Herman Cain 9-9-9 Plan

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joesxm2011's picture
joesxm2011
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Herman Cain 9-9-9 Plan

 If this is considered a political thread and should be moved somewhere else, please excuse me.  I figure since it is a proposed change to the tax code that I am trying to discuss it shold be ok.

I went to the Herman Cain web site to try to find the details of the 9-9-9 Plan.  From what I can tell it seems to basically set up the "rich" or "investor class" to pay absolutely no tax other than the 9% sales tax.  Please let me know if I am understanding this correctly.

The Individual tax is stated as being earned income minus charitable contributions.

There will be no capital gains tax and no tax on dividends.

As I understand it, interest on money market funds and interest on things in fixed income mutual funds is considered to be dividend income for tax purposes.  I think that interest on Treasury bonds is also considered dividend income.

It seems to me that the following types of people would basically pay no individual tax under the 9-9-9 plan:

People who have all of the wealth parked in treasury bonds.

People who have a large amount of corporate stock that they got by being given [shady] stock options from companies that they run or are affiliated with in some way.

Hedge fund managers, whose income is now considered to be capital gains rather than earned income.

People whose entire income comes from trading and speculation.

Am I understanding this correctly?

Thanks.

Joe

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rhare
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It's about double taxation....
joesxm2011 wrote:

It seems to me that the following types of people would basically pay no individual tax under the 9-9-9 plan:

People who have all of the wealth parked in treasury bonds.

People who have a large amount of corporate stock that they got by being given [shady] stock options from companies that they run or are affiliated with in some way.

Hedge fund managers, whose income is now considered to be capital gains rather than earned income.

People whose entire income comes from trading and speculation.

Am I understanding this correctly?

While I think his plan is awful, yes - I think you got it.  But instead you should look at it that they have already paid the 9%. If the corporations have to pay 9%, then if you had the investor pay 9% they are being double taxed.  The problem is right now the tax code encourages spending over saving - the opposite of what we need.

This chart explains it pretty well:

Wendy S. Delmater's picture
Wendy S. Delmater
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thanks for the laugh, rhare

That's a great chart.

I'm off to go buy a big-screen TV now...

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I don't like it...

I don't like the 999 plan for several reasons -

The Bad

1) He says the first year he is president he will balance the budget.  I don't think that is possible.  That would mean you would have to cut social security, medicare, medicaid, the military, food stamps, section 8 housing, agg subsidies, the federal government employee head count, and everything else the Federal Government does by at least 40% in one year.  I believe that would lead to acme instant depression, riots in cities, and possibly wide spread violence similar to civil war.  The Fed Gov is 32 to 35 percent of GDP right now.  Cutting it by 40% would result in about a 14% reduction in GDP in one year.  Thus - acme instant depression.  Millions of people would become unemployed.  The class of dependency would be thrown into a situation where they would not have sufficient food and housing to live.  Many would die.  Roving gangs would just take whatever they wanted by force.

2) I do not like the idea of a Federal Sales Tax.  That is just another revenue stream into the government to fund its constitutional and unconstitutional activities.  Once you opened up that revenue stream you would never get rid of it and we would have a federal sales tax forever.  I am dead set against creating additional revenue streams into the fed gov.  I have never seen a case where increased revenue into a gov resulted in a decrease in gov spending.  If you eliminate the income tax then a federal sales tax could be implemented.  However, the liberals would never agree to that as then the people would have the fed gov tax rubbed in their faces every time they bought something.  That would result in demands to lower the tax which would defund statism.  No VAT tax can ever be allowed under any circumstances.  Once you have a hidden tax the fed gov would just keep raising it and the vast majority would not know.  People need to be aware of the taxes they pay.  As prices rise from VAT tax increases immoral politicians would blame it on the evil corporations when it was the government doing it.  The VAT tax in Europe is TWENTY percent now after the last round of increases.  It is a disaster for those people.

3) His proposed flat tax does not have the current home mortgage interest deduction.  Many people have their family financial systems set up assuming there is one.  They take additional deductions on their W2s to balance their tax liability knowing this deduction will be there.  It increases their take home pay all year.  If this deduction was removed it would result in financial hardship for many Americans.  I am not sure what the loss of this deduction would do to the housing industry but it is a fair assumption that it would be bad.

The Good

1) Scraps the existing tax code which has so many things wrong with it I could write a 500 page book about it.

