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Even Conservatives Don’t Like Cain’s Plan

Even Conservatives Don’t Like Cain’s Plan October 23, 2011

Herman Cain’s 9-9-9 plan is getting heavy criticism even from conservatives now that he actually seems to matter, temporarily, in the Republican presidential campaign. The editors of the National Review slammed the plan this week:

This tripartite scheme makes for a succinct slogan but has little else to recommend it. In particular Cain’s inability to choose between a sales tax and a VAT is puzzling. The two are very similar in their economic effects. The chief advantage of the sales tax over a VAT is that the latter is considered easier for governments to raise, because it is hidden. The chief advantage of the VAT over the sales tax is that it is easier to enforce without stimulating black markets. (Another is that it reduces the risk of taxing business-to-business purchases.) Opting for both as a transitional step means courting the danger of a VAT with none of its rewards: In the first stage, the government would get a new money machine, and in the second it would supposedly destroy that machine and opt for something hard to enforce.

The two-stage scheme is self-defeating in another respect as well. The 30 percent national sales tax, whatever its other merits, would be significantly softer on the poor than the 9-9-9 transitional step, since the larger sales tax includes a “prebate” check to all Americans to exempt the basic necessities of life from being taxed, while 9-9-9 includes no similar provision. Leaving aside whether a major tax increase on people at the bottom of the income scale is a good idea, what is the point of first raising their taxes and then cutting them?

Cain envisions his presidency as featuring a quick move to the 9-9-9 plan followed by an educational campaign about the virtues of the national sales tax. He will have to move fast, since he is counting on the massive economic boom he expects his plan to create to enable him to balance the budget in his first year. None of this sounds very achievable, but let’s indulge the candidate. Even if one believes, as we do, that the mortgage-interest deduction should be set on a path to extinction, does its immediate abolition in the midst of a weak housing market seem wise?

And that’s without even mentioning that it would explode the national debt.


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