Herman Cain’s 9-9-9 Plan Doubles Your Taxes

Kevin Drum explains via Edward D. Kleinbard.

Now let’s put the three taxes together. Starting with $100 of pretax firm-level gross income available to pay salaries, the employee receives $91 in wages, and the firm pays $9 in “business flat tax.” The employee then pays $8.19 in “individual flat tax” (9 percent of $91.00). Finally, the employee incurs a $7.45 further tax (the sales tax, measured as 9 percent of $82.81 in post-flat tax cash available for consumption), leaving her with $75.36 after all federal taxes to invest or spend. That represents a 24.6 percent all-in tax on the firm’s gross income attributable to the employee’s added value. Converting the $24.64 in total tax to a payroll tax equivalent, by comparing that tax to the $91 in salary the employee receives, yields a payroll tax equivalent rate of 27 percent ($24.64/$91).

If you’re an middle-income worker, you will be really hurt here.

This means that if you’re an average worker who spends most of your paycheck each month (in other words, virtually all of us), you’ll be paying 27% of your income in federal taxes under Cain’s plan. This compares to a current federal tax burden of about 14% for an average family.

Bottom line: if you make, say, $50,000 a year, your current total federal tax burden is about $7,000. Under Herman Cain’s plan, it would be about $13,000. Even if you tweak the numbers a bit to make up for different measurement methodologies, that’s a big difference.

By: Alan

Alan Colmes is the publisher of Liberaland.