Herman Cain announced today that he is tweaking his 9-9-9 plan. The old version would have replaced the current tax code with a 9 percent sales tax, a 9 percent income tax, and a 9 percent business tax. The new version creates a special exemption for families in poverty. Cain would remove the income tax, making it, effectively, a 9-0-9 tax, which is at least a cozy number for San Bernadino Country Republicans. He would also create special business tax breaks for economically distressed districts.
According to the Tax Policy Center, a 9-0-9 tax would still raise rates on the poorest households. The center's first pass at Cain found his plan would raise taxes for 84 percent of Americans while handing out huge tax breaks to millionaires thanks to a zero percent tax on investment income. Households making less than $50,000 would lose an extra two months' worth of income. Millionaires would see their after-tax haul increased by more than a quarter.
The 9-0-9 corollary is a first step toward a plan with so many numbers, it's no longer worth running in a headline or campaign brochure. As long as Cain competes (and he's currently polling first in Iowa), he's going to be under pressure to create special exemptions in what began as an exemption-free tax code.
One can imagine how this will go. You carve out an exception for the poor. To make back the money, you slap new rates for the rich. You create special tax incentives for poor cities. But you don't want to reward poverty, so you extend those incentives to medium- and high-income business areas, too. You're not anti-innovation, so you add an research and experimentation tax credit for businesses. You don't want to pull the plug on the housing market, so you create a temporary tax incentive for mortgages. Ahh! This costs a lot of money! So you phase out benefits for the rich, and maybe raise their rates a bit. And on and on, until it's time to step away from the canvas to see what you've created, and you've basically re-drawn a rough outline of the U.S. tax code, even though you started with three digits.
Big ideas are a useful thing in politics. But Cain's tax reform ideas are simple-mindedness masquerading as useful simplicity. The 9-9-9 plan is the kind of thing you write, tell a friend, and put away. It's a great story for wonks to mock, but a horrible guide for policy-making. The only real tax reform we're capable of getting is to pay for lower marginal rates by limiting deductions for the rich and raising effective tax rates for some folks in the 99 percent. But this kind of real tax reform doesn't require a gimmick. It just requires a Congress.
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