Dial 999 for fluff

[Realitycheck]

So I did an analysis of Cain's 999 plan (which basically simplifies the tax code into 9% personal income tax, 9% corporate income tax, and 9% sales tax) to see what kind of effect it would have on personal and corporate taxation, as well other factors, and this is what I came up with, using 2008 numbers.

Total personal income equalled about 12 trillion that year, which includes all forms of income, including respective flow-through income from S-Corps and Partnerships, and doesn't factor in things like 401(k) deferrals. Total tax levied that year equalled about 1.25 trillion dollars. Under Cain's plan, that would bump down a bit to 1.08 trillion, not a big change.

In that year, total corporate income tax collected (not flow-throughs) was about 314 billion dollars, on net income of about 987 billion dollars. Notice how total receipts on that 987 billion in net income is a whopping 28 trillion dollars! So basically, on average, C-corporations in the U.S. operate with margins of about 4% net income. Almost sounds kind of fishy (will recheck, but I suppose there are lots of businesses which struggle or fail to offset the ones which succeed, not to mention the ones who puff up their expenses at every possible turn for tax purposes). Under Cain's plan, this would get reduced to 88.8 billion dollars. How fortunate for the bourgeosie C-Corps.

Nationwide, total taxable sales for applicable sales taxes in 2008 was about 4.4 trillion dollars. 9% of this would be around 396 billion dollars. Since there is no precedent for this, there is nothing to compare it to. Of course, since many states and localities already charge 5 to 10% for sales taxes, this could make shopping a bit expensive, at times, but it has to come from somewhere. It seems like this could have a significant dampening effect on economic activity, especially when pronounced to this magnitude and according to the good ole conservative model that higher taxes dampen consumption. How anti-Republican of Cain. Starting to sound like more of a gimick.

Lastly, what's significantly missing is 927 billion in payroll taxes, which would no longer be levied, as far as I can tell under this all-inclusive, simplified plan.

So, at this point in time, I have tallied 2.491 trillion in taxes collected under our current plan, which doesn't include a few other small figures for simplification and 1.5648 trillion collected under Cain's plan. However, notice how that 927 billion in payroll taxes not described in the 999 plan kind of balances the plan out. So let's just call it an honest mistake in tax semantics and say that it was actually supposed to be the 9999 plan, or actually the 9997.65 if they haven't changed the payroll tax rates since the last time I checked.

What now? Well, all I can say at this point is that it isn't exactly what has been advertised and has the potential to be his own big sore spot, not to mention the sales taxes levied which are already levied by the states, contributing to a double taxation effect. How un2epublican can you get? Maybe this is the real reason why people have left his staff. But that's just where I'm at now. I've resorted to a bit of speculation to answer a couple of issues.

[Realitycheck]

Ah-hah, I just read that he was Deputy Chairman of the KC Federal Reserve Bank, aside from his time as CEO, so this isn't your average not-so-accounting-savvy CEO. He should have a pretty good understanding of the inputs and ouputs of the standard model of business language and what he is doing by not acknowledging this big hole in his plan amounts to trying to pull the wool over peoples' eyes. He obviously would know that his "plan" adds up to nothing useful, but continues promoting it as a gimmick. Sounds like a naive, ridiculous strategy that any sound business-minded strategist should easily be able to pick apart, unless he also figures out a way to reduce spending by a trillion dollars and pay the national debt, as well.

Edited October 19, 2011 by Realitycheck

[Realitycheck]

I've seen some other comparisons which differ quite a bit from the one I've shown and that's probably because 2008 was a really bad year for our economy. When I was gathering information, 2008 was the first full year of the statistics that I found data on (from varying sources) and at the time, I had not remembered how depressing that year was.

Edited November 7, 2011 by Realitycheck

[swansont]

I've seen some other comparisons which differ quite a bit from the one I've shown and that's probably because 2008 was a really bad year for our economy. When I was gathering information, 2008 was the first full year of the statistics that I found data on (from varying sources) and at the time, I had not remembered how depressing that year was.

 

I'm sure there were a lot of business losses offsetting profits that year, as well as a reduction in personal income.

[Dekan]

It seems to me, that wise persons like Realitycheck and swansont, have a better grasp of economics, than the politicians who are in charge of us.

 

I despise politicians, and never vote for them. They make me feel sick.

[swansont]

I vote, even if the options are between limited to "bad" and "worse". I think it lends more legitimacy to any complaints I might lodge.

[Realitycheck]

It could also be that he is just classifying ss and medicare as insurance and conveniently leaving it out of the equation.