Posts Tagged ‘payroll 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.

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Warren Buffett calls for fair—that is, higher—taxes on the super-rich

August 15, 2011

The battle in Congress over America’s budget problem is both practical and ideological. People on the left argue that the budget can never be brought under control without a blend of tax hikes on the rich and spending cuts. On the right tea-party-fueled passions oppose any tax increase on the grounds that the rich are already paying more than their fair share and, moreover, that raising their taxes will stifle job creation.

Into this battle rides Warren Buffett, the world’s third richest person with assets of $50 billion. In an op-ed in today’s New York Times, headlined “Stop Coddling the Super-Rich,” Buffett demolishes both arguments against higher taxes for the super-rich.

First he explains how under-taxed the wealthy are: his tax rate of 17.4 % of taxable income is the lowest of the twenty people in his office, including his secretary. And that’s not uncommon for the super-rich. His summary:

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks.

And as far as the argument that higher taxes will slow down investment by the super-rich in new jobs, America’s most successful investor puts it this way:

People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. (more…)