By Dick Morris on October 18, 2011

Published on TheHill.com on October 18, 2011

In 1980, facing a terrible economy, Ronald Reagan called for a new tax program: 10-10-10. Based on the Kemp-Roth bill, he called for 10 percent cuts in income taxes for three years. He got it, and it kindled 20 years of prosperity.

Now, Herman Cain understands that we need fundamental reform to get our economy moving. He calls for replacing the current system with just three levies of 9 percent each on personal income, corporate income and consumption. There would be no capital gains tax, inheritance tax, Social Security tax or Medicare tax. Just 9-9-9.

His proposal is breathtaking. Currently, the lowest top tax rate is Poland’s 18 percent. And Poland is the only European nation that had no recession. If Cain passes 9-9-9, we will thrive and become the destination of choice for every business and businessman. Look at what Reagan’s tax cuts achieved, and at the best-performing state economies, where there is no income tax.

The proposal, naturally, attracts critics and skeptics.

Some worry that it will add to the deficit. But that’s not likely.

· Americans now earn $12.5 trillion of personal income. Tax it at 9 percent with no deductions and you generate about $1.125 billion.

· We spend $10.3 trillion. A 9 percent tax would yield about $927 billion.

· Net corporate income (after dividends) is $1.1 trillion. A 9 percent levy would generate $100 billion.

· That comes to $2.152 billion, about the same as our actual revenues of $2.162 billion for fiscal 2010.

And then, when you factor in the economic growth this plan will engender, the scenario becomes even better.

Liberals worry that the tax would shift the burden from the rich to the middle class. No, sir. Americans making $50,000 to $60,000 a year now pay an average of 6 percent of their income in income taxes. But they also pay 6.5 percent in FICA levies and 2.9 percent in Medicare payroll taxes (a total of 15.4 percent). The Cain proposal would replace these with a flat 9 percent, saving them 6.4 percent.

Of course, the middle class would also have to pay a 9 percent sales tax, but it would be largely offset by the savings in their payroll taxes.

Cain says that competitive pressures would hold down prices and force businesses to eat much of the 9 percent sales tax. Employers would not have to pay their 6.5 percent share of payroll in Social Security taxes, and their corporate taxes would be cut. For commodities with high price elasticity — like cars — competition will hold down prices. But for inelastic purchases — like food and drugs — some of the tax would probably be passed on. For the middle class? It’s a wash.

More compelling is the possible impact on the poor. A family making $20,000 to $30,000 a year pays only 3 percent of its income in taxes (much of it more than offset by tax credits). But it still pays 6.5 percent in FICA and 2.9 percent in Medicare taxes. So the requirement that such a family pay 9 percent in personal income taxes would probably be fully offset by the cut in payroll taxes. But the poor might face higher prices. Cain plans to spell out how he can mitigate the impact on the poor through special empowerment zones. We need to see the details. Certainly, the poor would benefit from the increased employment, wages and growth the Cain tax cuts would generate.

Conservatives worry that 9-9-9 will open the door to a European Value-Added Tax that starts at 9 percent but goes up each year. Cain proposes that a two-thirds vote be required to raise rates. But a simple act of Congress could change that.

The real answer is political. If the Republican Party surges back to power in 2012, captures the Senate, keeps the House and takes the presidency, it can make sure the rates don’t go up. Republicans usually can count on 40 votes in the Senate; we just have to use them.

The 9-9-9 is a good, good plan that can save our economy.

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Please leave a comment below - I would love to hear what you think! Thanks, Dick
now people can defer their taxes and are used to having a payroll tax put away so they can pay their federal taxes when it comes time. Lower income people and especially jobless people don’t have the cash flow for an additional sales taxe to boot. You can be sure that corporations will pass their tax costs down to us as well as transit services will pocket what they save in fuel taxes with no change in transit costs. Living in California we pay state and local district taxes on our purchases. It amounts to 7.25%. If I just pay 20.00 for cat food per week at 7.25% which is $1.45 tax plus $1.80 (fed tax @ 9%) over a 52 week period, I have spent $169.00 annually for tax on cat food alone and that’s for one cat not to mention the tax on vet services. No one has talked about how 999 will be implemented on the existing tax code, its effect on deductions which provides incentives right now and helps mitigate tax burdens.

What financial effect will an a 9% sales tax have on consumers once its implemented on an economy that could be already wracked with inflation by the time this is implemented? We just don’t have the TIME. I do think the devil CAN be in the “details” as Bachmann has said and that is what I am suspicious of. Cain although good in monetary and sales experience lacks the legislative and tax expertise that Bachmann makes up for being in Congress since 2007, a federal tax litigator, and state legislator which gives more credibility to her arguments for the “details.” Proposing a 9% sales tax on a public that already has a bad taste in their mouth over sales taxes on the state level to begin with, even it is a good plan is not that simple and requires a heck of a sales job on the “details.”

  • Georgiahoosier on October 19, 2011 8:18 pm

    It’s important for people to realize that their state tax collecting systems have nothing to do with 999 or the federal income tax system.

    It didn’t help for Bachmann to lie about 999 and call it a VAT, it is not.

    Like it or not, we all pay the corporate income tax, it is passed along as an embedded tax in the price of everything we buy. Currently that rate is 35%. Under the 999 plan it will drop to 9%. That will relieve a great deal of the embedded tax and the next part of 999, the 9% sales tax will be virtually invisible as far as prices on shelves go.

    Finally the last 9, the 9% income tax will affect everyone, even those not paying any income tax at all right now. And that will actually be a tax DECREASE on the 47% that pay no income tax.
    Once the 15% social security and medicare tax is removed (also known as “payroll tax”) and replaced with the 9% flat income tax people working at the lower end will be paying 6% less than they do now.

