Boortz Claims Low-Income Earners Would “Probably Still [Be] Coming Out Ahead” Under Cain's Tax Plan

Boortz: Low-Income Taxpayers Would “Probably Still [Be] Coming Out Ahead Of The Game” Under Cain's 9-9-9 Tax Plan. On the September 28 edition of Fox News' Fox & Friends, co-host Steve Doocy talked about GOP presidential candidate Herman Cain's proposed “9-9-9” tax plan with guest and radio talk show host Neal Boortz. After Doocy asked Boortz how the a national sales tax would affect “the poor,” Boortz replied that because payroll taxes would be eliminated under Cain's plan, low-income earners would “probably still [be] coming out ahead of the game.” From the show:

DOOCY: [I]t's the backbone of presidential candidate Herman Cain's economic proposal -- his 9-9-9 plan. Have you heard about it?

[start video]

CAIN: Throw out the current tax code and pass the 9 percent business flat tax, a 9 percent personal income tax and a 9 percent national sales tax.

[end video]

DOOCY: So what are the pluses and minuses of the 9-9-9 plan, and could it really work? Let's talk to Neal Boortz, radio talk show host extraordinaire and the co-author of a great book called The FairTax Book.

[...]

DOOCY: I know you were at that particular debate down in Orlando last week. You have known Herman Cain for a very long time, what do -- and you're a proponent of the fair tax.

BOORTZ: Right.

DOOCY: What do you think of his 9-9-9 plan?

BOORTZ: Well, Herman is also a proponent of the fair tax. When the book was written back in, you know, about, what, six, seven years ago, he would go on the road with me to fair tax rallies. Now, his 9-9-9 plan, Herman realizes, we've talked about this, that you cannot institute the fair tax overnight. You have to repeal the 16th Amendment, for instance, so he has developed a transitional plan, the 9-9-9 plan, to take us away from our impossibly expensive and impossible to understand tax code right now, put in his 9-9-9 plan, which a sixth-grader could understand, and then use the bully pulpit of the presidency to lead the people further into the promised land of the fair tax.

DOOCY: Well, let's talk a little bit about some of the pros of the 9-9-9 plan. It would lower the corporate taxes, it would lower the federal income taxes. But then when you look at the minuses, suddenly the poor are going to have to pay a 9 percent sales tax. What do you think about that?

BOORTZ: Well, the poor also are not paying payroll taxes anymore. Now, the payroll tax, for instance, is 6.2 percent for Social Security, you have a couple of percent for Medicare tax -- I think we're in the 8 percent range. That disappears from their paychecks under Herman Cain's plan. They don't pay that anymore, so even if they are paying a 9 percent sales tax, you only pay that on the money you spend, not on everything that you earn, so they're probably still coming out ahead of the game. No matter how low your -- how low your income may be.

DOOCY: Sure. Well, and the president of the United States himself has said everybody has to have some skin in the game, and this way, everybody would be paying something.

BOORTZ: Well, right now, we have, and I've heard this -- you folks quote this statistic often -- 47 percent of the people in this country do not pay any federal income tax --

DOOCY: That's right.

BOORTZ: -- At all. And you're right. Everybody benefits from living in this country. And no matter what your economic situation is, everybody ought to pay a little bit of the toll for keeping this country on its feet.

DOOCY: Right. Indeed.

BOORTZ: And the jobs producers and the workers, everybody needs to be, as the president says, have some skin in the game. [Fox News, Fox & Friends, 9/28/11, emphasis added]

But Experts Agree 9-9-9 Plan Would Disproportionately Tax Low- And Middle-Income Taxpayers

EPI President Mishel Says Plan Would “Disproportionately Tax Lower And Middle Income Earners.” A September 27 post on the ABC News blog The Note quoted Lawrence Mishel, president of the Economic Policy Institute, as saying that Cain's plan would disproportionately tax lower and middle income earners. The post also noted that the plan's provision of cutting capital gains taxes would “allow 23,000 millionaires to pay no income taxes.” From the post:

Lawrence Mishel , president of the center-left Economic Policy Institute, took issue with Cain's plan, saying it would disproportionately tax lower and middle income earners because they tend to spend a higher percentage of their incomes than wealthy people. And with a national sales tax, the more you buy, the more taxes you pay.

