9-9-9 is smarter than a fifth-grader

Bob Maistros Chief Writer, Reagan-Bush '84 campaign
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Here I am defending presidential candidate Herman Cain’s 9-9-9 tax plan again, this time from charges that it would raise taxes on some lower- and middle-income taxpayers.

Duh. If, as is the case with all too many Americans, you’re not paying any income taxes or very little — and suddenly you are paying nine percent plus a nine percent sales tax — then yes, you’re facing a tax increase.

But puh-leeze. Look at the whole picture. And do the math.

I’m reminded of a favorite family story revolving around the time my son asked our youngest daughter whether she would rather have $20 or $10 for her birthday. Ten dollars, she responded cheerfully, because she was 10 years old!

That’s the level of maturity in the fuss about 9-9-9 hurting lower- and middle-income taxpayers.

Figure it this way: If you don’t have a job, you’re not paying any taxes anyway. Would you rather have a) 100 percent of zero … or b) 91 percent of a paycheck?

If you do have a job, and you make, say, $10,000 and pay no income tax, would you rather a) pay 7.65 percent in payroll taxes (taking home $9,325) or b) have your employer be able to pay you 7.65 percent more and then pay nine percent income tax and no payroll taxes (taking home $9,796)?

And would you rather pay a) zero percent sales tax on a product that costs $1 (total cost $1) or b) nine percent sales tax on the same product that costs, say, 85 cents (total cost 93 cents)?

If you answered a) for each of the above, congratulations: you aren’t smarter than a fifth-grader.

Because if Cain is correct — and I believe he is — the 9-9-9 plan will set off a growth rocket. Low corporate and personal income taxes, plus the ability to expense all business spending and the elimination of the capital gains rate, will produce billions of dollars of new business creation and investment.

That means jobs. Millions and millions of them. With heavy competition for workers driving higher incomes in a red-hot labor market. And a gusher of new government revenues.

If Cain is correct — and I believe he is — the elimination of payroll taxes, which are basically taxes on hiring people (I know, stupid!), will essentially offset any increased income taxes people pay as employers pass their savings on in the form of higher wages. (Others, such as moi, will happily accept the huge cut in taxes 9-9-9 will offer.)

And if Cain is correct — and I believe he is — the excision of billions of dollars of high corporate and personal income taxes embedded in prices, not to mention the outrageously high cost of tax compliance and avoidance, will easily offset the introduction of a mere nine percent sales tax.

Not just 9-9-9, but win-win-win.

You see, there’s the same fundamental disconnect in thinking on the part of too many Americans that afflicted my poor little girl way back when. Big-government adherents have set up a really clever system. They have run up the cost of government to benefit a near-majority of Americans, while dumping the apparent costs on a small minority and skimming off a percentage for themselves and their friends with each collection and transfer.

Then, when sensible people talk about scaling back the size of government to reduce debt and provide more room for private investment, liberals, government employees and the media can holler about budget cuts crushing the poor and pushing poor Grandma off a cliff.

And when even more sensible people talk about simplifying and flattening the tax code, broadening the base or, even better, shifting from taxing work and investment and initiative to taxing mindless consumption, the same crowd can shout “regressive” and send reform proponents scurrying back into their holes.

What they don’t point out is the real cost of the big-government, high-tax system: lost opportunity, lost innovation (read: lower costs for more and better goods), higher prices (with the costs of taxes and compliance built in) and, most of all, lost jobs. In the end, lots of government for nothing adds up to taking $10 for your birthday because it sounds good — when you really could have had $20.

Herman wants us all to have $20. Me too. The big-government crowd? They just hope we can’t do fifth-grade math.

Bob Maistros was the chief writer for the Reagan-Bush ’84 campaign, a former Senate subcommittee counsel and a longtime public relations advisor for companies ranging from AOL to MTV to XM Satellite Radio. He now offers biting satire based on insights gathered at the front lines of headline-making corporate crises, political contests and the culture wars.