Herman Cain has moved up a bit in the polls, based on the strength of his surprise victory in the Florida straw poll and some strong debate performances. He has a commanding voice, and his experience as a radio talk show host and motivational speaker make him a natural for debates.
But, clearly, part of the reason that he has moved up in the polls, and part of the reason he won the Florida straw poll, is the simplicity of his central economic proposal, his 9-9-9 plan that would eliminate the current, cumbersome federal tax code and replace it with a flat 9 percent income tax, 9 percent national sales tax, and 9 percent corporate income tax. If “9-9-9” sounds a lot like $9.99, all the better for Cain, whose experience selling pizzas taught him the value of catchy, simple slogans.
The problem is that, viewed from the standpoint of social justice, 9-9-9 is best read upside down, as 666. Take the idea of a national sales tax. Obviously, the poor spend most of the little money they have on clothes and food that would now be subject to a national sales tax. Conversely, the wealthy pay a far smaller share of their income on such necessities. This is what makes a sales tax so regressive: The poor end up paying a higher percentage of their already small income and the rich pay a smaller share of their already sufficient income.
There is much to be said for a simplified federal income and corporate tax structure. I have long believed that the idea of cutting tax breaks and lowering rates is an essentially liberal idea. After all, most of those tax breaks that fill the volumes of the federal tax code are there because some corporation hired a lobbyist who got to someone on the House Ways and Means Committee and got the tax break into the code. Most mom-and-pop stores do not have lobbyists on K Street and do not, therefore, benefit from the breaks. They pay the full corporate or personal income tax rate. Certain tax breaks, such as that for home mortgage interest, are in theory available to everyone who pays taxes, but it is absurd in these times when concern for the federal budget deficit is so great that the deduction should extend to second homes.
But, Cain’s proposal takes the idea of tax simplification to an absurd length. It turns the value of simplicity into a fetish. For example, there is nothing confusing or confounding about maintaining progressive tax rates. The confusing part of filling out an IRS 1040 is figuring out all the deductions. Once you have determined your taxable income, determining your rate is easy: You go to the tax table and find what you owe. The idea of eliminating loopholes and lowering rates does not require us to abandon the idea of marginal tax rates.
Similarly, the numbers for Cain’s plan do not add up. According to Politifact, the independent agency that examines political claims, the 9-9-9 plan would bring in $360 billion less per year than the current tax code. That doesn’t help balance the budget. His 9-9-9 plan might have to become an 11-11-11 plan, but that isn’t so catchy.
The principal difficulty, however, is that the plan is so regressive. According to Andrew Fieldhouse of the Economic Policy Institute: “Mr. Cain’s tax proposal only makes sense if you believe that the problem with the current tax code is that low- and middle-income households have it way too good, and they should give more of their income to those poor Americans making more than half a million dollars a year.”
Cain’s plan may not make sense in terms of closing the budget deficit, nor in terms of promoting social justice, but it is politically astute because it touches on some of the increasingly prevalent ideas about taxes being bandied about on the right. One of these is the now frequently repeated “concern” that 47 percent of American households pay no federal income tax whatsoever. That is, they do not make enough money to be subject to current federal income tax rates. The poor and working poor still pay state sales taxes and local property taxes and federal withholding taxes such as FICA and Medicare taxes. These taxes they do pay add up to a higher percentage of their income than the top federal income tax rate for a millionaire. And, in the case of the Earned Income Tax Credit, the bottom 20 percent of wage earners actually get money refunded to them when they file their taxes.
I will grant that there is something innately democratic about the idea that everyone should pay taxes, that everyone should contribute to the country’s well-being. If our nation had a minimum wage that was actually a living wage, I would be willing to support the idea that everyone should pay something in federal income taxes. But, as it is, there is no overlooking the fact that the Earned Income Tax Credit keeps millions of households above the poverty line and its elimination would be a disaster for the working poor. As Catholics, we have no special obligation to prefer one tax system over another but our moral obligation to help the poor is absolute. The Earned Income Tax Credit does that. Exempting an additional 37 percent of Americans who live just above the poverty line, which at 22k per year is hardly living high on the hog, from federal income taxes also makes sense. And, when conservatives complain that the wealthiest top 1 percent of Americans pay some 40 percent of all federal income taxes, that sad fact is the result of the much sadder fact that the gap between the rich and the poor continues to grow. No other modern, industrialized nation has the high degree of income disparity in America and any policy that would make life worse for the poor and easier for the rich is suspect.
Another mantra on the right is that the Obama Administration, in seeking to let the Bush tax cuts expire as they were intended to do, is really trying to “punish” those who are successful. This is hogwash. No one is “punishing” the rich. Instead, returning to the tax rates of the Clinton years amounts to saying to the most successful and wealthy people: You, more than anyone, have a vested interest in keeping our country on a sound fiscal business. You, more than anyone, have an interest in avoiding the kind of social instability that Social Security (the words have a meaning) was designed to prevent. You, more than anyone, rely on America’s infrastructure – our roads and bridges, our schools, our communications network – for your continued success. We need you to pay a bit more to make sure those publicly funded universities can continue to do basic research so your companies’ more specialized experts can focus on the application of that basic research in ways that will be profitable. We need you to help pay for the roads and bridges that will carry your products to market. We need you to help guarantee that the security of our society by preventing all the social pathogens that take root when poverty is unchecked.
Of course, in today’s GOP, none of these social justice concerns may ring true. In today’s GOP, where they cheer executions and boo a soldier because he is gay, Cain’s 9-9-9 plan may run into trouble because some yahoos will not see that turning it upside down is a fun metaphor for calling attention to its malign social justice implications. They may just think Cain’s signature plan proves he is the antichrist, that is, those who do not already think Obama is the antichrist.