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Here's how Cain's 9-9-9 plan changes tax liabilities. Since you probably can't read it, the four blue columns represent quintiles of US Tax Payers (bottom 20%, next 20% etc) and the two red columns the upper 1% and 0.1%.
Herman Cain has urged Americans to "do the math" on his 9-9-9 plan, a tax reform package which would replace the whole of the US tax code with all its convolutions and deductions, with a simple system of a 9% flat income tax, a 9% sales tax, and a 9% corporate tax. The math is pretty stark; by any reasonable measure, Cain's plan amounts to a significant tax INCREASE for the majority of Americans. Indeed, the bottom 80% of Americans would see their total tax burden go UP under Cain's plan.
Yet Cain's tax reform package still enjoys widespread support from the Republican rank and file.
These people are by no means rich. Most Republican voters fall, economically, into the same strata as most Democratic voters. The rural poor (who vote Republican) more or less balance out the urban poor (who vote Democratic) and the middle classes shake out fairly evenly too. That means that Republicans who support Cain's plan either haven't done the math (and probably don't care to) or support it despite its impact on their personal bottom line.
Much the same can be said of other flat tax proposals, the so-called Fair Tax (which has its own complications), and a host of others besides. What all of these proposals share, however, is the commonality of simplicity.
The US Tax Code is stupidly complicated.
Pages upon pages - tens of thousands of them - make up modern American tax law. Tax law is an entire sub-discipline of legal study in this country and accountants train and study for years to master the complexities of their end of the tax system. Americans spend upwards of 6 BILLION man-hours doing taxes every year and the tax preparation industry -- and yes, there is such an industry -- employs more than three MILLION people, just over 1% of the working population.
Dismal employment market notwithstanding, that's too many people.
So it is no small wonder that Americans support tax reform. Not only are we frustrated by our taxes, we're unsure of what they are even supposed to be. Many Americans are rightfully suspicious that, buried within those reams of tax law is a provision or two that could save them a lot of money if they had the expertise to find it. That suspicion breeds resentment and that resentment leads many to support proposals which, while ultimately bad for them economically speaking, would at least make the whole sordid mess less complicated.
When business leaders make statements like the following there is a problem:
A 63-year-old attorney based in Lafayette, La., who asked not to be named, told ABCNews.com that she plans to cut back on her business to get her annual income under the quarter million mark should the Obama tax plan be passed by Congress and become law.
"We are going to try to figure out how to make our income $249,999.00," she said.
The tax debate in this country is steeped in ignorance and misinformation and fueled by frustration and resentment. While the Democrats can afford to embrace the status quo on many fronts, tax policy is not one of them. It is not enough for Obama to cling to the popularity of raising taxes on the wealthy; he must address the populist underpinnings of the tax reform movement or risk losing disillusioned voters to the understandably cynical notion that the wealthy can always exploit the complexity of the tax code to hide from higher taxes.
