Sunday, October 23, 2011
DOUBLING DOWN ON STUPID: California becomes first state to adopt cap-and-trade program. Watch for unemployment to rise as employers flee the state.
SOME THOUGHTS on Herman Cain's 9-9-9 (now 9.1-9.1-9.1) proposal. There has been considerable interest in Cain's 9% flat income tax, 9% capital gains tax, 9% sales tax proposal. The pundits/talking heads/competing Republican presidential candidates seem to uniformly agree that it's simple and bold, but that's where the agreement ends.
The primary criticisms are three: it's too simple (Mitt Romney in the last presidential debate); it provides a third pipeline to the taxpayer's wallet (Michele Bachmann, same debate); and that it increases taxes on the poor (Santorum and Perry, as I recall).
As to the first charge that it's 'too simple' I would respond with an old systems engineering axiom that I developed many, many years ago: "inside every big problem is a little problem screaming to get out." Cain gets it; the others don't. The little problem screaming to get out is that of funding the essential services of government in the simplest, most transparent way possible. 9-9-9 does that. This isn't to say that there won't be details to be worked out -- there will be -- but it does provide a structure that is both simple and transparent.
On the second charge that it provides a third pipeline to the taxpayer's wallet, it's a relatively simple physics problem to prove that 3 two-inch pipes provide less flow than 2 three-inch pipes. And it's much harder to change three tax rates than two -- especially when all three are exceedingly transparent to the payer. I'm mindful that Thomas Jefferson's adage "the price of freedom is eternal vigilance" can control any tax rate changes.
The third charge -- that it increases taxes on the poor -- is probably true, at least to the minor extent that trading payroll taxes for a 9% income tax probably isn't quite a wash. But as Michele Bachman said in the most recent debate, with taxes everyone should have some skin in the game. And I'm personally not convinced that our current progressive income tax is "embedded in our social and fiscal DNA."
Ramesh Ponnuru at Bloomberg.com attacks Cain's math, but I don't find his argument satisfying (he repeats the 30% rate fallacy of the Fair Tax -- it's actually 23%), with the exception that he along with Peter Schiff does identify a problem that does need to be worked out: the excision of so-called "embedded taxes" as they are replaced by the 9% national sales tax.
My single concern with 9-9-9 is how the abolition of the payroll tax will mesh with Cain's proposal to privatize Social Security. I like both parts, 9-9-9 and privatization, but how will the transition be handled?
All in all, 9-9-9 is a good idea. I favor it.
The primary criticisms are three: it's too simple (Mitt Romney in the last presidential debate); it provides a third pipeline to the taxpayer's wallet (Michele Bachmann, same debate); and that it increases taxes on the poor (Santorum and Perry, as I recall).
As to the first charge that it's 'too simple' I would respond with an old systems engineering axiom that I developed many, many years ago: "inside every big problem is a little problem screaming to get out." Cain gets it; the others don't. The little problem screaming to get out is that of funding the essential services of government in the simplest, most transparent way possible. 9-9-9 does that. This isn't to say that there won't be details to be worked out -- there will be -- but it does provide a structure that is both simple and transparent.
On the second charge that it provides a third pipeline to the taxpayer's wallet, it's a relatively simple physics problem to prove that 3 two-inch pipes provide less flow than 2 three-inch pipes. And it's much harder to change three tax rates than two -- especially when all three are exceedingly transparent to the payer. I'm mindful that Thomas Jefferson's adage "the price of freedom is eternal vigilance" can control any tax rate changes.
The third charge -- that it increases taxes on the poor -- is probably true, at least to the minor extent that trading payroll taxes for a 9% income tax probably isn't quite a wash. But as Michele Bachman said in the most recent debate, with taxes everyone should have some skin in the game. And I'm personally not convinced that our current progressive income tax is "embedded in our social and fiscal DNA."
Ramesh Ponnuru at Bloomberg.com attacks Cain's math, but I don't find his argument satisfying (he repeats the 30% rate fallacy of the Fair Tax -- it's actually 23%), with the exception that he along with Peter Schiff does identify a problem that does need to be worked out: the excision of so-called "embedded taxes" as they are replaced by the 9% national sales tax.
My single concern with 9-9-9 is how the abolition of the payroll tax will mesh with Cain's proposal to privatize Social Security. I like both parts, 9-9-9 and privatization, but how will the transition be handled?
All in all, 9-9-9 is a good idea. I favor it.
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