No Matter How You Slice This Pizza….
‘9-9-9’ Just Doesn’t Add Up

TV viewers who stumbled across the other week’s Republican presidential debate while surfing for the baseball playoffs, “The Biggest Loser or Extreme Couponing” can be forgiven for concluding that the GOP campaign now revolves around Herman Cain and his “9-9-9” tax overhaul plan.
The former restaurant industry executive opened the debate with a pitch for his plan, returned to it at every opportunity and fended off jibes from Jon Huntsman (“I thought it was the price of a pizza”), Michele Bachmann (“When you take the 9-9-9 plan and you turn it upside down, I think the Devil is in the details”) and the other candidates.
All the attention is understandable, if underserved.  Mr. Cain has moved into the top tier of Republican hopefuls in recent polls, and the tax plan is his signature initiative.  At speeches, crowds chant “9!9!9!” in unison with the candidate.  So, although Mr. Cain remains unlikely to win the GOP nomination and 9-9-9 has about the same chance of becoming law as the Boston Red Sox have of winning this year’s World Series, the plan warrants a closer look, both for what it reveals about the appeal of tax reform and for its deep flaws.
Mr. Cain touts his plan as simple, and that it is.
Unlike today’s maddeningly complex, loophole-ridden tax code, the plan can be explained in a single sentence:  It would replace the current 10 million-word mess with a 9 percent personal income tax, a 9 percent corporate tax and a 9 percent national sales tax.  For voters who dread filling out their Internal Revenue Service forms every April, or have to pay preparers hundreds of dollars to do it for them, the attraction is obvious.
But Mr. Cain also touts his plan as fair, and that it assuredly is not.
At its core, 9-9-9 would be a windfall for the rich and a burden on the poor--“a distributional monstrosity,” in the words of economist Bruce Bartlett, a former policy advisor to two Republican presidents.
Wealthy people in the 35 percent top tax bracket would find themselves paying 9 percent instead.  Beyond that, the Cain plan would abolish taxes on capital gains, two-thirds of which are reported by taxpayers with annual incomes above $1 million, and on estates.  No wonder 9-9-9 is so popular in certain circles.
If the rich pay less, the money has to come from somewhere, namely from lower-income people who now pay little or not income tax and who would also get slammed by the 9 percent national sales tax on food, clothing and other goods.
Talk about regressive.
Mr. Cain claims his plan is revenue neutral, but “Bloomberg News” estimates that 9-9-9 would have raised about $2 trillion last year, or $200 billion less than the government collected.  Even giving Mr. Cain the benefit of the doubt, $2.2 trillion isn’t enough at a time when the government is spending $3.7 trillion.  To balance his first budget, something he promised in the debate, President Cain would have to slash $1.5 trillion in outlays--an amount equal to Social Security and defense, combined.
For all the focus on Mr. Cain’s plan, another GOP hopeful--Mr. Huntsman--has a tax reform plan more worthy of attention.  Call it 8-14-23.  Those would be the new marginal rates, after elimination of all deductions and credits.  In fact, Mr. Huntman’s plan closely tracks a proposal by the bipartisan Simpson-Bowles deficit commission, which smartly concluded that combining spending cuts with tax reform is the key to a grand political bargain on debt reduction.
A Cain economic advisor tells us that details on spending cuts are coming, and that lower-income taxpayers will benefit from “empowerment zones.”  We’ll see.  For now, the former pizza company executive’s plan is best described as half-baked.