Posts Tagged ‘Social Security and Medicare 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.