Friday, September 30, 2011

Herman Cain's 9 - 9 - 9 Plan - Not The Best Idea

Republican candidate for the Presidency and successful businessman, Herman Cain has proposed his 9 - 9 - 9 Plan to scrap the current federal tax code with all its loop holes and deductions and replace it with a 9% Corporate Income Tax, a 9% Personal Income Tax and a 9% National Sales Tax.   First, this Blogger really respects Herman Cain.   Cain is an African American, who came from poverty and through his own hard work became the CEO of a major company.   Cain is the personification of the American dream.   In addition, Herman Cain is a self made, common sense Conservative, which puts him very high on my list of common sense Republican Presidential candidates. 

And, while Herman Cain's 9 - 9 - 9 Plan is indeed interesting, it highly doubtful that it will ever become the law of the land, even if Cain was elected President.   Further, we should never support the addition of a National Sales Tax, a new tax, unless and until the federal income tax is repealed because what starts out as 9 - 9 - 9 will undoubtedly become 20 - 20 - 20, or even higher in no time at all because politicians of both political parties use tax money to buy votes and elections.   There will be one pretext, or another, to incrementally raise these three tax rates over time from 9% to something much higher.    We then will end up with both high income taxes and a National Sales Tax. 

We only have to look to Socialist Europe as our model to see the end of this story.   Most European countries have personal and corporate income taxes of 20 - 50%, or more, in addition to National Sales taxes of 17 - 23% or more.   That is addition to taxes on gas that puts the price at $8 a gallon or more.    Europeans, that cannot live within their means, are now even discussing a new tax on all financial transactions.    Politicians are very good at raising taxes rather than cutting spending as the natural tendency.   Giving US politicians a new tax, a National Sales, without getting rid of the personal income tax,, which means amending the US Constitution to do it, is not a good idea. 

So, while Herman Cain's 9 - 9 - 9 Plan sounds good and is even logical,  history be our teacher.    The likelihood of a 9% tax rate remaining constant over the years, is just not reality.   Instead, we should reform the current tax code.    We have to bring corporate income taxes down from the current 35%, among the highest in the world, to no more than 20% to be competitive with other countries.   This assumes closing various loop holes and eliminating all subsidies going to business.  And, over time, we should eliminate personal deductions, including the mortgage deduction, which just distorts housing pricing.   The only deduction that ultimately should remain should be the charitable deduction.   Once done, the top personal rate should be no more than 25% with all working Americans paying at least some income tax, rather than having 50% of Americans pay no income taxes at all.  Tax on dividends and capital gains should be no more than 10%.    If this plan was put in place, the US economy would boom and the government would actually generate significantly more tax revenues than is occurring now with the higher tax rates in place. 

We must reform entitlement as well.   Medicare should be means tested NOW for all Americans 65 years or older.   Those that can afford to pay more should be paying more to prevent Medicare from going bankrupt.   This is already happening; but we need to go the rest of the way.   Wealthy Americans should be paying at least 50% of annual Medicare premiums.  The retirement age for full Social Security benefits for those under 55 years old should be raised to 68 years old, since people are living so much longer.   This would still allow people to retire at 65; but with reduced benefits as happens now when people retire at 62.   If these simple changes were made both Medicare and Social Security could be made sound. 

Most important, we must cut federal government spending by imposing a hiring freeze to eliminate 500,000 federal civilian employees out of the 2.65 million federal workforce.   This can be done through normal attrition over five year without lay off's.   This will lead to the elimination of redundant programs, departments, agencies and commissions.  This common sense plan will help get federal spending down to about 17 or 18% of Gross Domestic Product, rather than the current 25% under Obama's management that is bankrupting our country.  

None of these things will happen as long as Socialists, including President Obama, remain in government, which is the reason we must sweep them all out of office in 2012 and 2014.   We must take back our country.   Herman Cain's 9 - 9 - 9 Plan is interesting; but probably not workable.   The Plan put forth by this Blogger is workable and will lead to economic growth and job creation again in our country.   Of course, we must also eliminate ObamaCare and Dodd Frank and many of the regulations that are strangling the private sector and destroying jobs.  It is time for major change.   We have to make Obama a one term President in 2012.   We can do it.   We must do it to preserve our freedom, our nation and way of life for the sake of our children and grandchildren.   In the mean time,  hurrah for Herman Cain.   Cain is a good guy who could be a great President even if his 9 - 9 - 9 Plan is not the best idea. 

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