I want to take the high road and just report this story without a wink and an “I told you so” and act like I’m all gracious like that. My brothers would tell you that’s a lie. I’m totally about the “I told you so.” So here: I told you so.
Almost every presidential candidate has been pushing for a tax plan that’s simple. Throw-out-the-Tax-Code-and-replace-it-with-an-easy-does-it-plan simple.
But as I reported previously, that’s easier said than done. Simple is hard.
GOP hopeful Herman Cain is learning that the hard way. After pushing his 9-9-9 plan in place of “the stupid tax code,” Cain is admitting that the plan needs some tweaking.
I assumed that he might be scaling back the scope of his proposed national sales tax: a 9% tax that would be imposed in addition to state and local income taxes. That’s the piece of the plan that seemed to draw the most criticism: after all, a sales tax is generally regressive (hitting those at the bottom of the income scale the hardest). But that wasn’t it.
Cain, taking a page, perhaps, from Perry’s playbook has suggested an exemption for poor taxpayers for the 9% income tax. He introduced the exemption at a campaign stump in Detroit, saying:
Your plan isn’t 9-9-9, it’s 9-0-9. Say amen, y’all. In other words, if you are at or below the poverty level… then you don’t pay that middle 9 on your income…
In other words, those at the lowest end of the income spectrum (at or below the poverty provision) would pay no federal income tax under Cain’s plan. Of course, they don’t do that now either. The result is that the 9-0-9 plan is still a tax hike for many taxpayers at the bottom. About 20% of taxpayers are eligible for the EITC and other tax credits which effectively equal a negative tax rate. A 0% tax rate would be an increase, though I’m not so sure that’s a bad thing – if you regularly read the blog, you know that I’m not generally a fan of the EITC and related credits since I think we all need to have some skin in the game.
Cain’s tweaks have put him at a disadvantage with his opponents seizing the opportunity to suggest that the plan wasn’t well thought out. Cain, however, disagrees, claiming that the plans were part of the original strategy and that he had elected not to release the details so that Americans could get used to the idea. That’s not a bad strategy – it’s what Perry is doing – if you can maintain interest in the plan without exposing the details.
But that’s been the problem all along for these tax simplification proposals offered by the candidates. They’re being sold as simple – so simple you could fill out your tax return on a postcard or a single piece of paper – and then the exemptions, credits, and other details imply that maybe things aren’t quite so simple after all. It is, as I’ve said all along, how our Tax Code ballooned to more than three million words. It didn’t start out that complicated. The first tax return was actually pretty darn simple.
For now, Cain is sticking with his 9-9-9/9-0-9 plan. I wouldn’t be surprised, as I’ve said before, to see it morph into a 10-10-10 or 12-12-12 plan. Stay tuned.