Nine Zero Nine


I have to admit that I didn’t enjoy chronicling Herman Cain’s abortion misadventures.  I think they expose a structural weakness in his campaign, as he shoots from the hip on an issue he should have been more prepared to deal with.  Maybe I can cushion the blow by taking his side in another arena where changing positions have gotten him in some trouble.

CNN reports that Cain’s 999 Plan has received some “clarification” recently:

GOP presidential candidate Herman Cain clarified his much talked-about “9-9-9” tax plan Friday, saying those who fall at or beneath the poverty level would have a different plan: “9-0-9.”

Cain took heat over his proposal, which replaces the current tax code with a 9% corporate tax, a 9% income tax and a new 9% national sales tax. Opponents have argued the middle part of the plan would increase taxes on the poor, who currently pay little to no taxes.

But Cain fired back Friday, saying in a Detroit speech that those paying no taxes now would continue to pay zero taxes under his plan.

“If you are at or below the poverty level, your plan isn’t 9-9-9 it is 9-0-9,” Cain said. “Say amen y’all. 9-0-9.”

The former Godfather’s Pizza CEO also laid out his “opportunity zone” proposal. Under his current plan, businesses would be allowed to deduct purchases from the 9% corporate tax provision. But in cities facing high unemployment – the so-called “opportunity zones” – businesses could also deduct a certain amount of payroll expenses from their corporate taxes.

This “909” stuff is entirely new, although Cain did allude to the “opportunity zone” concept in the Las Vegas debate, without really explaining what it meant. 

Both of these proposals add some complexity to a plan previously hailed for its remarkable simplicity, and Cain has been taking some heat for making changes under fire.  That doesn’t strike me as a fair criticism. 

Cain is a smart man with a track record of learning from his mistakes.  He’s adjusting his signature initiative in response to criticisms he obviously believes have merit.  The 999 Plan is just a proposal at this point, not an entrenched piece of legislation that must be fine-tuned with scads of amendments.  Isn’t this exactly the right time to be making reasonable adjustments?  What rule says Cain had to introduce something as huge as the 999 Plan on Day One of his campaign and never change it again?

This is an economic proposal we’re talking about, not a matter of eternal moral principle.  We’ve had more than our fill of bills we had to pass in order to find out what was in them.

As to the merits of these individual changes: the flatness of the 999 Plan is obviously compromised by exempting those at the poverty line, although most pure Flat Tax proposals include a standard deduction of some kind, and there isn’t a lot of revenue to be gleaned from the taxing lowest income levels anyway.

On the other hand, if Cain is serious that “those paying no taxes now would continue to pay zero taxes” under the income tax of the 999 Plan, he’s talking about exempting a lot more people than merely those who live below the poverty line.  46% of households paid no net federal income tax in 2011, and some of them got back more than they put in during the year. 

Of course, those Cain extends the “909” benefit to would still pay the 9% national sales tax he proposes, unless he’s got some exemptions coming there.  This significant increase in sales taxes remains one of the objections to the 999 Plan he hasn’t dealt with yet.

The problem with the “opportunity zone” proposal is that we’re getting back into social engineering through the tax code, which is something the 999 Plan explicitly rejected at first.  A sizable break on corporate taxes would entice many businesses to move into the “opportunity zones,” which is the point behind offering them – but it’s also a deviation from the concept of a simple and minimal tax system designed strictly for funding the government, rather than a mass of sticks and carrots intended to shape economic behavior. 

There’s plenty of time to go before the next debate.  If I were Cain, I’d do some hard thinking and be ready to roll out a “999 Plan version 2.0” with all changes incorporated, and careful explanations for each revision, built into a nice PDF file he can circulate across the Internet.  There’s nothing wrong with a highly skilled manager like Herman Cain doing a bit of crowd-sourcing to perfect a historic initiative that would change the nation.