Article

2011-10-19 Economy

Laffer: Cain's Stimulating '9-9-9' Tax Reform

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Posted by tipper 2011-10-19 14:01|| || Front Page|| [11131 views ] Top

#1 The problem with this is it cuts out opportunities for crony capitalism and graft. Why pony up big campaign contributions if you can't get the tax code jiggered in your favor?

That and it puts lawyers and accountants out of work. (anguished Oh Noes! of dismay rise from the audience)

Posted by SteveS 2011-10-19 14:41|| 2011-10-19 14:41|| Front Page Top

#2 The problem is potential future abuse by providing the politicians with another cash stream that they might abuse without eliminating one of the current streams. I'm not sure I'm all that worried about that 'potential' but I do prefer the flat tax idea Perry started shilling this morning.

Posted by rjschwarz 2011-10-19 14:47|| 2011-10-19 14:47|| Front Page Top

#3 However,
Economist Who Helped Cain Craft 9-9-9 Plan Backs Away From Sales Tax

Posted by tipper 2011-10-19 15:31|| 2011-10-19 15:31|| Front Page Top

#4 Our local and state sales tax is 9.25%. Nine percent on top of that gets to be stiff. Add in property taxes, booze tax, gasoline taxes, vehicle registration taxes, and various other taxes and inflation effects and taxes get to be too damn high.

Posted by JohnQC 2011-10-19 15:57|| 2011-10-19 15:57|| Front Page Top

#5 Sales tax is another tax on earning.

Posted by Bright Pebbles 2011-10-19 17:06|| 2011-10-19 17:06|| Front Page Top

#6 Conceptually it is fine. In practice it won't work.

Words is that Perry will be proposing a flat tax. Will enjoy looking that over.

Posted by Iblis 2011-10-19 17:06|| 2011-10-19 17:06|| Front Page Top

#7 Not against a sales tax if the feds remove all other paycheck taxes.

The problem is, they won't and we will be left with a double tax whammy that will grow bigger and bigger along with the income tax and payroll tax.

Posted by DarthVader 2011-10-19 17:25|| 2011-10-19 17:25|| Front Page Top

#8 Our local and state sales tax is 9.25%. Nine percent on top of that gets to be stiff.

This point is one of my great frustrations with the right-wing radio talkers who are desperately trying to drive a Romney nomination.

The corporate tax rate in the US hits 34% @ $75k. For the sake of discussion let's stipulate that most of the goods & services we purchase (by total dollar value) are provided by businesses in at least the 34% bracket and that most businesses are therefore paying income taxes at at least this rate (in theory for large corporations, in reality for small & medium sized corporations, and at rates above that for pass-through entities taxed at personal rates + double payroll rates).

To believe that Cain's 999 plan would cause you to expend an additional 9% on goods & services you have to believe that lowering the best-case business tax rate from 34% to a worst-case of 9% will result in no corresponding drop in the prices consumers pay for goods & services provided by these now lesser-taxed businesses.

To actually persist in that belief you must believe all of a number of things including but not limited to: that cartel pricing mechanisms that are inherently unstable and nearly impossible to enforce for any length of time even among cartels with few members would be perfectly enforced forever across the entire US economy among millions of participating businesses of all sizes; that no business would ever initiate price competition with any other; that consumers would never choose cheaper brands over more expensive ones; etc..

In other words you must believe that there is no sliver of free choice or competition in any US market and that none will ever exist. Because as soon as there is ANY competition or free choice on the part of consumers businesses will compete on price, prices will fall by an amount equal to part of the additional profit realized by businesses via lower tax rates, and your additional 9% will be 9% of a price that will significantly lower than the price you paid for the identical good or service before the new tax plan was implemented.

That Hewitt, Medved, et al. are trumpeting the idea that the price of goods & services will not fall as the cost of providing goods & services fall because neither Cain nor anyone else can absolutely quantify with complete certainty the amount by which prices will fall is sickening in its disingenuousness.

rjschwarz has identified the real practical problem with Cain's plan. Namely that future politicians will rejigger rates and almost certainly morph a national sales tax into an invisible but far more expensive and damaging VAT.

Pretty much everyone discussiong the matter is demonstrating the political problem, namely that the US public is too stupid to realize that competition will drive prices down as business tax rates come down. Thus Cain's plan is easily demagogued as an additional 9% sales tax when the net effect will be much smaller and may well (will probably IMHO) actually result in lower net costs of goods & services to consumers.

Posted by Galt, J. Galt 2011-10-19 17:41|| 2011-10-19 17:41|| Front Page Top

#9 Cain a gamer?

Posted by Ebbang Uluque6305 2011-10-19 17:41|| 2011-10-19 17:41|| Front Page Top

#10 By my calculations, a single person making $75,000 with a standard deduction will pay 11.84% effective income tax (Do the math if you don't believe me). A 9% income tax plus a 9% sales tax addition (I spend the great majority of my check) would be an enormous increase in taxes. It would be awesome for corporations as Galt states, taking them from 34% to 9% at $75,000. But since I spend most of my check with the exception of savings and retirement, I would once again bear a heavier burden.

Posted by bigjim-CA 2011-10-19 18:34|| 2011-10-19 18:34|| Front Page Top

#11 You want a capitalist solution?

Ground-rents are a still more proper subject of taxation than the rent of houses. A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground. More or less can be got for it according as the competitors happen to be richer or poorer, or can afford to gratify their fancy for a particular spot of ground at a greater or smaller expense. In every country the greatest number of rich competitors is in the capital, and it is there accordingly that the highest ground-rents are always to be found. As the wealth of those competitors would in no respect be increased by a tax upon ground-rents, they would not probably be disposed to pay more for the use of the ground. Whether the tax was to be advanced by the inhabitant, or by the owner of the ground, would be of little importance. The more the inhabitant was obliged to pay for the tax, the less he would incline to pay for the ground; so that the final payment of the tax would fall altogether upon the owner of the ground-rent.

Adam Smith , The Wealth of Nations, Book V, Chapter 2, Article I: Taxes upon the Rent of Houses

Posted by Bright Pebbles 2011-10-19 19:16|| 2011-10-19 19:16|| Front Page Top

#12 Yah, and if we all die, then there is no problem with older people owning the places that younger people rent. This is because younger people become older people.

Only the end of mortality would change this, which is not currently in the scope of reality.

So shut up, you are arguing against your future self, you stupid fuck.

Posted by rammer 2011-10-19 22:33|| 2011-10-19 22:33|| Front Page Top

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