Broadly, Cain's plan is to tax all sales 9%, all wages and salaries 9%, and business profits 9%. There would be no other federal taxes--no other payroll taxes, no capital gains tax, no estate tax. Deductions would be severely limited, maybe only charitable gifts would be exempt.
With such major change to the tax structure, would the federal government be collecting the same amount of tax, or would it create even larger deficits? According to Cain, this plan provides the same revenue. But he doesn't provide analysis.
So the analysis is left to motley horde of the internet, which is my favorite horde. Think Progress estimates this:
- $665 billion from tax on wages/salaries
- $112 billion from tax on business
- $500 billion from tax on sales
- $1.12 trillion total
Bloomberg News has this estimate:
- $913 billion from tax on wages/salaries
- $128 billion from tax on business
- $920 billion from tax on sales
- $1.96 trillion total
Critiques of this plan are so rare, I have to include this one from either a joke or racist site:
- $1.13 trillion from tax on wages/salaries
- $270 billion from tax on business
- $378 billion from tax on sales
- $1.78 trillion total
Now, I'm rather ticked that I can't find more information on this plan. In fact, one of the best sources is the Christian Post. That isn't totally surprising, since Cain first explained the rate for his plan at a Christian conference. Cain says in his video introduction of the plan "If 10% is good enough for God, then 9% should be just fine for the Federal Government."
That statement doesn't allay my doubts, maybe because "trust me" or "God will deliver" aren't reassuring to the hard scientist in me. On comment threads, Cain's supporters even throw out this one:
Let's see. Herman Cain has a degree in mathematics and a Master's degree in computer science. You have an English-major understanding of math.... What is more likely is that Herman Cain explained his economic policy quite clearly and ... anyone with more than an English-major understanding of math would understand....Look, don't whip out your degree from Harvard or Yale or wherever and expect me to stop asking the question. Instead, go borrow Glenn Beck's unused chalk board and write up your figures. I'm completely capable of checking the math... and of calling bullshit on a candidate who won't give us the math. I'm waiting, Herman...
- $7.7 trillion in wages/salaries x 9% = $693 billion
- $9.5 trillion in business gross income x 9% = $855 billion
- $8.3 trillion in taxable sales x 9% = $749 billion
- Total $2.3 trillion --on par with current revenues
Now the correction: I had written that the business tax was on profits. I was wrong. The tax is on gross income minus certain major deduction. I haven't been able to check whether $9.5 trillion is reasonable or not. I tried, and found that the Bureau of Economic Analysis reported $21.6 trillion total private industrial output in 2009. Now, that confuses me because I thought our annual GDP was approximately $14.6 trillion. So where does the extra come from? Trade deficits? I've reached my limit on trying to understand this on my own. I hope some journalist with real economic understanding will clear this up.
Update 10/21/11. I finally noticed the inconspicuous links to the plan details on Cain's website. But they just lead to more confusion. Good luck if you go there.