"9-9-9″ Taxation 101. So crazy, it might just work!

There is widespread consensus that the current tax system is a complicated failure that hinders the nation’s growth while allowing the politically well-connected to manipulate the system to get special breaks that are not available to average workers and businesses. This is stimulating a great deal of interest in shifting to the simple and fair flat taxes proposed in the 9-9-9 plan. The current income tax system punishes the economy, imposes heavy compliance costs on taxpayers, rewards special interests, and makes America less competitive. The proposed 9-9-9 tax plan would dramatically reduce these ill effects.

The 9-9-9 Plan gets Washington D.C. out of the business of picking winners and losers, using the tax code to dole out favors, and dividing the country with class warfare. It is fair, simple, transparent and efficient. It taxes everything once and nothing twice. It taxes the broadest possible base at the lowest possible rates. It is neutral with respect to savings and consumption, capital and labor, imports and exports and whether companies pay dividends or retains earnings.

9% Business Flat Tax

- Gross income less all purchases from other U.S. located businesses, all capital investment, and net exports.

- Empowerment Zones will offer deductions for the payroll of those employed in the zone.

9% Individual Flat Tax

- Gross income less charitable deductions.

- Empowerment Zones will offer additional deductions for those living and/or working in the zone.

9% National Sales Tax

Unlike a state sales tax, which is an add-on tax that increases the price of goods and services, this is a replacement tax. It replaces taxes that are already embedded in selling prices. By replacing higher marginal rates in the production process with lower marginal rates, marginal production costs actually decline, which will lead to prices being the same or lower, not higher.

Economic Impact

According to former Reagan Treasury official Gary Robbins, of Fiscal Associates, the 9-9-9 Plan will expand GDP by $2 trillion, create 6 million new jobs, increase business investment by one-third, and increase wages by 10%.

9-9-9 Plan: Summary

- Removes all payroll taxes and unites all tax payers

- Provides the least incentive to evade taxes and the fewest opportunities to do so

- Lifts a $430 billion dead-weight burden on the economy due to compliance, enforcement, collection, etc…

- It is fair, simple, efficient, neutral, and transparent

- Ends nearly all deductions and special interest favors

- Features zero tax on capital gains and repatriated profits

- Exports leave our shores without the Business Tax or the Sales Tax embedded in their cost, making them world-class competitive. Imports are subject to the same taxation as domestically produced goods, leveling the playing field.

- Lowest marginal rates on production

- Kills the Death Tax

- Allows immediate expensing of business investments

- Eliminates double taxation of dividends

- Increases capital formation which aids capital availability for small businesses

- Increased capital per worker drives productivity and wage growth

- Features a platform to launch properly structured Empowerment Zones to renew our inner cities

- The pro-growth, pro-job, pro-export economic policies of the 9-9-9 Plan equals a strong dollar policy

The 9-9-9 plan would sharply reduce the federal income and corporate tax, eliminate the capital gains tax, the estate tax, payroll taxes and all current federal excise taxes.

First, you ask; “Wouldn’t the lowered income tax shift a larger share of taxes to the poor and lower class?” The answer is no. The poor and middle class currently pay a payroll tax equal to 15 percent of all income. With 9-9-9, these taxes are eliminated and replaced by a flat 9% income tax, less than what the poor pay(before some extreme tax credits are factored in), and significantly less than the middle class pay(even after exemptions and deductions).

I hear you. Your saying “ahh-ha”, the poor will be paying more than they currently are, since they will lose tax credits. Yeah…. so what?(just kidding) Fact is, the poor are in need of financial assistance, and that is a state welfare department issue, not a federal tax issue. These people need to have “skin in the game”, same as every other American worker. Being of need should not remove the mantle of shared responsibility. Sure, they may be paying in at one end and taking out at another, but at least they are first doing what is expected of them….. what is expected of us all.

Then, you ask; “Aren’t sales taxes a larger burden on the poor and lower middle class?” The answer, at first glance… is yes. But when you look further, you find that they have been forced to pay the embedded costs of business taxes all along, plus the added business costs involved with processing, collecting, avoiding and/or complying with the tax code. It is, without a doubt, the most inefficient, regressive tax of them all. It has been estimated that, most products we buy have an embedded tax, or hidden tax, of between 22-30%, due to corporate taxes and tax related compliance costs. The point is, when a tax is levied against a corporation, that corporation just includes the cost of that tax (and the cost of complying with it) in the price of its product or service. So, corporations are simply collecting taxes for the government. They don’t actually pay taxes, they pass it on to you. So, with a 9% national sales tax, along with a 9% corporate tax, we should expect the same, or slightly lower, total cost at the department store, while at the same time generating nearly the same government revenue.

