“9-9-9” or “9-0-9”: A Realistic Look at Cain’s Tax Plan

I don’t know how a firm like Integrity First CPA’s can blog without taking note of—and commenting on—the proposal by current GOP frontrunner for President of the US, Herman Cain. Mr. Cain is proposing scraping the US Tax Code altogether and replace it with a 9-9-9 tax plan: 9% sales tax, 9% on income, and 9% on corporations.

This has created a bit of controversy recently when the Tax Policy Center, an arm of the Brookings Institution, analyzed his plan a little more carefully and announced that his proposal would slightly relieve the tax burden on the rich and impose it on the poor…significantly. Since that time, Mr. Cain has revamped his program a little to reflect a 9-0-9 plan for those living at or below the US Federal poverty guidelines, which means that for those who are impoverished, they would pay no income tax (but still pay the 9% sales tax). Of course, Mr. Cain’s proposals only impact federal taxation, as state, county, and city taxes remain (and in a constant state of flux, at that!)

Mr. Cain is taking some heat over his changes and some are trying to paint him as a flip-flopper. It’s unfortunate because in the political world, reflection and adaptation should be encouraged, not branded as flip-flopping. The truth of the matter is that if Mr. Cain were to win the race for the Presidency, his 9-9-9 or his 9-0-9 tax plans still would not be implemented as he has proposed, since there is always the Congress with which to deal. And we know that Congress is a cesspool of political gamesmanship. As such, 9-9-9 will probably end up something more like 4-13-7—or more realistically, 4.312 - 13.946 - 7 ¼ with numerous exceptions and caveats to boot. Additionally, there is the unknown of how a dramatic revamping of the federal tax code would impact state and local taxing authorities.

The fact that Mr. Cain’s plan to revamp the entire US tax code so radically is a bigger headline than is his statement that he is 100% pro-life gives you an idea of how important an issue taxes are in this election cycle. Tax prep and tax planning—especially business tax preparation and planning—are sure to be issues for businesses and hard-working citizens no matter what plan is in place.