2) A flat tax removes an uncountable number of loop holes and gets the people back to paying taxes.  47% of people in America do not pay fed gov income taxes now.  That is definitely broken.  Under a flat tax if you make more you pay more, if you make less you pay less - everyone above a very low threshold would pay the same percentage - the essence of fairness.  It is good if the people believe the tax system is fair.  of course people who push the class warfare thing and statists will never be happy with a flat tax.

Question - Does anybody know if the 999 plan has a deduction for charities ?  If it doesn't then good bye a significant portion of charity money.

On Herman Cain in general, he seems OK.  He has a long history of business activitiy.  I would see that as a plus.  He has no political experience but maybe that is not so bad.  He speaks plainly and does not BS around as much as professional politicians do.  I would vote for the devil herself over Obama.

 

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That's a great write-up,

That's a great write-up, shields.  Big picture stuff that seems to escape the public consciousness-

"I have never seen a case where increased revenue into a gov resulted in a decrease in gov spending."

I don't think that has EVER happened.

Many people have no idea the first income tax laws were intended to be temporary, just to pay off some war debt.  Look how that panned out.

Or how about one of our first income taxes, the Tax Act of 1862.  Those earning more than $13K (our dollars) paid 3%, those earning more than $220K paid 5%.  This was only supposed to last 4 years.  Just temporary, no need to get worried.

Why does the percentage of our income the government is "entitled" to gradually increase?

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The Fed - The problem with Herman Cain

My bigest problem with Cain, is he was a former Federal Reserve board member and still thinks highly of the Fed and Alan Greenspan.  How can anyone that misses the root cause of nearly all our problems possible be the one to solve them?  That right there disqualifies him completely as far as I'm concerned.  The only two people running on the GOP side that I think would actually do any good are Ron Paul and Gary Johnson.  Unfortunately the media wants Perry, Romney or Cain......   It's funny because the latest Ron Paul fund raiser is poking fun at the media "black out" of his campaign. (here and here)

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it is easy...
tictac1 wrote:

That's a great write-up, shields.  Big picture stuff that seems to escape the public consciousness-

"I have never seen a case where increased revenue into a gov resulted in a decrease in gov spending."

I don't think that has EVER happened.

Many people have no idea the first income tax laws were intended to be temporary, just to pay off some war debt.  Look how that panned out.

Or how about one of our first income taxes, the Tax Act of 1862.  Those earning more than $13K (our dollars) paid 3%, those earning more than $220K paid 5%.  This was only supposed to last 4 years.  Just temporary, no need to get worried.

Why does the percentage of our income the government is "entitled" to gradually increase?

Sometimes there are very tough qustions posted on this site, but this one is easy.  A one word answer - statism.

 

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Double Taxation Buys Separate Legal Entity Protection

There is a good reason for a so-called "double taxation". It is the first thing you learn in accounting class.

A corporation is a separate legal entity apart from the stockholders. The Faustian bargain is that, for having a corporate veil that allows it to be it's own legal entity (and have rights), and also to be able to shield the ownership from liability beyond the ownership stake, the corporation pays taxes on profits before any profits are distributed to the stakeholders. That's why there is such a thing as "double taxation".

Its not unfair for this kind of bargain. It is disgusting to advocate allowing a corporation to get away from paying any taxes, while still allowing it be it's own legal entity, able to shield investors from liabilities. That's called getting something for free - a change from hundreds of years of corporate tax law and precedent.

Besides, if someone doesn't like the "double taxation", there's a very legal way around it. Simply remove the corporate veil. Any corporation is free to change to a sole proprietorship or full partnership status. Then all income is passed onto the owner(s) and the owner(s) pay(s) taxes just like a regular citizen or legal resident.

Of course, with a sole proprietorship or full partnership, that also means there's no "corporate veil". If the company is liable for negligence or at fault for something, the owner's home, cars, boat, vacation home, savings account, etc. are all fair game for creditors and those who win judgments - if they don't carry insurance (like malpractice insurance).

If someone doesn't want "double taxation", I don't mind if the owners also get their protective corporate "veil" removed.

Poet

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Not really a Faustian bargain...
Poet wrote:

A corporation is a separate legal entity apart from the stockholders. The Faustian bargain is that, for having a corporate veil that allows it to be it's own legal entity (and have rights), and also to be able to shield the ownership from liability beyond the ownership stake, the corporation pays taxes on profits before any profits are distributed to the stakeholders. That's why there is such a thing as "double taxation".