[...]

While a formal number crunch has yet to be completed, some economists are already crying foul over whether the 9-9-9 plan can bring in as much revenue as the current tax system.

“The first thing I think is show me the money,” said Joel Slemrod, an economics professor at the University of Michigan. “I want to know whether it adds up and I suspect it doesn't.”

The 9-9-9 plan eliminates the payroll tax and estate tax, which brought in a combined $883 billion in 2010, or about 41 percent of the $2.16 trillion collected by the federal government last year. Cain's proposal also wipes out taxes on capital gains and repatriated corporate profits.

The Tax Policy Center estimates that cutting capital gains taxes alone would allow 23,000 millionaires to pay no income taxes, a move that would add $11 billion to the deficit each year. Cain's fellow GOP presidential candidates Michele Bachmann, Newt Gingrich and Jon Huntsman also support eliminating the capital gains tax. [ABCNews.com, 9/27/11]

PolitiFact: Cain's Tax Plan Would Make “Some Poorer Americans Pay More Into The System.” In an article published on PolitiFact on September 26, PolitiFact writer and St. Petersburg Times editor Aaron Sharockman wrote that “the flat income tax and the elimination of payroll taxes would result in shifting some of America's tax burden, making some poorer Americans pay more into the system while many middle- and upper-class Americans would pay less.” From Sharockman's article:

Herman Cain stunned the Republican political establishment on Sept. 24, 2011, easily winning Florida's Presidency 5 straw poll by trumpeting a platform of specific tax reforms he calls the “9-9-9 Plan.” The plan would eliminate the current tax system all together, replacing it with a 9 percent personal income tax, a 9 percent corporate income tax and a 9 percent national sales tax.

[...]

Cain has yet to detail hyper-specific points about the 9-9-9 Plan, but we have a good idea of how it would generally function.

The 9 percent income tax

The centerpiece of the 9-9-9 Plan is to eliminate the current, complicated income tax system -- with its series of tax credits and deductions and its variety of tax rates based on income -- and to replace it with a flat income tax. Cain's flat 9 percent income tax also would replace payroll taxes, which all workers pay and that fund Medicare and Social Security, and would end the estate tax, which is a tax on inheritances. Currently, about 49.5 percent of all tax filers pay no income tax at all, according to the Joint Committee on Taxation, a respected bipartisan committee of Congress. Cain's income tax would be collected equally for workers with two exceptions -- taxpayers could claim a deduction for charitable contributions (we haven't heard him discuss a limit) and taxpayers could earn a type of tax credit for living in an “empowerment zone,” which Cain has described as inner cities needing revitalization. While the result of this part of Cain's plan would affect taxpayers differently, the flat income tax and the elimination of payroll taxes would result in shifting some of America's tax burden, making some poorer Americans pay more into the system while many middle- and upper-class Americans would pay less. [PolitiFact, 9/26/11, emphasis original]

PolitiFact: “A National Sales Tax” Like Cain's “Would Raise the Relative Tax Burden On Low- And Middle-Income [Earners].” Sharockman also noted in his article, “Most economists agree that a national sales tax would raise the relative tax burden on low- and middle-income earning taxpayers.” From his PolitiFact article:

Cain's national sales tax, in effect, would attempt to make up for the reduction of federal revenue by creating the 9 percent income tax. The national sales tax, which would help fund the federal government, would be on top of state and local sales taxes, which fund state and local government. In Florida, that would create a hypothetical tax rate of 15 percent in most parts of the state. In the Wall Street Journal, Cain said the national sales tax would be levied “on all new goods.” (A good question to ask would be whether services are exempted.) Most economists agree that a national sales tax would raise the relative tax burden on low- and middle-income earning taxpayers. “The main reason is that low- and middle-income households consume more of their income than high-income households do,” said William Gale, senior fellow for economic studies at the Brookings Institution. “Another way of saying that is high-income households save more of their income than low-income households do.” [PolitiFact, 9/26/11, emphasis original]