Herman's 9-9-9; Mark's 20-5-5

There has been a lot of buzz about Herman Cain’s 9-9-9 tax reform plan, and rightfully so. Of all the candidates, he has articulated with specificity the problem with taxes in America and why our job situation is so dismal. He has addressed the first pillar of my three pillar plan to bring America back to prosperity: Tax Reform / Energy-EPA Reform / China Trade Reform.

So let’s look at what the pizza dude has to say. It is a beautiful thing in its simplicity. He proposes to reduce the corporate tax rate to a flat 9%; a flat personal tax rate of 9%; and a national sales tax of 9%. He has stumbled on the obvious. A tax system in which 47% of working Americans pay no tax while complaining while complaining about the 53% that do is not going to work. Everybody should pay something, even if it is nominal.

He also realizes that the corporate tax rate in the United States is the highest in the world at 35%. The norm is 25%. Couple that with all of the regulations, high wages, and EPA crap companies have to deal with here, he queries why would anyone want to come here?

Finally, he spells out that there are a large number of Americans and foreigners in the country that pay no taxes at all because they are under the radar. These are folks who are currently skirting the system in the underground economy or participating in the illegal economy (translate: drugs). That is a large reservoir of untapped revenue that can only be tapped by either a sales tax or value added tax.

I am for this plan, or something like it. But there are some political potholes the pizza delivery man is going to have to dodge while delivering the pizza (am I good or what). Democrats are going to argue that he is reducing taxes on big corporations while shifting the burden to the middle and lower classes who currently pay no income tax and no federal sales tax. They will also argue that the sales tax is a “regressive” tax that hurts the poor the most. I can hear him them lamenting profusely that Cain want to tax milk and bread for the poor while the rich have their caviar dreams and champagne wishes. Maybe yes...maybe no.

But that doesn’t mean that the 9-9-9 plan can’t be a starting point for a workable tax reform package. Here are some proposed moderations that might make Herman’s proposal a little more palatable.

1) Reduce the corporate tax rate to 20%. Eliminate tax credits and accelerated depreciation. Close all other loopholes. No corporation should be in the position of General Electric and IBM that paid NO taxes last year.

2) A flat income tax rate of 5% for individuals who make over $35,000.00/year regardless if married or not. Keep the dependant and home interest income deductions…but that’s all.

3) A flat sales tax of 5% on items that cost more than $250.00. That eliminates the tax on basic food and clothing items.

4) Cap capital gains tax at 20%

And this is important for conservatives who like the plan but don’t trust the government, do the sales tax in the form of a constitutional amendment requiring any modification of the rate be subject to approval of at least 30 states. That removes the temptation from the government to start nickel and diming the sales tax up!!!!

So cheers to Herman Cain for starting a serious discussion about the tax code. This is do-able.