Here Are 9 Ways Herman Cain's Tax Plan Might Hurt Consumers

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Bloomberg Businessweek has a write-up today outlining several ways Republican presidential candidate Hermain Cain could screw consumers with his 9-9-9 tax plan.

The plan, which proposes a 9% corporate tax, 9% income tax, and a 9% national sales tax, vaulted Cain to the front of the race, but has drawn the ire of conservatives, who are scoring the plan a big fat zero.

Calling the plan “Dumb Dumb Dumb” in the most blunt headline we’ve seen so far, The Daily Caller agrees with Michelle Bachman that the plan is just another way to “give Congress another pipeline for revenue.”

While that remains to be seen, shifting the tax burden from the rich to the poor and throwing yet another wet blanket on the ailing housing market are plausible reasons for voters to think twice about Cain’s proposal.

Here are nine reasons 9-9-9 might be “dumb, dumb, dumb” for cash-strapped Americans.

First, the tax burden would be shifted to poor and middle-income Americans.

In a written analysis, Edward D. Kleinbard, a University of Southern California tax-law professor and a former chief of staff at the congressional Joint Committee on Taxation said, 'the 9-9-9 Plan would materially raise the tax burden on many low- and middle-income taxpayers.'

As an example, a taxpayer who earns $20,000 per year, would pay $1,800 in income taxes, plus another $1,605 in sales taxes, assuming they spend 98% of their income like most low-income Americans tend to do, reports the Christian Science Monitor. 'The combined income and sales taxes would amount to 17% of income.

By way of comparison, using today's tax rates, that individual -- married filing separately -- would pay $2,575 in combined taxes or 12.8% of their income, according to the website moneychimp.com.'

Source: Miami Herald

And paying such exorbitant taxes would crush retirees.

The reduced income tax would not benefit retirees in any way, writes U.S. News columnist Paul Berard, especially since 'they would be socked with a new 9% sales tax at a time when they are getting ready to spend some money on themselves ... that could amount to about a third of a retiree's savings.'

What's worse, it would penalise Americans who have been saving all along.

If the income tax was eliminated and replaced with a massive sales tax, prospective retirees, who've been saving all along, would get hit.

However, this does reward future savings, explained Nigel Gault, chief US economist for IHS Global Insight in Lexington, Mass.

Source: The Christian Science Monitor

As a result, American business could screech to a halt.

And if business fared poorly, that would mean fewer jobs.

Specifically, the tax plan would hurt small businesses and the service sector.

John Silvia, chief economist at Wells Fargo Securities in Charlotte, N.C., told the Christian Science Monitor that Cain's proposal would eliminate the business deduction for labour but not investment, a move that favours 'heavy industries that use lots of capital and penalise companies where labour is significant and capital is small,' but not small businesses or the service sector.

And across the board, housing would tank even further.

Housing groups oppose the plan, arguing that it could impose harsh taxes on mortgages, home sales, remodelling jobs, and rentals, driving up prices--and consumers away from spending.

Source: Miami Herald

Particularly, new home sales would get crushed.

Robert Dietz, an economist at the National Association of Home Builders, explains that new homes sales would see a double tax increase, with a 9% retail sales tax possibly getting tacked on to the house itself.

The result: Home buyers would have to face higher taxes on the interest of thier mortgage, as opposed to being able to deduct that interest from their income on their returns.

Source: Bloomberg Businessweek

Health care might hit the skids, too.

With long-standing tax breaks heading out the window, employer-sponsored health care plans could go by the wayside along with Americans' health in general, which has already declined.

In fact, less disposable income to go around might eliminate doctor's visits altogeher.

Source: Bloomberg Businessweek

See how Cain did in the recent Republican debate.

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