    To prevent the rates being increased, there’s a provision for a 2/3 majority vote for any rate increase.

    Really, it’s that simple.
    Check out Dick Morris’ video on the subject, so far it’s the best explanation of how 999 works and what the future implications for economic growth and increased employment will be.

    You can try to overcomplicate it all you want, but once you toss the current system out the window and replace it with something as simple as 999, trying to paint it as something it is not is just being dishonest.

  • Herman Cain … Rising for Good Reason! | Tax Bites & Tasty Morsels on October 20, 2011 8:40 am

    […] Political author and commentator, Dick Morris, who describes the Cain proposal as “breathtaking”, says, “9-9-9 Can Save Our Country“. […]

  • Herman Cain Newsfeed – Thursday, 10/20/2011 « Herman Cain News on October 20, 2011 11:07 am

    […] Dick Morris: 9-9-9 Can Save Our Country Dick Morris writes, “Herman Cain understands that we need fundamental reform to get our economy moving. He calls for replacing the current system with just three levies of 9 percent each on personal income, corporate income and consumption…”  http://www.dickmorris.com/blog/9-9-9-can-save-our-country/ […]

  • mrichter on October 21, 2011 7:31 pm

    Dick – Following your recent article, I am in support of approach such as Herman Cain’s 9-9-9 plan. As a republican, I could not agree more. Simplify the tax code and lower taxes for all. To jumpstart this economy, the government needs to raise the minumum wage to increase the buying power of the lower income individuals or families under a plan such as 9-9-9. The increase in the minimum wage would enable the lower income earners, college students, etc… This will counter the claims that the 9% sales tax added to the state sales tax will affect the lower income’s wealth distribution. Raising the minimum wage is not an entitlement, but during an economic downturn, an enticement for people to go out and find work. This increase in minimum wage would need to be significant but balanced against the corporate payroll tax cuts to bring profits back to private sector companies and more importantly for profits to the small business, which employ a greater percentage of their personnel at minimum wage salary rates. In turn, this will result in more consumer spending, revenue in Washington to balance the budget and reduce the deficit, even reduce the CEOs annual compensation, and ultimately reinvigorate the economy. We need fresh ideas and a leader in Washington who has the knowledge, energy, and guff to bring this country back.

  • wyrbendr on October 21, 2011 8:42 pm

    In the first place, terms like taxes on the rich, taxes on the poor, corporate taxes et cetera are largely irrelevant. All taxes are eventually paid by the consumer, in one form or another. Corporations treat every tax as a business expense and price them into their products. High earners, such as physicians, dentists and attorneys price them into their services. And everyone subject to higher tax brackets make adjustments to minimise his or her tax burden and pass on the rest.

    The current tax system allows politicians to pretend they are pitting these groups against each other in order to manipulate public opinion and gain polititical advantage. They can appeal to the poor to raise taxes on the rich, or beat up on corporations, pretending that the new tax will actually come out of some deep corporate pocket. That’s why politicians like Obama and Bachmann hate 9-9-9,they lose their ability to manipulate us.

    Under 9-9-9 they cannot pit rich against poor, or threaten the big corporations to gain public support because UNDER 9-9-9 WE ARE ALL ON THE SAME SIDE!!!

    A political party, congress or president proposing to raise the any part of the 9-9-9 tax will have no ‘disadvantaged’ group to appeal to, because there is no such group. Raise the 9% sales or income tax? Everybody, rich or poor will be opposed. Raise the 9% corporate tax?
    Everybody will pay more for goods and services.

    Finally, the political parties will be subject to the same pressures from consumers that businesses have always felt. Whoever promises
    the best price gets the business, or in their case, gets elected. Wanna raise 9-9-9? Make my day, Bro!!!

  • Dragon on October 22, 2011 7:21 pm

    I’ve long been interested in the FairTax but I see Mr Cain has caught the imagination of many citizens with more creativity and thought than with other candidates. I’m certainly interested — interested enough to go to his site. I discovered there was a “Phase 2” and that would be the FairTax.


  • billinmissouri on October 24, 2011 11:10 am

    I really think Herman Cain’s Plan could work but it need’s a lot of fine tuning, an answers to details…Can I bounce some idea’s off you ?
    For Example… Who will collect it if we just empty the IRS Building in DC and Close all IRS Office’s all over the country and save a Fortune… Well Let’s see ?

    Let’s say your a small business and need Financing and cooperation from a local bank in your home town (Collections must be Local ?).. This bank loans you money and help’s you so you love this local bank… You are sent paperwork from a new federal agency to fill out for your collected fair/new/ TAXES, what ever it get’s called. You fill out the paperwork as to what you have collected and you have the right to take it to any bank of your choosing, sign up and pay the taxes due on your paperwork..The Small bank collects a fee (SMALL) for handeling the tax and paperwork and you are rewarding the bank because it helps your business with loans etc..This keeps the money moving local, rewards the bank for local support, creates job’s locally in your community, etc. This would include any taxes due in your local area.. Local, county, state, federal. (This is another area to discuss),,, The money is then dispersed to the agency who should receive it.. This is a way to move the money from local up to the agency’s instead of top down…It also strengthens you local small banks an support’s your local businesses. No Big non local bank can collect Bank must be Local to collect act as payment agents. Small Local banks would want the collections and enlist the companies to pay through them in return for local bank loans an support to the businesses ..

    More if you wish to continue…Much More

    The Poor
    The Fed
    Local Taxes
    County Taxes
    Federal Taxes
    Sales Taxes
    and More