Why 9-9-9 Will Not Work

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The United States Constitution generally does not limit the ability of a state to impose a sales or use tax on persons using goods within the state.

On Wednesday, The Pink Flamingo had a conversation with a realtor, a very successful, Republican realtor who was once considered supporting Herman Cain.  After Tuesday night’s debate, he said there is no possible way he could support Cain because of the 9-9-9 plan.  He said it would absolutely destroy the real estate business.

You must give Herman Cain kudos for trying, but his 9-9-9 plan is based on elaborate fiction, tide to a lovely little fantasy about a world that does not exist.  Dave Mataconis has one of the best commentaries on the plan, but still misses one salient point.  No one is discussing one aspect of the 9-9-9 plan – sales tax.  I guess that’s because most of the commentary I’ve seen to date comes from men.  All gender jokes aside, men are usually not shoppers.  They are abjectly ignoring the implications of the Cain plan, perhaps because they are abjectly ignorant of the way of the world.

“…The state of New Mexico does not have a sales tax. It instead has a statewide gross receipts tax of 5%. Effective July 1, 2010, the rate increased to 5.125%. Municipalities may assess an additional gross receipts tax. The gross receipts tax rate is between 5.375% and 8.5625% throughout the state. In New Mexico’s gross receipts tax, all receipts from sales of goods or service within the state are taxed (with the exception of food for offsite consumption, such as grocery store sales). The state does not prohibit retailers from collecting this tax directly from the consumer, so the gross receipts tax is commonly just passed on from the retailer to the consumer as if it were a sales tax…”

Slate

Sales taxes are a nasty thing that are a necessary evil.

“…Many cities, counties, transit authorities and special purpose districts impose additional local sales or use taxes. Sales and use tax is calculated by multiplying the purchase price by the applicable tax rate. Tax rates vary widely by jurisdiction and range from less than 1% to over 10%. Sales tax is collected by the seller at the time of sale. Use tax is self assessed by a buyer who has not paid sales tax on a taxable purchase.

Unlike the value added tax, a sales tax is imposed only once, at the retail level, on any particular item. However, in cases where items are sold at retail more than once, such as used cars, the sales tax can be charged on the same item indefinitely. The definition of retail sales and what goods and services are taxable vary among the states. Nearly all jurisdictions provide numerous categories of goods and services that are exempt from sales tax, or taxed at reduced rates. The purchase of goods for further manufacture or for resale is uniformly exempt from sales tax. Most jurisdictions exempt food sold in grocery stores, prescription medications, and many agricultural supplies.

Sales taxes, including those imposed by local governments, are generally administered at the state level. States imposing sales tax require retail sellers to collect tax from customers, file returns, and remit the tax to the state. Procedural rules vary widely. Sellers generally must collect tax from in-state purchasers unless the purchaser provides an exemption certificate. Most states allow or require electronic remittance. States are prohibited from requiring out of state sellers to collect tax unless the seller has established a physical presence in the state sufficient to establish a nexus….”

Wikipedia

Then there are idiot taxes like the one we are paying here in Lincoln county to keep a multi-millionair and his racing and gambling industry here in town.  There is also the Tennessee model.

Tennesseans for Fair Taxation

“…Because Tennessee raises over 70% of its income from the sales tax and selective sales taxes, low-income families pay a much greater share of their income in state and local taxes than higher income families do. In fact, according to a report from the Institute on Taxation and Economic Policy, low-income families pay more than three times the taxes as the top 1% of income earners pay in Tennessee….”

Now, please try to grasp the salient point here.  Herman Cain’s 9% sales tax is IN ADDITION to local/state sales taxes.  If, like here in Lincoln County, we are currently paying nearly 8%, you add the 9% sales tax and that is SEVENTEEN PERCENT – 17% Sales Tax.

Do you comprehend the implications of this?

I already do what I can to avoid paying this blasted 8% by buying online as much as possible.  By purchasing my MacBook Air via Amazon Prime, I paid no sales tax. If I had ordered it through Apple, I would have spent nearly a hundred bucks more in sales tax.

This is a killer. It is an economy killer.  It is a job killer.  It is a GOP Party killer.  It is death by taxes.

Herman Cain’s “experts” tell him that the taxes that are added to items as they are being produced will be eliminated, there by causing the price of things to go down.

What planet are they living on, currently?

We don’t tax items when they are being manufactured.  It is obvious the people working with Cain and those embracing this have no concept of how things work.  You don’t pay sales tax on wholesale items and items being manufactured. Not even in New Mexico, where they would tax doggie poop if they could, these things are not taxed.

It is a great big libertarian canard.

Sales taxes are added on the retail end.  Sales taxes are charged on USED items.  How do I know this?  Try shopping for antiques.  Those are used items.  You pay sales taxes.

Once upon a time I knew someone who owned a big truck stop on an interstate.  He loved high gas prices because he could sneak a few extra cents onto every gallon of gas he sold. Even if Cain is right about the production end of things, and he is not, people are NOT going to lower their retail prices to accommodate a few cents less.

This is not reality.

Herman Cain arrogantly says that, if people can’t afford to buy new items, they can buy used things, because you don’t charge sales tax on used items.  At dinner on Wednesday, my mother said that was one of the worst things she has ever heard a Republican candidate say.

Do you comprehend if you live in Phoenix, where they are paying 9.5% sales tax, and you add Herman Cain’s 9% that is basically 20%.  If something costs a dollar, you are basically going to pay $1.20.  If it is five bucks, you will pay six bucks.  If it is $100, you pay $120.  A $1600 Louis Vuitton bag, will nearly two thousand bucks when you add $320 sales tax.

You think I’m going to shell out $320?

Forget it.

Say a family that brings in about $450 a week.  That’s $23,500 a year.  Basically every cent in take-home pay is going to go out for living expenses.  To say it won’t is simply ill informed.  If you have the misfortune to live in Phoenix, you are going to end up paying nearly $5000 in sales taxes.  That’s a good $2500 more in taxes.

I guess they only need to eat every other week.

 

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3 thoughts on “Why 9-9-9 Will Not Work

  1. A very informative post! Cain has had no political experience and he is not living in the real world. He seems to be a very nice person and I have been amused by some of his comments, but as POTUS he is not electable.

  2. My state is one of the states that has a sales tax of 7 percent on groceries. With a 9 percent government sales tax we will be paying a 16 percent tax on groceries. 9-9-9 turned upside down is 6-6-6.

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