Herman Cain and His 999

Recently Herman Cain has shot up in almost all polling. In fact he is the front runner in several polls. Some say he is benefiting from poor performances from Perry and Bachmann. But many believe he has earned his new found fame.

Herman Cain is showing himself to be a straight shooter, something Americans are looking for in its new leader. Cain’s business resume does show he is a leader and a winner. He has had several prestigious positions in both the public and business fields. He has sat on the Fed board to sitting on the board including being CEO of several top companies. But he is most known as the man who bought Godfathers Pizza and turning it into a great business success.

But you can point to two reasons that Cain has people not only talking about him, but even backing him. First are his performances in the debates. He has shown he is not just another face. He has shown he is serious about wanting the position in order to fix the ills of the United States. He has shown he is not only intelligent, quick witted, good on his feet, has a good sense of humor, but he is a great communicator.

The second is his revelation for changing of the current tax system. His plan is quite simple, 999.Cain’s idea is to eliminate everything and put in its place 9% employee withholding, 9 % business tax, and a 9% national sales tax. What the reason is for most Americans in favor of this plan is that it appears simple. Cain himself while campaigning says”it’s easy and transparent”.

While it sounds easy, it is far from transparent. In fact, this is not the tax plan that Cain actually wants. This 999 plan is only a phase one move till Cain can move to phase two, a consumption tax. Why is he not telling or revealing to the American voter what his true intentions are? Could it be because he knows he will need to do something else because 999 will not work? And last, if Cain has a view of wanting to go to a consumption tax system, why even waste time and money on creating a new system, get taxpayers use to the system that you will replace in short order?

But that is what Cain is actually proposing. It is a wonderful marketing tool designed to get two voter markets to back him. The Phase 1 of the Enhanced plan unites the views of flat tax supporters and the fair tax supporters. Together they are a large voter base that any candidate would like the backing of. Then Phase two , his goal is to educate Americans as to the benefits f the next phase, the fair tax. The odd part is that everything he claims is a benefit for the fair tax, are the same reasons he claims are the benefits of the 999 plan. Well if they have the same benefit, why make a change? Why hide one from the other?

Well in fact both plans are extremely flawed and could not work. Let’s take a close look at the 999 plan. The claim is that the IRS is totally blown up and will no longer be needed, the elimination of all deductions , elimination of all loopholes,end Death tax, end capital gains tax, the end of all payroll taxes, and more. But in reality, you cannot eliminate Internal Revenue Service. After all, if they were eliminated who would make sure that businesses paid their entire 9 %. Or who would overlook that the taxpayer paid all their 9%? And last, who would make sure that the stores turned over all of the 9% sales tax they collected? The elimination of the IRS while a great dream, cannot be done in reality.

Next, lets look at the revenues that 999 will generate. The numbers used evaluate the 999 plan ore the numbers available for financial years 2009 and 2010. 2011s final reports are not out yet. The criteria comes from the GAO< the CBO, and the IRS. At the current time, based on the budget and national debt, we should bring in at a minimum 4 trillion dollars per year. That gives the US enough funding to pay all bills in the budget and slowly begin to pay down the national debt. That figure is based on current expendatures as after all, there is not budget. Now of course total revenues needed can change if proper budget cuts occur. Now based on 999 using the personal, business, and consumer consumption numbers, the 999 plan will raise approximately 1.9 trillion dollars. That figure is way short of what is needed. Now of course, a higher consumer confidence towards spending and a higher employment rate will have a positive effect on revenues generated. But we are using actual numbers as of today, no fantasy projections on where we could be, possibly, maybe, but not defiantly. Those fantasy numbers is part of why we are at this point.

Of course one of first things to take notice of is the low and middle class would pay more in taxes than they do now. I know it is painfully obvious, but for some reason many are not seeing it. Even Cain himself tries to get you to look the other way. Cain tries to say if “your tax rate is 15% and you pay the 9% withholding, then you have 6% left over to put toward other consumption taxes”. Who is he kidding? If you pay 9% to earn it and 9% to spend it, the tax rate is 18%. And let’s not forget the local and state taxes in both withholding and sales tax. And if you are a small business, you paid another 9% on your business as well taking you to 27%.

