As he did in last year’s budget, President Obama has called for a cap on retirement accounts, even though the personal savings rate in America hovers in the low single digits. Obama has added a provision to encourage...
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- Some Rather Important and Unspecified Details of 9-9-9
Some Rather Important and Unspecified Details of 9-9-9
In my post last Friday about what Buffett would pay under 9-9-9, I mentioned that many consider the business tax component of 9-9-9 to be something more akin to a Value Added Tax (VAT). This does seem more likely now that a) the campaign has not denied it, and b) the campaign released their calculations of revenue, revealing that the business tax base would be $9.5 trillion, about 9 times larger than the current corporate tax base.
However, the campaign keeps us guessing as they've changed the website a bit over the weekend, such that the business tax base is now described as: "Gross income less all purchases from other U.S. located businesses, all capital investment, and net exports." It used to read: "Gross income less all investments, all purchases from other businesses and all dividends paid to shareholders." So dividends are no longer deductible, but exports are?
If the business tax is essentially a VAT, then this is another 9 percent consumption tax in addition to the sales tax, so the total consumption tax would be 18 percent (or 27 percent if one consumes all of their income). That doubles (or triples) the numbers I've been using in my two analyses of what Buffett would pay under 9-9-9, and, likewise, doubles (or triples) the incentive to save and invest rather than consume. But as I mentioned in my post last Friday, it becomes less appropriate to compare these 9-9-9 taxes to what Buffett pays currently in federal income and payroll taxes without also taking into account his share of the corporate tax. This is the largest of the "invisible taxes" that Herman Cain has recently mentioned.
The bottom line is that we could use some more clarity from the Cain campaign regarding the business tax component.
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