With Herman Cain surging up Republican presidential polls in recent weeks, his plan to dramatically overhaul the tax code is starting to attract questions – even from fellow conservatives.
Cain’s so-called “9-9-9” plan has liberals and tax analysts worried that the plan would not take in enough revenue, and that it would cause lower- and middle-income families to pay more.
Cain’s rivals for the Republican nomination, like former Sen. Rick Santorum of Pennsylvania, are not the only ones expressing that concern. Even Grover Norquist’s Americans for Tax Reform (ATR), while saying there is a lot to like about the 9-9-9 plan, says the idea could give liberals a chance to expand the nation’s revenue base.
“All Mr. Cain’s plan does is establish a new tax on the American people and, while a 9 percent tax may pass the Congress, Harry ReidHarry ReidWarren builds her brand with 2020 down the road 'Tuesday Group' turncoats must use recess to regroup on ObamaCare Dem senator says his party will restore 60-vote Supreme Court filibuster MORE and Nancy Pelosi will waste no time making 9 percent into 19 percent,” Santorum told The Washington Post.
As for ATR, Ryan Ellis, the group’s tax policy director, said Cain’s plan to tax more on the consumption side was a positive step. But Ellis also worried that, if a new national sales tax was implemented, Democrats would try to use it to expand the scope of the federal government.
“The national sales tax in ‘9-9-9’ would be used by the left to be that new source of money if given the opportunity,” Ellis said.
Meanwhile, Cain, who wowed the crowd at the Values Voter Summit on Friday, has tried to brush aside the critics.
The former Godfather’s Pizza chief executive told the social conservative conference – which shouted “9! 9! 9!” in unison with Cain during his Friday speech – that the potshots come with his new territory as a presidential front-runner.
“I'm just saying, you get this bull's-eye on your back,” Cain said.
Cain has also given more detailed rebuttals to the charge that his plan would give Democrats an opening to raise taxes, suggesting that critics were using tired assumptions about his proposals. The candidate also says that, as part of implementing 9-9-9, he would ask lawmakers to require a two-thirds vote to make changes to the plan.
And Cain adds that, as a fiscal conservative, the government won’t need influxes of revenue with him in the Oval Office.
“As president, I am going to be working to bring down the debt,” Cain said on “Fox News Sunday” this month. “So, we're not going to have that tendency to continue to raise it because spending is out of control the way it is now. We will get spending under control at the same time that we grow this economy.”
As it stands, the 9-9-9 plan scraps a host of taxes already on the books – including levies on dividends and capital gains, the estate tax and the payroll tax, which funds Social Security.
On his website, the Cain campaign also says the candidate would like to eventually put the Fair Tax into place in the U.S., which would completely eliminate the corporate and individual income taxes and implement a much broader national sales tax.
But while the Fair Tax proposal includes rebates for purchases on “basic necessities,” the 9-9-9 plan as described on Cain’s website does not mention any exception for food, clothing or other household goods.
Still, the 9-9-9 plan would allow for a few deductions, including on charitable contributions and for businesses’ capital investments.
Cain’s proposals come as at least some Republican candidates aren’t ready to totally shut the door on a consumption tax.
“The idea of a national sales tax or a consumption tax has a lot to go for it,” former Gov. Mitt Romney of Massachusetts said at a September debate. (Romney did add that he thought the Fair Tax disproportionately burdened the middle class.)
But Curtis Dubay of the Heritage Foundation says many conservatives would not feel comfortable with a national sales tax unless the 16th Amendment, which established the income tax, was repealed, to totally cut off that vein of revenue.
Dubay also said he would be concerned about allowing a new stream of revenue with the current entitlement structure in place, given that officials in both parties have said that programs like Medicare and Medicaid need to be restructured.
“Having an easy ability to raise new revenue gives members of Congress the incentive not to really deal with the problems,” said Dubay, a senior policy analyst at Heritage. “That’s a fool’s errand.”
For his part, Cain has said that his 9-9-9 plan was structured to be revenue-neutral, but some analysts have questioned that assertion.
For instance, the liberal Center for American Progress said that, based on 2007 data, Cain’s proposals would bring in far fewer tax dollars than the current system. And Bloomberg said that, based on 2010 information, 9-9-9 would have brought in close to $2 trillion, compared to the government’s actual collections of $2.2 trillion.
Cain has dismissed claims that his plan would be regressive as well, noting that the payroll tax, which 9-9-9 eliminates, takes up a large chunk of taxes paid by the lower and middle class.
But Roberton Williams of the Urban-Brookings Tax Policy Center, which is also working on an analysis of the Cain plan, isn’t buying that stance.
“This plan very likely shifts more of the tax burden away from the rich and toward the poor,” Williams said.