Understanding Herman Cain's 9-9-9 Plan

Recently, a friend of mine asked me my thoughts about Herman Cain's 9-9-9 Plan, expressing concern about the addition of a 9% sales tax to he already pays, a total 8% sales tax in Upstate New York between state and local. He was concerned about seeing his sales tax increased to 17%.  I understand the concern, however, when the plan is explained more clearly, basically everybody is looking at a cut in their overall tax burden.

Before we proceed, it is important to understand that Cain does not intend 9-9-9 to be the permanent tax plan.  Rather it is Phase 1 of a two phase plan to institute the Fair Tax as the new tax system of the nation and completely erradicate our current system.  To read the entirety of the plan, visit Herman Cain's Website or Click Here to see the plan in PDF form.

One must remember that if you are paying taxes, you are paying not just your current income taxes but an additional 6.2% in payroll taxes.  So if we use the current Median Household Income of approximately $50,000 per year, let's look at what they would be paying in taxes under the current system vs the 9-9-9 Plan.

Under our current system, the family making $50,000 per year would be paying 25% Federal Income Tax and 6.2% Payroll Tax, for a total of a 31.2% tax burden.  Let's break that down:

$ 4166.66   Income Before Taxes

-  1041.68  Federal Income Tax (25%)
$ 3124.98 After Federal Income Tax

$  3124.98 After Federal Income Tax

$ 3124.98 After Federal Income Tax
-     258.33  Federal Payroll Tax (6.2%)

$    2866.65 After All federal Taxes

So under the current system:

Total Taxes paid: $1300.01 Monthly
Total Spendable Income: 2866.65 Monthly

Now under Cain's 9-9-9 Plan, all that would be replaced with a 9% income tax and a 9% sales tax.

$ 4166.66 Income Before Taxes

-    374.99 Income Tax (9% Rate)
$ 3791.67 After Income Tax   

$ 3261.67 Total Money After Paycheck

$ 3261.67 Total Money After Paycheck
-    327.30 Total Sales Tax (If 100% of Paycheck Spent)
$ 2934.37 Income After Taxes

So under the 9-9-9 Plan the median American family would have:

Total Taxes paid $702.29 Monthly

Total Spendable Income: $ 3498.12 Monthly

$597.72 LESS taxes paid each month.  That's $597.72 MORE MONEY in your pocket, every month! What would an extra nearly $600 per month do for you?  If the Median American family had $600 extra each month to spend, what do you think that would do for the economy?  I'll tell you what it'd do:  A whole lot.  You want to talk stimulus?  How about an extra $600 in the pockets of the average American family. 

You want to talk about fundamentally changing the American tax system to one that's fair?  How about a plan that taxes on what you buy, not on what you earn.  Also, remember that there are no taxes on used items, like a used car or purchasing an existing home.  By the numbers, the 9-9-9 Plan as written is good for America.

Now look,  I recognize the need for some very heavy safeguards in the program.  Requirement of a super-majority within the plan to raise the tax rates is one of them.  Without the safeguards, a lot can go wrong.  However, overall, I think if properly implemented it's a good plan.