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Megan McArdle

Megan McArdle - Megan McArdle is a senior editor for The Atlantic who writes about business and economics. She has worked at three start-ups, a consulting firm, an investment bank, a disaster recovery firm at Ground Zero, and The Economist. More

Megan was born and raised on the Upper West Side of Manhattan, and yes, she does enjoy her lattes, as well as the occasional extra-dry skim-milk cappuccino. Her checkered work history includes three start-ups, four years as a technology project manager for a boutique consulting firm, a summer as an associate at an investment bank, and a year spent as sort of an executive copy girl for one of the disaster-recovery firms at Ground Zero … all before the age of 30.

While working at Ground Zero, Megan started Live From the WTC, a blog focused on economics, business, and cooking. She may or may not have been the first major economics blogger, depending on whether we are allowed to throw outlying variables such as Brad Delong out of the set. From there it was but a few steps down the slippery slope to freelance journalism. She has worked in various capacities for The Economist, where she wrote about economics and oversaw the founding of Free Exchange, the magazine's economics blog. She has also maintained her own blog, Asymmetrical Information, which moved to The Atlantic, along with its owner, in August 2007.

Megan holds a bachelor's degree in English literature from the University of Pennsylvania and an M.B.A. from the University of Chicago. After a lifetime as a New Yorker, she now resides in northwest Washington, D.C., where she is still trying to figure out what one does with an apartment larger than 400 square feet.

The 9-9-9 Plan

By Megan McArdle
Oct 19 2011, 8:09 AM ET Comment

A number of commenters want to know what I think about Herman Cain's 9-9-9 tax plan: 9% federal sales tax; 9% "business flat tax" (basically a VAT); and 9% personal income tax with no deductions except for charity.  The answer is that I don't, mostly.  Herman Cain obviously never intended to be the presidential front-runner, and his policies show it.  I don't think he's going to be president, and if he becomes president, I don't think that anything remotely resembling this plan will become law.

I will give him this: there's a lot to be said for blowing up the tax code and replacing it with something much simpler.  This plan avoids a lot of the contentious of the current tax code: the necessity of calculating net taxable business income; the dangers of high marginal personal tax rates.   In a 9-9-9 world, taxes would be much easier to calculate and collect.  He'd put a multi-billion dollar tax preparing industry out of business overnight.

Nonetheles, the plan looks like (and as I undertand it, is) something prepared by a very smart person who thinks a lot about policy in the abstract, and knows nothing about the policy process in particular.  That's not all bad--policy wonks are as prone as anyone to navel gazing and herd thinking.  But in this case, it means that he didn't know enough to cover all his bases.  There isn't any proof that this plan would collect as much as the current tax code--not even "proof" of the wildly overoptimistic variety that campaigns usually provide for these sorts of plans.  Nor has he been prepared to address concerns (entirely valid) that this plan would be less progressive than the current system.  And though I haven't seen anyone raise it, adding a VAT to a sales tax is going to be hella expensive for consumers.

Even if those concerns are addressed (though it's hard to see how, given that the rates are baked into the name of the plan), there's another overwhelming problem, as many of the other candidates have been pointing out: it's not going to pass.  People don't like sales taxes, precisely because they're very transparent and hard to evade.  People love their tax deductions.  Lobbyists from industries with high capital costs will descend on Congress like  birds in a Hitchcock film.

So beyond what I write above, I haven't spending a lot of time pondering the whiches and wherefores fo the plan: it's not ready for primetime, and it's not going to become the law of the land.  That's all you really need to know.

Update:  Josh Barro argues that Cain's "business flat tax" is essentially a VAT, and upon reflection, I think he's right.  I've updated accordingly.


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