Misery Index Hits Highest Level in 28 Years

From a Herman Cain economic adviser here:

There is certainly more than enough misery to go around. With the unemployment rate at 9.1%, and the 12-month change in the CPI at 3.77%, the “misery index,” the sum of the two, in August was 12.87, its highest level since May, 1983.  And, last week’s report that the unemployment rate remained stuck at 9.1% in September means economic misery remains high.

Herman Cain: “We’ve got some altering and abolishing to do!”

Cain also quoted the Declaration of Independence, stating that “it is the right of the people to alter and to abolish” the government.  “We’ve got some altering and abolishing to do!” he said.

Story here.

Herman Cain Comes Closest to a True Flat Tax

So says Stephen Moore for The Wall Street Journal, here, pointing out that FICA taxes do go in the shredder under Cain's 999 plan:

But the candidate who comes closest to a true flat tax is Herman Cain, the former Godfather's Pizza CEO. His argument for a "9-9-9" plan puts the current income and payroll taxes in the shredder and replaces them with a 9% personal income tax with no deductions, a 9% net business income tax, and a 9% national sales tax.

That would be rocket fuel for the economy, though the combination of a federal sales tax and an income tax is a big worry. But at least Mr. Cain has super-sized solutions to an economy with super-sized problems.

Solution? In 2008 Cain's 999 plan would have meant 900 billion fewer dollars in receipts for federal social insurance. I don't see how he could make up that difference, let alone an additional $300+ billion he comes up short compared to what was actually collected in 2008.

It looks more like a stealth plan to bankrupt Social Security and Medicare by ignoring it.

• A 9 percent tax on $8.50 trillion in adjusted gross incomes in 2008 comes to $765 billion (actual collected in 2008 was $1.03 trillion).

This is actually a huge tax cut on the wealthy and a big tax increase on everyone else. And does Cain intend to do away with deductions even for IRAs and 401Ks? If so that AGI number would be much higher, and the tax revenue higher, along with your tax bill. At least the billionaire will pay the same rate as the janitor, as Obama now famously says he wants.

• A 9 percent tax on $1.25 trillion in corporate profits comes to $113 billion (actual collected was $309 billion).

This is a huge tax cut on business, which is why Stephen Moore calls Cain's plan rocket fuel.

• A 9 percent tax on $4.40 trillion in total retail and food service consumer spending in 2008 comes to $396 billion. 

Does Cain intend this to be wider in scope than indicated? It is often said that 70 percent of the economy is consumer spending. In a $15 trillion economy, that's $10.5 trillion. A 9 percent tax on that would boost the receipts of a national sales tax to $945 billion.

But all told, Cain's plan would have collected only $1.274 trillion in federal revenue for 2008 when the government actually collected $2.5 trillion and still ran a deficit of close to $400 billion anyway.

We're currently spending $3.8 trillion in this country under Obama, $1 trillion more than in 2008. The 999 plan doesn't look up to the task.

Herman Cain's 999 Plan Would Have Cut Corporate Taxes in 2008 by 64 Percent

Average annual corporate profits for 2008, 2009, and 2010 were $1.47 trillion.

The average annual corporate tax paid on those profits was $331 billion for an average annual corporate tax rate of 22.5 percent.

How Herman Cain thinks he can lower the rate to 9 percent and still have enough revenue in combination with a 9 percent income tax rate and a 9 percent national sales tax rate is beyond me.

In 2008, those 9 percent rates would have yielded a mere $112 billion in corporate taxes (instead of the $309 billion actually collected), $400 billion in sales taxes, and $765 billion in income taxes, or $1.223 trillion short of the $2.5 trillion actually collected by the federal government.

If Cain leaves social insurance taxes in place, which would make it a 9997.65 Plan, not a 999 Plan, the $900 billion collected in 2008 in FICA taxes would still have left him $323 billion short of actual revenue collected in 2008.

See the corporate profits data in Table 11 from the Bureau of Economic Analysis, here:

Herman Cain's 999 Tax Idea is a Pipe Dream

Total retail and food services sales, according to the US Census Bureau here, in 2008 came to $4.4 trillion. (For 2010, the annualized estimate based on 8 months' of data is running at $4.6 trillion).

To replace the federal tax revenue of $2.5 trillion in 2008 solely on the back of consumption taxes, such as a national sales tax, would imply a national sales tax rate of . . . 57 percent. Unthinkable, unless you are Greece.

Herman Cain doesn't advocate that. But his idea of a 9 percent sales tax would have generated, at most, a paltry $400 billion in 2008. Coupled with about $765 billion from a 9 percent income tax on about $8.5 trillion in total adjusted gross income in 2008, the business community would have been on the hook for the missing $1.3 trillion in 2008 federal revenue, when it actually contributed only $300 billion in taxes that year.

A 333 percent increase in the tax liability of American business sounds like something only a commie like Obama would propose.

Herman Cain's numbers don't even come close to matching the problem which we are facing.

High Tariffs Allowed Domestic Producers To Get Really Rich Off Captive Consumers

So says John Steele Gordon, who provides a short history of taxation for The Wall Street Journal, here:

After the Civil War, nearly all the wartime taxes—including the nation's first income tax—were repealed and the federal government relied mostly on the tariff for revenues. It provided the government with more than ample peacetime income. In 1882, the government had revenues of $403 million, but expenses were only $257 million, a staggering budget surplus of nearly 36%. The reason the tariff was so high was, ostensibly, to protect America's burgeoning industries from foreign competition.

Of course, the owners of those burgeoning industries—i.e., the rich—were greatly helped by the protection, which enabled them to charge higher prices and make greater profits than if they had had to face unbridled foreign competition.

But the tariff is a consumption tax, which is simply added to the price of the goods sold. And consumption taxes are inherently regressive.

Which ought to get more attention on the right when one considers that liberals like Paul Krugman, Nancy Pelosi and Barack Obama and so-called conservatives like Herman Cain, Rick Perry and Mitt Romney all seem to like consumption taxes in one form or another.

The move would raise more revenues off the rank and file, and preserve the fortunes of the rich, which is why so many politicians support them. The better to eat you with, my dear.