Cain's 9-9-9 Would Mean Less in Taxes for Some in Iowa City
Iowa caucus hopeful Herman Cain's 9-9-9 plan would put a sales tax on basic food items in Iowa and Johnson County, where no such tax now exists.
Cristi Gleason, a University of Iowa accounting associate professor, said Cain's highly publicized tax plan would not mean a flat sales tax across the nation. In fact, the plan's 9 percent sales tax would be on top of the taxes already imposed by the state and local governments.
"It hits the poor the hardest because a big percentage of their budget goes to food," she said.
In addition to increasing the sales tax by 9 percent, Cain's plan would put both corporate and individual income-tax rates at 9 percent, replacing the current progressive tax system, which requires people with higher incomes to pay more taxes, in theory.
"If we don't boost this economy, people coming out of college are going to be in a world of hurt," Cain told The Daily Iowan in October. "Look at [my] economic growth and jobs plan because that represents your economic future opportunities."
Natalie Ginty, the chairwoman of the Iowa Federation of College Republicans, said even though the plan addresses the need to alter the country's tax policy, it is "overly simplified."
"While our tax system does need to be simplified, and [Cain's] plan will get rid of loopholes and make it fair for everyone, I think it's too simplified," she said. "I am not saying it's the exact plan that I would want, but it's definitely a step in the right direction."
According to Johnson County family-income data from the U.S. Census Bureau, roughly 50 percent of families in the county would see a decrease in federal taxes under Cain's plan.
About 6 percent of Johnson County families bring in an annual income of more than $200,000, and for those families, the decrease in the federal-tax rate would be highest under Cain's plan.
"I think, for most people, the income tax will go down, and the increased sales tax would not make up the difference," Gleason said.
She noted Cain's plan still allows for deductions based on charitable contributions, but it would eliminate standard deductions and personal exemptions.
"That, I think, favors the rich," she said.
Cain's plan would also eliminate payroll taxes, meaning employers can't withhold any payments for Social Security and Medicare.
But Anjali Singh, a UI graduate and tax accountant, said eliminating the payroll tax would make funding Social Security and Medicare "difficult."
Ginty said older people who have been paying for these programs will continue to receive their benefits, but the younger generation would not have to enroll in "a system that is not sustainable."
In addition to altering tax rates for individuals and families, Cain's plan would aim to eliminate taxes on profits made by American firms and individuals abroad.
"When companies sell products overseas, they face double taxation when those profits are brought home," Cain said in his Vision for Economic Growth.
However, many firms and individuals doing business abroad qualify for tax credits when they return to the United States, Singh said, noting Cain's change may give American firms more of an incentive to move their businesses abroad, which would hurt the U.S. job market. But the lower corporate-tax rate would encourage businesses to invest locally, Ginty said.