An article I wrote for Politic365.com has some obvious Herman Cain supporters up in arms. An economist by the name of Ryan Ford has taken issue with me implying that low income individuals will get hit the hardest by Mr. Cain’s flat tax.
Of course they will. Isn’t that the point?
Mr. Ford misses an opportunity to show how Mr. Cain’s plan could spur entrepreneurial activity. Instead he focuses on payroll taxes. Try this exercise. If everyone goes to their 1040 for last year, you see no mention of payroll taxes. Mr. Cain’s discussion has always been focused on income tax. Textbooks on federal income taxation make no mention of payroll taxes.
Go to line 44 of your return, and find your tax. Now, compare a tax resulting from multiplying your income by 9%. The income tax alone will be higher for a low income person under 999 versus their tax under the current system where they receive deductions to calculate their adjusted gross income plus the post AGI standard deduction.
What Mr. Ford and the rest of the Hermanator posse fail to tell you is that the social policy behind 999 is two fold. First, it is designed to broaden the tax base, a policy that conservatives advocate. Second, it promotes entrepreneurial activity, by getting taxpayers to move from a consumer mindset to a producer mindset.
Also, no one has come flat out and said they are getting rid of FICA or the payroll tax, so everyone, low income included will stay pay it. Do we really think that the social security tax will go away with all the talk about social security going broke?
Personally, I support both of these policy goals. Too bad Mr. Ford can’t admit that he favors these goals and Mr. Cain won’t come out and promote these social policies either. That is the true and only error here.