Herman Cain: No Exemptions For The Poor With His Regressive Consumption Tax

For the second week in a row on the Sunday shows, Herman Cain was out there pushing his regressive 9-9-9 tax plan, this week going so far as to say he would not even allow the poor to be exempt from paying taxes on food. From Think Progress --
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For the second week in a row on the Sunday shows, Herman Cain was out there pushing his regressive 9-9-9 tax plan, this week going so far as to say he would not even allow the poor to be exempt from paying taxes on food.

From Think Progress -- Herman Cain: Tax Poor People’s Food To Finance Massive Tax Break For The Rich:

The centerpiece of former pizza czar Herman Cain’s presidential campaign is his “999″ plan, which would slash taxes on the wealthy, drive up deficits to the worst point since World War II, and force low-income Americans to pay a massive nine times their current tax rate. In an interview this morning with CNN’s Candy Crowley, Cain even said food and clothing would not be exempt from the 9 percent national sales tax he would put in place if elected president. Indeed, he said it would be “fair” for a poor person to pay as much in sales taxes as Crowley does [...]

Because he says his plan would lower the income tax for some Americans — and, by his calculations, leave people with more money to spend — Cain seems to think his plan would leave low-income Americans with more money. He is wrong. Presently, the bottom quintile of earners pays about 2 percent of their income in federal taxes. Under Cain’s plan, their taxes would increase all the way up to 18 percent. [...]

This week, Cain said his plan would not be regressive because “It expands the base so that everybody has a lower rate. And it is not regressive on the poor.” Clearly, he is ignoring how his tax plan would actually affect hardworking Americans, especially when it comes to the food they buy so that they can feed their families.

Full transcript via CNN below the fold.

CROWLEY: Let me move you to your plan.

CAIN: Okay.

CROWLEY: 999. I know you love to talk about this. So, this would be -- your plan would be to have everybody pay 9 percent of their gross income and the only thing you could deduct would be charitable contributions.

CAIN: Correct.

CROWLEY: 9 percent corporate tax rate, now at 35 percent just for purposes of comparison. And then a 9 percent sales tax or consumption tax.

CAIN: Yes. CROWLEY: So the criticism of this has been, a, it won't raise enough money as much money as is need, and, b, it is really regressive, because I would pay the same amount for a blouse in taxes as someone making $10,000 a year and that's regressive. It's not fair.

CAIN: Let me start with the first one about how much revenue it will raise. The people who are saying it will not be revenue-neutral? They are absolutely wrong because they did a static analysis. We had this done with the dynamic analysis with an outside independent firm so they are making an erroneous assumption.

Relative to regression. No, it is not. If you take a family of four at $50,000, and $25,000, start with the fact that if they're getting a paycheck, they pay 15.3% in the payroll tax like you pointed out earlier.

CROWLEY: Social Security...

CAIN: Social Security and Medicare. So that 15.3 becomes 9 percent. That's a six percentage point differential.

Now let's take someone making $50,000 a year. We can do it for $25,000 or $50,000. It doesn't matter. You now have -- they will pay in taxes based on standard deductions, and standard exemptions if they're making $50,000 a year, family of four, they're going to pay over $10,000 in total taxes.

Go to the 999 plan. They're going to pay $4,500. So they have a $5,500 gap to apply to the sales tax. If the person applies that to both new and used goods, they will come out just fine.

CROWLEY: Is there any exception, as you see it, in this consumption tax? Would you -- except for clothing perhaps? Except for food? Would food be a consumption?

CAIN: No, you don't have to do that.

CROWLEY: No food, clothing?

CAIN: No. You don't have to do that. No. Because that 6 percentage point difference makes up for a lot of the sales tax that people will have to pay. Here's the thing that people don't talk about...

CROWLEY: I'm sorry, but I think I misunderstood you.

CAIN: OK.

CROWLEY: You would make an exemption for food and clothing?

CAIN: No, no, no.

CROWLEY: No exemptions to the sales tax.

CAIN: No, you don't need those exemptions. No, you don't need those exemptions.

CROWLEY: So a person poor person is paying the same amount of tax on groceries as I am.

CAIN: Right. Now...

CROWLEY: Does that sound fair to you, just in a vacuum?

CAIN: Yes, it does sound fair, because of the other point that I'm about to make. If they need to buy a car or a home or some hard goods that are used, they pay no taxes. So they have an opportunity for them to leverage their income.

The assumption made by the critics is that they're going to spend all of the rest of their money on new goods. No. That's not how my parents did it. They knew how to stretch a dollar. So to say that it is regressive is based upon erroneous assumptions.

CROWLEY: Let me have you hold it right there. We'll be right back with Herman Cain.

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