it is a great idea. Doing so wouldn’t just make us a little more competitive, it would make the U.S. the job magnet of the globe.
Also, Mr. Cain says 9-9-9 will throw out the existing tax system. Actually, it doesn’t. Somebody will still have to collect the 9% business tax and the 9% personal income tax — and that somebody will require reporting about who’s working and how much they are making. It might be a bit simpler, but it still looks and sounds like an IRS to me. The Fair Tax, on the other hand, does allow eliminating the IRS. In fact, the states could collect the tax and be compensated for doing so. The feds will have no reason to require reporting about employees or how much they are paid.
I don’t mean to pick on Herman Cain here. At least he has put an idea on the table. But his 9-9-9 plan is a perfect example of the kind of policy timidity that makes the status quo so difficult to dislodge. For years, Herman Cain advocated the Fair Tax. But once he entered the arena, he took a good idea and “moderated” it into a hybrid something that proposes a little bit of new thinking, but hangs on to the old thinking that has gotten us into the mess we are in today. I’m not sure what he’s afraid of.
If throwing out the tax system and replacing it with a Fair Tax makes sense, why do we need a 9-9-9 rest stop along the way?
Gary Johnson is a Republican candidate for president. Johnson served two terms as governor of New Mexico from 1994 to 2002.