999 Can Save Our Country

In 1980, facing a terrible economy, Ronald Reagan called for a new tax program: 10-10-10. : Based on the Kemp-Roth bill, he called for 10 percent cuts in income taxes for three years. : He got it, and it kindled 20 years of prosperity.

Now Herman Cain understands that we need fundamental reform to get our economy moving. : He calls for replacing the current system with just three levies of 9 percent on personal income, corporate income and consumption. : There would be no capital gains tax, inheritance tax, Social Security tax or Medicare tax. : Just 999.

His proposal is breathtaking. Currently, Poland has the lowest top tax rate at 18 percent. : And Poland is the only European nation that didn’t have a recession. : If Cain passes 999, we will thrive and become the destination of choice for every business and businessman. Look at what Reagan’s tax cuts achieved and how the best performing state economies are the ones where there is no income tax.

Naturally, the proposal attracts critics and skeptics. Some worry that it will add to the deficit. : But that’s not likely.

— Americans now earn $12.5 trillion of personal income. : Tax it at 9 percent with no deductions and you generate about $1,125 billion.
— We spend $10.3 trillion. A 9 percent tax would yield about $927 billion.
— Net corporate income (after dividends) is $1.1 trillion. : A 9 percent levy would generate $100 billion.
— That comes to $2,152 billion, about the same as our actual revenues of $2,162 billion for the fiscal year of 2010.

Then when you factor in the economic growth this plan will engender, the scenario becomes even better.

Liberals worry that the tax would shift the burden from the rich to the middle class. :  No sir. Americans making $50,000 – $60,000 a year now pay an average of 6 percent of their salary in income taxes. : But they also pay 6.5 percent in Federal Insurance Contributions Act levies and 2.9 percent in Medicare payroll taxes – a total of 15.4 percent. : The Cain proposal would replace these with a flat 9 percent saving then 6.4 percent.

Of course, the middle class would also have to pay a 9 percent sales tax, but the savings in their payroll taxes largely would offset it.

Cain says that competitive pressures would hold down prices and force businesses to eat much of the 9 percent sales tax. : Employers would not have to pay their 6.5 percent share of payroll in Social Security taxes, and their corporate taxes would be cut. : For commodities with high price elasticity — like cars — competition will hold down prices. But for inelastic purchases — like food and drugs — some of the tax would probably be passed on. : For the middle class, it’s a wash.

More compelling is the possible impact on the poor. : A family making $20,000 to $30,000 a year pays only 3 percent of their income in taxes (much of it more than offset by tax credits). : But they still do pay 6.5 percent in FICA and 2.9 percent in Medicare taxes. : So the requirement that they pay 9 percent in personal income taxes would probably be fully offset by the cut in payroll taxes.

But the poor might face higher prices. : Cain plans to spell out how he can mitigate the impact on the poor through special empowerment zones. We need to see the details. Certainly, the poor would benefit from the increased employment, wages and growth that the Cain tax cuts would generate.

Conservatives worry that 999 will open the door to a European Value Added Tax, which starts at 9 percent, but goes up each year. Cain proposes that a two-thirds vote be required to raise rates. But a simple act of Congress could change that.

The real answer is political. : If the Republican Party surges back to power in 2012, capturing the Senate, keeping the House and taking the presidency, it can make sure the rates don’t go up. : Republicans usually can count on 40 votes in the Senate. We just have to use them.

999 is a good plan, which can save our economy.

To find out more about Dick Morris and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at: www.creators.com.

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