Almost overnight, Herman Cain has vaulted to the front of the 2012 GOP field with his charismatic speeches and his catchy, 9-9-9 tax plan.However, that tax plan is now drawing widespread ridicule from members of Cain’s own party, with typically conservative sources scoring 9-9-9 a big fat zero. The Wall Street Journal and Daily Caller both ripped 9-9-9 in recent articles, and even Freedomworks, the Koch brothers-funded, Dick Armey-run Tea Party organisation, has released a strong critique titled.
The main criticism of the tax plan is the proposed creation of a new 9% national sales tax.
The WSJ said that Cain’s 9% sales tax was “seductively low,” and warned that similar sales tax rates in Europe quickly rose to to offset rising spending, thus “coincid[ing] with the rise of the entitlement state and slower economic growth.”
Similarly, Freedomworks raised concerns about the potential for the sales tax to grow in response to future demand. They too raised the specter of European-style taxation through the sales tax, mulling the potential for the sales tax to “morph” into a value added tax in which taxes are collected at every stage of production rather than solely at the final transaction from seller to consumer.
“Cash-register sales taxes have a habit of evolving into VATs. That’s what happened in Europe. And that’s undoubtedly what will happen here, if we adopt Cain’s plan,” the group warned.
The Daily Caller argued along the same lines, but did so with the strongest, most blunt headline of the three: “Why 9-9-9 is Dumb Dumb Dumb.”
One of Cain’s own economic advisors, while defending the plan’s viability, said he would have preferred an alternative plan.
“”It’s not a plan that I concocted,” that consultant, Gary Robbins, told Politico. “There’s nothing wrong with the plan, it just wouldn’t be the one I picked.”
There is also some debate about whether the plan would be, as Cain claims, revenue neutral, meaning it would bring in the same amount of revenue as the current tax structure does.
An analysis, conducted by Fiscal Associates Inc. for the Cain campaign — and first obtained by Bloomberg News — claimed that the plan is essentially revenue neutral. However, when Bloomberg ran the numbers on their own, they arrived at a very different conclusion, finding that the plan would have resulted in tax receipts of $2 trillion in 2010, well under the $2.2 trillion the government actually collected.
Meanwhile, the centre for American Progress, concluded that 9-9-9 would explode the deficit. By their measure, Cain’s plan would have taken in half the revenue the government collected in 2007.
Regardless, Cain’s biggest challenge in selling his 9-9-9 plan may not be in convincing conservatives that the plan won’t raise revenue levels now, but rather in convincing them that revenue won’t balloon later thanks to his new, European-style, tax.
Business Insider Emails & Alerts
Site highlights each day to your inbox.