The University of Southern California’s Edward Kleinbard performs the thankless task of trying to figure out the actual impact of Herman Cain’s 9-9-9 campaign slogan cum tax plan, and he comes up with the following. Warning: It gets a little complicated:
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).
In other words, when you take a look at the actual effect of the three different parts of Cain’s plan, they all act similarly to a flat payroll tax. And the three parts add up to 27 percent. 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 percent of your income in federal taxes under Cain’s plan. This compares to a current federal tax burden of about 14 percent 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.
So here’s Herman Cain’s new slogan: If you want to double your federal taxes, vote for me! I know I’m not a conservative and can’t really pretend to understand what conservatives want, but I’m pretty sure this is not a tea party winner.
Via Ezra Klein, who adds the obvious point that Cain’s 9-9-9 plan isn’t a real plan anyway; it’s just a brief set of bullet points. Which is just another way of saying that it’s a joke.