Herman Cain has a plan for America’s tax system: junk the federal income tax and payroll tax, and substitute his 999 system, in which everybody pays 9% federal income tax and 9% federal sales tax, and corporations pay a 9% income tax.
Elegant in its simplicity. But a crusher for the working poor, who now pay 8% in payroll (Social Security and Medicare) taxes, but get a substantial credit via the earned income tax credit, or EITC.
Here’s how a single mother of two earning the California minimum wage of $8 an hour would fare under the 2011 tax structure and under Cain’s 999 plan.
2011 actual Cain 999
Earned income $16,000 $16,000
Federal payroll tax 900 -0-
Federal income tax -0- 1,440
Federal sales tax -0- 1,440
State/local taxes 1,600 1,600
Subtotal taxes paid 2,520 4,480
Net income before EITC* $13,480 $11,520
EITC 4,800 -0-
Net income 18,280 11,520
So under Cain’s plan her actual taxes paid increase by 77% ($2520 to $4,480), and she loses the EITC of $4,800. Her net income is slashed by 37% ($18,280 to $11,520).
What does it say about the media and about Cain’s competitors for the Republican nomination that they let this barbarism go unremarked?
*Earned Income Tax Credit. Cain’s plan abolishes (“simplifies”) it.