Its not unfair for this kind of bargain. It is disgusting to advocate allowing a corporation to get away from paying any taxes, while still allowing it be it's own legal entity, able to shield investors from liabilities. That's called getting something for free - a change from hundreds of years of corporate tax law and precedent.

Except that you also learn that corporate veil is only for contractual type obligations.  You behave negligently or illegally and you get prosecuted.  It separates a shareholders assets from corporate assets as far as bankruptcy is concerned.  Do you really think it should be otherwise?

Some hypothetical situations: You deposit money in a bank, and that money gets loaned to someone who does something illegal, should you be held responsible?  I see that as the same as a shareholder in a public company.  The only thing you should loose is your investment.

How about this, you vote for someone, they do something illegal, should you be held responsible?

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Odd Hypotheticals

An employee behaves negligently or illegally, perhaps even at the direction of a supervisor. The corporation may be liable, but the stockholder is not and at most may lose his stake. The sole proprietor who hired the employee and supervisor may be liable and it may go to his personal assets.

I deposit money in a bank. The bank is a separate legal entity. It lends to a separate person. I am not responsible. The bank is not responsible if it didn't know. My money is still mine. If the bank goes belly up, there's FDIC insurance. I vote for someone, they do something illegal like start an undeclared war, of course I'm not personally responsible. The politician is a separate entity.

Poet

rhare wrote:
Poet wrote:

A corporation is a separate legal entity apart from the stockholders. The Faustian bargain is that, for having a corporate veil that allows it to be it's own legal entity (and have rights), and also to be able to shield the ownership from liability beyond the ownership stake, the corporation pays taxes on profits before any profits are distributed to the stakeholders. That's why there is such a thing as "double taxation".

Its not unfair for this kind of bargain. It is disgusting to advocate allowing a corporation to get away from paying any taxes, while still allowing it be it's own legal entity, able to shield investors from liabilities. That's called getting something for free - a change from hundreds of years of corporate tax law and precedent.

Except that you also learn that corporate veil is only for contractual type obligations.  You behave negligently or illegally and you get prosecuted.  It separates a shareholders assets from corporate assets as far as bankruptcy is concerned.  Do you really think it should be otherwise?

Some hypothetical situations: You deposit money in a bank, and that money gets loaned to someone who does something illegal, should you be held responsible?  I see that as the same as a shareholder in a public company.  The only thing you should loose is your investment.

How about this, you vote for someone, they do something illegal, should you be held responsible?

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Seems like a double standard to me....
Poet wrote:

An employee behaves negligently or illegally, perhaps even at the direction of a supervisor. The corporation may be liable, but the stockholder is not and at most may lose his stake. The sole proprietor who hired the employee and supervisor may be liable and it may go to his personal assets.

I deposit money in a bank. The bank is a separate legal entity. It lends to a separate person. I am not responsible. The bank is not responsible if it didn't know. My money is still mine. If the bank goes belly up, there's FDIC insurance. I vote for someone, they do something illegal like start an undeclared war, of course I'm not personally responsible. The politician is a separate entity.

Yet you advocate that it should be different than those situations above for corporations and their shareholders.  You say that shareholders should be penalized for the corporation being a separate entity.  Why is it different?

Poet wrote:

If the bank goes belly up, there's FDIC insurance

So you basically view it's okay pushing your risk onto other citizens.  Are you negligent in not choosing a bank wisely based on if they are making stupid bets and putting taxpayers at risk?  Shouldn't you be penalized if your bank does something stupid and you were banking with them for higher interest rates?

 

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Sheesh, Rhare

Depositors don't own the (regular, for profit) bank. Voters don't own the politician. But shareholders own the corporation. That's the difference. That's why your hypothetical doesn't count.

You're advocating reaping profits from a legal entity a person owns, and then also not paying for being shielded from liabilities. You want people to have the best of both worlds while not paying for it. Sounds like another way to dodge taxes and shirk responsibility. If they're so eager not to pay corporate taxes, why not just go partnership? Problem solved instantly!

I deliberately don't bank with Ally Bank, or bail-out banks. I stick with credit unions.