But what is not talked about is the Empowerment Zones. Cain has not told you about this yet, but it is coming. Simply, this is a loophole in the 999 plan. Mr. Cain will try to tell you it is not only a relief for those not making a large salary, but it will stimulate jobs as companies will want to relocate to these empowerment zones. Empowerment zones will be low incomes areas as defined by the census. Let’s take shall we say Harlem, New York. Harlem would easily qualify as an empowerment zone. It is Cain’s belief that this zone should pay a lesser rate based on how low the income area is. Harlem’s qualifying number may take the tax rate down to 333. So employees working or living in Harlem will only pay 3 % withholding. Business will only pay 3% business tax, and stores will only charge a 3 % sales tax. Cain’s belief is that businesses will flock to these empowerment zones, hire local people in order to lower overhead. It is also Cain’s belief that local merchants in the empowerment zone will generate more business as they only charge 3% sales tax. Not that has some merit as people do cross county and state lines to shop in areas with a lower tax rate. But even that will have only a residual effect, because only local communities will cross into those zones. Someone will not drive say 45 minutes to save a few dollars on the goods they need to purchase.

Earlier I called the empowerment zones a loophole. While they are that, there are also many ways to beat this tax system. We will not inform you of all of them but will say this; there are 7 legal ways as individuals to not pay any tax at all, and several to pay less than the designated 9%. First, as we said driving to an empowerment zone to shop. Second, get a PO Box or one of several other ways to establish residency within a power zone, and pay lower withholding taxes. Third, as a business, set up your office somewhere in an empowerment zone so as to only pay 3% business tax. I wonder how many world corporations will suddenly be a one unmanned office in an empowerment zone.

Now to make matters worse knowing our revenues are going to come up short comes the next question. What about Social Security and Medicare? Under Cains 999 plan there is no more withholdings for SS or Medicare. While he has been pressed for answers on that issue, he has been stonewalling except at the Bloomberg debate he said he will be publically addressing His ideas on SS soon. No matter what his solution will be, it will either cost the American people money, or he planes to end the program all together. While on could not believe Cain would be allowed to live politically through such a choice of elimination, the choice will be one which will cost people somehow. He cannot pay for it out of the 9%; we already showed he cannot pay the bills in the first place. He faces the same on the issue on Medicare. Can you imagine what the elderly would do to Cain if he eliminates Medicare? I shudder to think.

Now I normally leave my personal views out as best I can. But I need to interject something here not only for me but for all who find themselves in my position. Tomorrow, October 19, I will turn 51 years young.Many people my age have made moves to create a retirement on which to survive. SS is not good enough on its own, 401Ks are not good enough on their own, even most union retirements are not enough on their own. But the combination with SS and Medicare was the plans for the twilight years. To that end I have paid 25% of my salary to SS and Medicare to meet that end. If any President decides to eliminate these programs from doing as they were meant to do, know this. If you terminate this program, I expect every penny I paid into both SS and Medicare paid back and at a fair interest rate of say 8% APR.It will be an obvious breach of contract by the US government to not deliver the promises that were made.The Government expected me to make weekly payments for all these years since I was 16 years old. I not only made the payments but I was never late on these payments or premiums if one wants to call them that. Therefore I have reasonable expectations that what I paid for be delivered to me on time.If you cannot, please expedite my refund check for all funds paid to SS and Medicare, and do not forget to pay everyone else as well.

After stepping down off my soap box, it is painfully obvious Cain’s idea will not work. But what is most disturbing is that Cain is not being honest with the voters as to what his true beliefs are. Campaign on what you believe and be judged accordingly. We do not need another President that has no experience, is not honest with the American people, change or create smoke screens over issues. We have that now and we see how well that works. What is needed is someone to stop what the current administration is doing, not give us more of the same.

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