Is it, as Michelle Bachman says, the 666 Plan turned upside down?

by Clifford F. Thies

The 999 plan is a catchy but unfair, unworkable and unconstitutional proposal. The plan is to tax all income twice, once at the business or individual level when the income is earned; and, again a second time when purchases are made. There are some deductions (charitable contributions and savings), but, for now, I'll ignore them. The combined tax rates, 18 percent, essentially kicks in at dollar one and stays flat or unchanged no matter how high is income.

The real advantages to the plan are: (1) increased compliance (or, a broader tax base), (2) lower cost of compliance, including ease of administration and reduced efforts to avoid or evade taxation, and (3) lower marginal tax rates to working and saving for some. These advantages can be obtained by a flat income tax, as well as by a national sales tax or fair tax as it is sometimes called, of which the 999 plan is a hybrid. But, a flat income tax can include a zero bracket so as to exempt the working poor from taxation.

For approximately the bottom third of the population, the 999 plan would raise their tax rate. For these people, the earned income tax credit essentially rebates their Social Security Tax, so their combined federal income and payroll tax rate is about zero. This proposal would raise their combined federal income and sales tax rate to 18 percent, assuming they do not save or make charitable contributions.

For approximately the middle third of the population, the plan would not change their tax rate much. For these people, the Social Security Tax - employer plus employee portion - plus what little federal income tax these people actually pay, total about what the income plus sales tax would total under the 999 plan. On the other hand, the 999 plan, as any flat income tax or fair tax, would mean less paperwork, and that's not nothing.

For approximately the top third of the population, the plan would greatly lower their tax rate. This would actually be a very good thing and result in a tremendous increase in work and investment. And, it is probable that revenue to the federal government from this segment - the top third - would actually increase, rather than fall.

While I appreciate efforts to differentiate oneself from other in a competitive marketplace, the difference between the flat tax as proposed by Dick Armey some years ago, and the fair tax as touted by Mike Huckabee during his Presidential run four years ago are not very great except that the fair tax taxes the working poor, and that's not in keeping with classical teachings on a just tax.

Prior to the Marxist influence on the church, it was thought that taxes should be in proportion to wealth above the poverty line. Following the influence of Marxism, we got stuck with progressive taxes, with multiple rates as well as lots of deductions, which now makes some form of tax reform absolutely necessary. But, just because people no longer know about just tax rate theory, doesn't mean we should accept any alternative to progressive taxes.

Plus, there is the tiny problem that the U.S. Constitution doesn't authorize a national sales tax. It allows a tariff, excise taxes and an income tax. In addition, we have very little experience collecting sales taxes on services, to include health care services. States that have attempted to subject services to their sales tax have done so incrementally, first applying the tax to this form of service and then to that form; and, none of them have gone very far in taxing services.

On the other hand, the apparatus is in place for the federal personal and corporate income tax, and - assuming we can get the votes - these can be transformed into a flat income tax rather easily.

Finally, there is the matter of the 999 plan converting Social Security into a pure welfare program, with absolutely no connection of benefits paid out to taxes paid in. Herman Cain says he is in favor of the Chilean model of Social Security, in which those who work build up ownership of financial assets to finance their own retirement, turning all who work into capitalists and ending the cleavage between "labor and capital."

We, at LR, are anxious to unite both halves of the productive class of society, those who sign the front of the paycheck with those who sign the back. The 999 plan would obliterate any Chilean-style reform of Social Security and make that program even more into a breeding ground for Moochers and Looters.

Photo h/t - Fragor Factor