Poet

rhare wrote:
Poet wrote:

An employee behaves negligently or illegally, perhaps even at the direction of a supervisor. The corporation may be liable, but the stockholder is not and at most may lose his stake. The sole proprietor who hired the employee and supervisor may be liable and it may go to his personal assets.

I deposit money in a bank. The bank is a separate legal entity. It lends to a separate person. I am not responsible. The bank is not responsible if it didn't know. My money is still mine. If the bank goes belly up, there's FDIC insurance. I vote for someone, they do something illegal like start an undeclared war, of course I'm not personally responsible. The politician is a separate entity.

Yet you advocate that it should be different than those situations above for corporations and their shareholders.  You say that shareholders should be penalized for the corporation being a separate entity.  Why is it different?

Poet wrote:

If the bank goes belly up, there's FDIC insurance

So you basically view it's okay pushing your risk onto other citizens.  Are you negligent in not choosing a bank wisely based on if they are making stupid bets and putting taxpayers at risk?  Shouldn't you be penalized if your bank does something stupid and you were banking with them for higher interest rates?

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rhare
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Maybe splitting hares.... (lol)
Poet wrote:

Depositors don't own the (regular, for profit) bank. Voters don't own the politician. But shareholders own the corporation. That's the difference. That's why your hypothetical doesn't count.

What's the difference? 

You own a corporation - giving them money in exchange for future money, you place your money with a bank knowing it will be lent in hopes you get a return(interest), or you vote for someone based on what they will do.  In all the scenarios you are benefiting and turning over responsiblility to another.  I believe the limited liability is necessary in all of these cases because you can not control what another person will do.   You can only be responsible for your own actions.    You seem to want to draw a distinction and make shareholders of a private corporation different simply because the primary purpose for the shareholder is to make money (although it could be argued it's the same case for the bank and in many cases the politician. )

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Hehehehe, Rhare

Shareholders, such as majority shareholders who sit on boards or and people who hold 51% or more like family corporations, get to control and get protection.

Banks? I'd prefer no banks if I could. That's why I use credit unions. Most people earn rather little from bank deposits compared to the historical earnings and dividends from stocks over the long term.

I don't own it or direct it. Politicians, I don't own him - moneyed interests do. My votes - like for Ron Paul - have mostly been useless.

Anyways, if you really hate double taxation, you should be drumming up support to get every corporation turned into a full partnership. It's entirely legal, requires no new legislation, and I wonder why more corporations don't do it. :-)

Poet

rhare wrote:
Poet wrote:

Depositors don't own the (regular, for profit) bank. Voters don't own the politician. But shareholders own the corporation. That's the difference. That's why your hypothetical doesn't count.

What's the difference? 

You own a corporation - giving them money in exchange for future money, you place your money with a bank knowing it will be lent in hopes you get a return(interest), or you vote for someone based on what they will do.  In all the scenarios you are benefiting and turning over responsiblility to another.  I believe the limited liability is necessary in all of these cases because you can not control what another person will do.   You can only be responsible for your own actions.    You seem to want to draw a distinction and make shareholders of a private corporation different simply because the primary purpose for the shareholder is to make money (although it could be argued it's the same case for the bank and in many cases the politician. )

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pondering

i have thought about it some more and i still do not like 999.  my previous post on this thread is still my position.

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tictac1
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The world of powder cocaine,

The world of powder cocaine, it is not uncommon for each person that handles the "product" to take some, and replace the weight with cutting agents.  It starts off as relatively pure cocaine, but by the time it has reached the end user, it is diluted plenty.  This is called being "stepped on".  The more people it goes through, the less pure it becomes.

That chart shows savings getting taxed 4 times.  I like it, I've shared it with others.  But the other side is decieving.  Our money gets taxed MULTIPLE times, in fact, every time it changes hands.  Much like the cocaine in the above analogy.

Let's say I start with $100 in wages, with which I will pay a contractor for some plumbing work.  Right off the bat, that $100 in wages becomes about $62, due to a variety of taxes that come out of my check.  Next, we can assume some depreciation from inflation, but let's assume zero for this example.  My contractor has to pay licensing "fees", permitting "fees", inspection "fees", sales tax on his tools and materials, tax on his gas to get to my house, you get the picture.  In turn, a percentage of money HE spent to do the job went to taxes in their myriad of forms.

Now, how much of that $100 went to government?  If we ONLY figure my income taxes and the plumber's, it's well over 50%.

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