I think this is the first time I’ve ever agreed with Grover Norquist on anything: Herman Cain’s tax plan is bogus. Naturally, old Grover and I have different reasons for thinking it so. He says that having three 9% tax rates — income, profits, and sales — is “like having three needles in your arm.” There’s also the conservative objection that a sales tax is just too easy a way to raise revenue, making it harder for Norquist to realize his dream of starving the government beast and drowning it in the bathtub.
Unlike Norquist and Cain, I’m one of those people who’s against regressive taxes, like, you know, a 9% sales tax. As David Weigel at Slate noted, it seems to be about sticking it to that alleged freeloading 47% who don’t pay income taxes (but do pay payroll, excise, and state income taxes). And, as Bruce Bartlett notes, there’s no mention in Cain’s income tax plan of a personal exemption, so the income tax rate is presumably 9% for everyone. So Cain would raise taxes on nearly half the population by up to 18% of their income.
Once upon a time Republicans boasted about taking poor people off the income tax rolls (as with the Reagan tax reform of 1986 and even the Bush tax cuts of 2001), but times have changed. Demanding that almost half of Americans pay an extra 9% of their income in taxes is now the order of the day, as long as that half is the poorer half.
Oh, and if lowering the top income tax rates to 9% weren’t enough Robin Hood in reverse, Cain’s plan would also exempt capital gains from taxes altogether. Imagine, hedge fund managers might not have to pay income taxes at all!
And then there’s the issue of lost revenue from slashing tax rates and shrinking the tax base for the affluent. The basic rationale for progressive taxation is that it raises more revenue more easily than flat or regressive taxation. Cain claims that his upper-income tax cuts would spur so much prosperity that they’d pay for themselves. Stop me if you’ve heard that one before.