Inequality is a hot topic these days. Everyone seems to want to write about it. The launch of TheUpshot, the new project from the New York Times, included a story on the wealth of the middle class, the Times Sunday...
- The Tax Policy Blog
- 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.
Buy this blogger a cup of coffee!
Join the Tax Foundation's fight for sound tax policy Go
About the Tax Policy Blog
The Tax Policy Blog is the official weblog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.