(Updates with Cain comments on income inequality in seventh paragraph.)
Oct. 31 (Bloomberg) -- Republican presidential candidate Herman Cain said his so-called 9-9-9 plan is the first step toward an ultimate goal of a “pure consumption tax.”
The 9-9-9 proposal has bolstered Cain’s bid for the Republican presidential nomination. The plan would scrap much of the current tax code and replace it with a 9 percent national sales tax and 9 percent levies on businesses and on individual income.
In a discussion today at the American Enterprise Institute, a Washington group that supports smaller government, Cain framed the 9-9-9 plan as a tool that could bring together advocates of a flat tax and the so-called fair tax, which is a national sales tax. The U.S. then could make the more fundamental shift toward a system that taxes only consumption, Cain said.
“You put the consumer totally in charge for what they pay in taxes based upon their purchasing behavior,” he said. “That’s going to supercharge this economy.”
Switching from a system that taxes income to one that taxes consumption would push more of the burden to people who spend more of their income. That tends to be lower-income households.
Consumption Tax Effects
The nonpartisan Tax Policy Center said on Oct. 18 that the 9-9-9 plan would cut taxes for almost 95 percent of taxpayers with annual cash income exceeding $1 million while 95 percent of those with cash income between $30,000 and $40,000 would face a larger tax bill than they currently pay. Cain’s campaign has criticized that analysis for ignoring poverty programs that are part of 9-9-9.
Cain said the 9-9-9 plan wouldn’t “exacerbate the problem” of income inequality in the U.S.
In his nearly hour-long appearance at AEI, Cain didn’t address a report that he had sexually harassed two female employees while head of the National Restaurant Association in the 1990s.
In the remarks, Cain sought to combat criticism of the 9-9- 9 plan, including comments from other candidates seeking the 2012 Republican presidential nomination.
Cain said his opponents, including U.S. Representative Michele Bachmann of Minnesota, are saying that the 9-9-9 plan creates a European-style value-added tax “because they want to scare people.”
“You could call it a VAT, but it only happens one time,” he said. “In Europe, it happens multiple times.”
He also said Texas Governor Rick Perry’s proposed optional 20 percent flat tax would make the tax system “more complicated.”
“I call Governor Perry’s plan ‘flat tax light,’” he said. “He keeps in some of the favorite” tax benefits “to basically try to reduce criticism. I’m not interested in a plan that’s going to reduce criticism. I’m interested in a plan that’s going to solve the problem.”
--With assistance from Richard Rubin in Washington. Editors: Jodi Schneider, Bob Drummond
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