Posts Tagged ‘federal income tax’

Here’s an innovative idea from Herman Cain: 999, or crush the working poor

October 17, 2011

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

    Less taxes:

               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?

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*Earned Income Tax Credit. Cain’s plan abolishes (“simplifies”) it.

The poor pay plenty in taxes, don’t believe anybody who says they don’t

September 1, 2011

You’ve no doubt heard that half of federal tax filers pay no income tax. That’s part of the argument that we shouldn’t raise taxes on the rich. It’s also part of a despise-the-poor argument, like the one made by Curtis Dubay, senior tax policy analyst at the conservative Heritage Foundation.

“We have 50 percent of people who are getting something for nothing.”

It’s true that the poor pay no federal income tax. But it’s also a lie—a big one.


The truth is the poor pay taxes at a rate nearly that of the rich—the reverse of the way we usually think of our tax system as “progressive.” They don’t pay federal income tax, it’s true. But they pay state and local taxes at a higher rate than the rich. (more…)