Then, you ask; “If the poor and middle class keep more of their income, and pay the same or less at the shopping center, where does the government revenue come from that makes up for the drastic reduction in taxes paid by the rich?” First, I reject the premise of the question. Haven’t you heard the saying; “The rich don’t pay taxes, they have the means to pay a tax accountant instead.” Well, those days are over! There is only one income tax deduction allowed(charity). A quarter of all households making $1 million paid a smaller share of their income in taxes than 10 million middle class families, according to a new report from the Congressional Research Service. In addition to the 94,500 millionaires paying a lower tax rate than much of the middle class, they’ve also shown that about 7,000 of them likely paid no federal income tax at all. The super-rich escape middle income taxes in two ways. First, the payroll tax, which comprises the bulk of most families’ tax bills, doesn’t touch any income above $107,000. That means millionaires pay this tax on a smaller share of their income. Second, investment makes up a larger share of richer household’s income, and it is taxed at a lower rate than regular income. In short, millionaires make more of the kind of money the tax code preferences and less of the kind of money the tax code punishes.

Plus, the sales tax not only collects from every tax payer, it collects from visitors to this country and illegal aliens living in this country – adding billions of additional dollars to the nation’s treasury. It would also tax the underground, illegal “cash economy” in the U.S. Even those successful at evading income taxes, would be still be “sales-taxed” when they spend their ill-gotten gains on goods and services.

Now, while all goods and services imported into the United States would be taxed at the 9 percent rate, all exports(products not sold within the United States), would not. This provides the added benefit of making American products more competitive, both here and abroad. Lowering the corporate tax rate and adding a sales tax would bring jobs back to America, help to rebuild our manufacturing base, and put more Americans back to work.

Other factors to consider include;

- There would be a much simplified tax form for taxpayers to fill out. Both it and the business tax forms could easily be filled out by an elementary school student.

- It would tax all citizens at the same rate so that only those who make more, or spent more, would pay more.

- It would encourage savings and/or investment.

Again, I know what your thinking. More tax cuts to the rich? Wont that create even larger deficits and debt? Wont that make matters worse? The answer is no. It removes tax loopholes, exemptions, and nearly all deductions as trade for the reduced rate. It is designed to be revenue neutral, but more importantly, it’s finally fair. Plus, the amount of money taxed out of our economy is already too high. If government can’t make budgets to match the revenue these taxes raise, we need a new government.
Some fear that one, two, or all three of these taxes will later be increased to 12-12-12, or 20-20-20! To this I say…BUNK! If government does decide to impose higher taxes, take cover!! I truly believe historians of the future will be studying this point in American life as the start of the people’s revolt, leading to either a second revolution or an all out civil war. The people are angry! And the budget, along with all the bailouts and unrestrained spending since the housing collapse, has done nothing to ease that anger. Obama had an opportunity to really bring change, but traded it off for misguided political ideology and party harmony. The time for reducing governments size, cost, and its drag on our economy is now. Before events grow out of control. Beyond the current non-violent marches, protests and rallies. Unlike most liberal groups, conservatives will not just wave signs for years on end. We are a results-oriented people, and if speaking out does not work, acting out is the next logical step.

-PERSONAL NOTES-

While I am fully in favor of the 9-9-9 proposal, I am also in favor of adding a couple more nines, by taxing capital gains and repatriated profits. Letting the investment class off the hook… scott free, does not sound fair, and is politically stupid in a time when class warfare is the Obama reelection strategy. To truly be fair, all types of income, no matter the source, or its adverse effects, should be taxed equally, or not at all. All taxation is detrimental to the economy, the key is keeping them all as low, and equal, as possible. And no!..Inheritance is not income, but it will be taxed as it is spent.

I also am in favor of an “10% of poverty level” exemption before the calculation of the income tax.

And, while I understand the need and thinking behind the use of Empowerment Zones, I truly believe they should be more of a “state provided” tax credit.