- Eliminate the Internal Revenue Code (the Tax Code or the Code)
- Impose a flat 9% personal income tax on all income, apparently excluding bonafide charitable contributions
- Impose a flat business income tax at a rate of 9%, eliminating all deductions (the media and the activists on both sides and in the center usually call these loopholes)
- Impose a 9% sales tax on, as I understand it, the purchase of all new (not pre-owned) end products
Mr. Cain says that it is revenue neutral, or better. I have not had a chance to review either his math or his assumptions, so I can't vouch for him, or dispute his claims.
I have to give credit to Jay Leno for the second part of my blog post title. Mr. Cain was a guest on the Tonight Show the other night and Leno talked about Republican Presidential candidates being fluent in foreign languages: Romney in French, Huntsman in Mandarin and Cain in German as nein, nein, nein translates to no, no, no.
But, back to the point of the post, look at that first bullet. Eliminate the Internal Revenue Code. If you are an average American, or even a not so average American, you probably think that's great. But, there are complications. And, if we are pointing them out here, they probably relate somehow to benefits or compensation.
Do you participate in a 401(k) plan? You do, now there's a shocker. The fact is that the large majority of working Americans either participate in a 401(k) plan, or are at least eligible to. And, why is it called a 401(k) plan? Well, duh, it's sanctioned by Section 401(k) of the Internal Revenue Code. That's why you as a participant have the opportunity to make deferrals on a pre-tax basis and not pay any tax on the money until you take a distribution. And, there are rules in the Code related to those distributions. Those would all go away. When would your distribution be taxed? Well, I don't know. Since the build-up in your account is exempt from taxes under Code Section 501(a) until you take the money, would it no longer be exempt from taxes if there ceased to be a Section 501(a) of the Code? I don't know.
Suppose you made Roth contributions. That means the money was taxed in the year that you contributed it, but would not be taxed upon distribution. So, it's already been taxed, but with no tax exemption, would it be taxed again? I don't know.
How about life insurance that you may be the beneficiary of? Suppose your parent took out a $1 million policy on their own life and made you the beneficiary. Currently, if that parent were to die, that $1 million would be exempt from income taxation (it would be subject to estate taxation) because the Code exempts it. What would happen under 9 9 9? I don't know.
And, you were one of those parents who chose to save for your child's college education using a 529 Savings Plan. Why is it called a 529 plan? It's sanctioned under Section 529 of the Internal Revenue Code. Would it lose its tax effectiveness? I don't know.
You would think that Donald Rumsfeld was my role model.
With regard to 9 9 9, you may like it or you may not. But, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns -- the ones we don't know we don't know.
I don't know, do you?