The impact of Herman Cain’s 9-9-9 plan, in graphs

The nonpartisan Tax Policy Center has done a detailed evaluation of Republican presidential candidate Herman Cain’s 9-9-9 Plan.

The plan would replace the existing federal individual income tax, corporate income tax, payroll tax, and estate tax with three taxes:   a nine percent flat individual income tax, a nine percent flat corporate tax rate, and a nine percent national sales tax.  Deductions on the plan would be minimal.  Corporation could deduct dividends paid to shareholders from their tax base, individuals would be able to deduct charitable contributions and capital gains would be exempt from taxation.

Cain claims that this plan would unleash the American economy and would be “fair, simple, efficient, neutral, and transparent“.

Well, let’s look at how the numbers actually shake out.  First, let’s look at how many people would be getting a tax cut or  seeing their taxes increase because of this plan.

Fully 84% of households would see an increase in their federal taxes under the 9-9-9 Plan.  Let’s check on the distributional effects of the 9-9-9 Plan.

This graph shows that the effective tax rates paid by income level would effectively flip under the 9-9-9 Plan.  Under current law (blue line), the poorest taxpayers pay the least percentage of their income in taxes, while the wealthiest pay the most.  Under the 9-9-9 Plan (red line), middle class taxpayers (between $40,000 and $100,000) would pay the highest percentage of their income (23.8%) in taxes, while millionaires would pay the least (17.9%).

Let’s look at these impacts further.

This graph shows the change in after tax income by income level under the 9-9-9 Plan.  This shows just how large of a giveaway this plan is to the wealthy.  Those with incomes under $10,000 would see their after-tax incomes reduced by 20%, or an average of $1,1,22.  Meanwhile, millionaires would receive an average tax cut of $455,247, a boost in their after-tax income of 22.4%.

Most Americans can agree that the federal tax code needs to be made more simple.  Just because a plan is simple, though, doesn’t mean it is good.  Americans should expect a better and more fair plan than Herman Cain’s 9-9-9 Plan.





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