Sunday, October 16, 2011

Herman Cain: Flat Tax Advocate

Ever since casting my very first vote— for Dwight Eisenhower in 1952—presidential campaigns have fascinated me.  This year’s GOP contest for the nomination is proving to be confusing, with the pollsters proclaiming a new frontrunner as rapidly as the news media can anoint a favorite.  The latest flavor of the week is Herman Cain, who seems to have struck a chord with a segment of the voting public.  Mr. Cain’s claim to temporary immortality appears to be his 9-9-9 Plan.

The Plan is simply explained.  First, it replaces the personal income tax, immersed in its complexities, with a flat 9% tax on all income, with capital gains taxes excluded completely.  The only allowable deductions will be charitable contributions and a credit for living in an “entitlement zone,” translated to mean an approved slum.  Secondly, it establishes a 9% national sales tax.  This, of course, is in addition to the sales taxes currently in effect in states and communities throughout the country.  And lastly, it provides for a 9% federal corporate tax, a levy which currently extracts rates exceeding 30% on all annual corporate income over $75,000.

I’ll not attempt to dissect Mr. Cain’s handiwork, other than relate a comment from a friend.  His sole livelihood is from a 28-unit apartment building he managed to acquire a few years ago.  He told me he generates about $580,000 in annual gross rentals, but after property taxes, maintenance expenses and mortgage interest, he nets only $35,000.  His current income tax bite is modest, so he manages to get by, though not extravagantly.  He expressed dismay that Cain’s plan, described as taxing gross income, would strip him of $52,200.

The flat tax, which at its simplest is the taxing of all income from whatever source, with no exemptions or exclusions, at a single rate, is not new.  The concept is propounded from time to time by various political candidates in the hope its simplistic approach will somehow capture the hearts and imaginations of the beleaguered tax-paying voters.  Its supporters include representatives of both major parties, where variations on the specific details are introduced in order to satisfy one or another special interest group.  Though popularized by Republican Stephen Forbes in both his 1996 and 2000 presidential bids, a decade earlier current California Governor Edmund G. (Jerry) Brown, Jr. championed it with an equal lack of success.  Over the years the flat tax contrivance has remained a durable issue for those candidates utilizing the Christopher Columbus approach to electioneering: just discover an issue and land on it.

Whether we like it or not, taxation is an intricate and convoluted process.  It must be, because it involves taking the possessions of some persons and giving them to others.  I’ll conclude with a final thought by a most profound philosopher, H. L. Mencken: “For every complex problem there is an answer that is clear, simple, and wrong.”

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