Republican presidential candidate and Georgia businessman Herman Cain has revised his controversial 9-9-9 tax plan in response to criticism that it would dramatically increase the tax burden on the poorest Americans while dramatically reducing taxes for millionaires.
But independent tax policy analysts say Cain's revised plan would still hit poor Americans hard.
The 9-9-9 tax plan that Cain has made a centerpiece of his campaign would have simplified the current complex but progressive U.S. tax code into three flat taxes: a 9 percent tax on business gross income (minus purchases from U.S.-located businesses, capital investment and net exports), a 9 percent tax on individuals' gross income (minus charitable deductions) and a 9 percent national sales tax.
An analysis by the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution, found that Cain's plan would raise taxes for 84 percent of U.S. households -- while reducing taxes for 95 percent of millionaires. It also found that Cain's plan would reduce after-tax income for households earning less than $10,000 per year by 18.2 percent while increasing after-tax income for households earning over $1 million by 30.5 percent.
In response to the storm of criticism over the proposal's unfairness, Cain revised the plan so that poor families would be exempt from the 9 percent flat individual income tax. Cain announced the tweak in a Friday speech in Detroit, the Wall Street Journal reported:
"Say amen, y'all. If you are at or below the poverty line…then you don't pay that middle 9."
But Roberton Williams of the Tax Policy Center says that Cain's "9-0-9" plan would still raise taxes for the poorest Americans, according to the Washington Post:
Currently the bottom 20 percent of Americans actually pay a negative tax rate, receiving credits from the federal government, says Williams. So even if poor Americans were to pay zero federal income taxes, they would still experience what is in effect a tax hike.
What’s more, Williams adds, "those folks are still going to be left with a sales tax" under Cain's plan, which would disproportionately affect the poor who often [have] to consume most of their income instead of saving it. So even with the "9-0-9" tweaks, "you still have the fact that poor people will bear a higher tax liability, and rich people will bear a much, much lower one," he concludes.
In addition, while Cain's original 9-9-9 plan was basically revenue-neutral, meaning it would raise as much revenue as the existing tax system, the revised 9-0-9 plan would raise less revenue for the federal government.
(Photo of 9-9-9 mug via Zazzle.)