Friday, October 28, 2011
The Stupidity of 9-9-9 Tax Plan
The 9-9-9 tax plan is the dumbest shit I've ever heard. I'd really like to see Herman Cain go to the presidential election trying to convince poor people that they'll be losing a little less than 20% of their money to taxes. If you're sufficiently poor, you're going to lose 9% of your income to federal taxes, and then everything you buy will cost an additional 9%. You know that $400 dollar XBox 360 bundle you want. Well, it's not really that much any more. Add on, let's say, 15% combined sales taxes and it's now, $460. Have fun with that. Try adding another 9% sales tax to your car purchase and lose a couple thousand dollars.
People allegedly like this idea because it's simple. Guess what, simple usually isn't good. Tax code is a reflection of what we think people owe back to the government. Things such as donating to charity are considered to absolve you of some of your tax burden. Life, income, and economics are complicated, so it makes sense for the tax code to be too.
In statistics, the most accurate systems are also the most complicated. Adding more variables to your analysis can only increase the accuracy of your model. That's why our tax structure is complicated, but it's also good that it is. The only real problem with it is that there are these complicated loopholes that allow the wealthy to avoid paying taxes. The tax loopholes for businesses also need to be sealed up.
By the way, this isn't just bad for the poor. What about the elderly? The elderly have no income, and thus no income tax burden. However, they'll become saddled with additional sales tax burden. This will throw off the retirement plans of people who've had everything set up for 30 or 40 years. This would also add to the price of medicines, which our country already has a million problems with. Oh, and with a business tax, you can bet your ass that pharmaceutical companies are going to increase the cost of their products, further compounding the problem of sales tax on medications. You could, of course, always exempt medications from sales tax.
So what would the government do to correct the problem of sales tax burden on the elderly? They could either a) increase social security benefits or b) let the elderly suffer. If they increase social security benefits they'd either have to increase the social security contribution of income earners or businesses (increasing tax) or let some of the sales tax feed back into social security. They could also create exceptions where the elderly don't pay the sales tax.
It seems, just from this cursory analysis, that the 9-9-9 tax plan creates several problems. These could be fixed with exceptions to the rule, but that kinda defeats the point of it's simplicity, doesn't it?