12/2/11

Simon Thorpe's 0-0-0-0.1% plan

Republican Candidate Herman Cain has been getting a lot of coverage for his 9-9-9 plan. Essentially, he proposes to get rid of payroll taxes and capital gains taxes, and replace the whole system with a simpler system of just three taxes, all rated at 9%. This is how he describes it.
9% Business Flat Tax
  • Gross income less all purchases from other U.S. located businesses, all capital investment, and net exports.
  • Empowerment Zones will offer deductions for the payroll of those employed in the zone
9% Individual Flat Tax.
  • Gross income less charitable deductions.
  • Empowerment Zones will offer additional deductions for those living and/or working in the zone.
9% National Sales Tax.
  • Unlike a state sales tax, which is an add-on tax that increases the price of goods and services, this is a replacement tax. It replaces taxes that are already embedded in selling prices. By replacing higher marginal rates in the production process with lower marginal rates, marginal production costs actually decline, which will lead to prices being the same or lower, not higher.
Well, on the face of it, it sounds like a good idea to simplify things. But, as you may know, I have a proposition that is even simpler. It's called the 0-0-0-0.1 tax plan. Get rid of Business taxes, individual income taxes, and general sales taxes, and just put a very low financial transaction tax on all transactions.

As I noted recently, the Bank for International Settlements lists financial transactions in the USA that total nearly 3000 trillion dollars a year. At 0.1%, an FTT would logically generate more than all the current revenue of the US government (currently 2.33 trillion dollars). They really could scrap ALL the other taxes. And since a financial transaction tax can be continuously modulated on a day to day basis if necessary, it could easily be increased to compensate for any move by the banks to move their transactions elsewhere. It is inconceivable that the tax could ever reach the 9% for income and sales taxes that Herman Cain is proposing.

Add to that the fact that with no taxes on company profits, the multinationals would be able to bring the trillions that they have stashed away in tax havens back into the real world.

Oh, and just in case you thought that Herman Cain's 9-9-9 plan was a good idea, have a look at the recent calculations that show that 84% of Americans would be worse off. And, amazingly, the richest people would get a net tax cut - roughly 50% for those earning more than $1 million a year. Funny that. Fancy a republican candidate coming up with a scheme that cut taxes for the 1%.

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