I’ve mislead you a bit with the title. I trust, though, that you probably already knew that. We know the plan itself, if enacted, would be a disaster for America – increasing our economic inequality beyond levels that already resemble the age of 19th century robber-barons and monopolies. However, as Cain keeps pointing out, the idea is simple and relatively easy to understand. It has gained enough recognition that vast swaths of people are talking about it. These two points provide us with the best opportunity we have had in some time to explain 1: Capital gains taxes, 2: Why a flat tax is unfair, and 3: Why a progressive marginal tax can be just as simple as a flat tax (but more fair). So, if you would, repeat this to as many people as you can – I think they’re primed to hear it:
Financial gains need to be taxed at least as much as a hard-earned paycheck, and 9-9-9 doesn’t tax them at all.
The first million bucks is the hardest and the same % tax doesn’t have the same effect on quality of life at all levels, and 9-9-9 doesn’t reflect that.
Affordably scaled tax rates (Affordable Taxation) can be just as simple to administer as 9-9-9, reduce all of the same operational costs, are more fair, and better for economic growth.
I’ve had more opportunities to talk to people about these important concepts since Herman Cain gained some spotlight than I can remember from the last decade. People other than progressives, and libertarian Norquist-worshipers are discussing fundamental principles of taxation. Not throwaway comments like “my taxes are too high”, or talking about how “wasteful” they are. I’ve been able to talk to (normally unconcerned) people about what capital gains are and the fact that they’re currently taxed lower (and wouldn’t be taxed at all under Cain’s plan). They’ll talk about a flat tax because it seems intuitively more fair to them, but they listen when I tell them why it’s not.
I think most people would say what they dislike most about the current tax code is the complexity and the loopholes for special interests. And once we talk about those things, and I sound like I know a thing or two, they listen as I segue into how you can set up the same type of simple system of X amount of income = Y amount of tax and still have it be fair to those who don’t have all the money-making advantages of already having a pile of money sitting around. The formula which calculates Y is a little (seriously, only a little) more complicated.
I think this is really a moment presented to us by our opposition to actually shift the window on tax policy conversation and understanding in this country. The combination of this and the Occupy movement (solidarity, all) really gives us an opportunity to present ideas to people who usually would walk away from such conversations (or just wouldn’t be around them in the first place). It’s important to consider the audience, as the same sentence that will get cheers and heads nodding at an Occupy general assembly might sound like fringy Bolshevik talk to a lot of people. And before you say ‘Well, screw politeness, we need to ruffle feathers and rattle cages’, just hang on.
I’m not suggesting to be polite to the wealthy corruptors of our democratic society. I am not suggesting you sugar-coat the truth – only to choose your words deliberately to communicate the universal nature of these ideas. I am suggesting you remember that most of us are the 99% - even if we don’t all realize it yet. I am suggesting that the entrenched mechanisms of division that confuse people about which side is theirs and who else is on it are very effective. If you try to violently wake someone from a nice dream to yell at them about the terrible things going on around them while they are still mostly asleep, they will likely kick you out and go back to sleep.
So, about the 9-9-9:
…Taxes Income you work for, but not financial income for anyone whose pile of money makes them more money (like hedge fund managers for example)
o Financial income (capital gains) is currently taxed less than money earned*, and not taxed at all under 9-9-9
…Is a nice flat tax. Simple, and really unfair.
o It’s understandable why the concept sort of sounds fair to some on paper; ‘everyone pays the same proportion’ – but then there’s reality.
The proportional effect is not the same across different income levels
• Actual cost of living is roughly the same regardless of your income – 9% of $25-50k affects standard of living; 9% of $25-50M does not.
• Working folks have to spend most of their income for a comfortable (and getting less so) life. Rich folks don’t.
Even the millionaires will tell you: The first million is the hardest…it takes money to make money, etc.
• Trite, but true. Each thousand (or million) in your account makes it easier to get more.
• Put another way, someone with $1M has many more opportunities for income than the exact same person with $0
The simple economic principle of monetary gravity not only shows us why a flat tax is unfair, but why progressive taxation is better for economic growth
• Economic activity is dependent on the velocity of money (money for good/services = value creation = economic activity)
• Money changing hands = activity, so money sitting around accumulating is preventing value creation that could be happening
…Is not economically viable – inequality increases, consumption goes down (so demand goes down), and the job crisis gets worse
...The same efficiency and transparency can result with a simple progressive marginal tax – an Affordable Taxation (rates scaled on affordability) system
o same reduction in compliance costs
o every person pays (for example) no tax on the first 10k, a low rate on the next 10k, slightly higher on the next 15k, etc. up through brackets for hundreds of millions
o rates can be lowered from current due to lack of deductions/credits/loopholes
o all income types taxed the same
Is this a bit pie-in-the-sky? About as much as 9-9-9, and as long as people are talking about that, we might as well be telling them why an Affordable Tax Deal would be so much better than a Pizza-Pizza Tax Deal. Not only could you reduce inequality via fairer taxation, but also put more people back to work investing concretely in our future while reducing the long term deficit (since tax breaks for the wealthy contribute heavily). Part of government’s role in managing the economy is to make sure the money keeps flowing and doesn’t stagnate. An economy based on a strong working/middle class who have money to spend because they work hard and are paid in kind and taxed fairly is much more stable and healthy. Speaking of healthy, this would obviously work better in conjunction with the efficient, non-profit option of Medicare for all if you’re eliminating deductions for medical expenses, for instance.
Financial gains need to be taxed at least as much as a hard-earned paycheck, and 9-9-9 doesn’t tax them at all.
The first million bucks is the hardest and the same % tax doesn’t have the same effect on quality of life at all levels, and 9-9-9 doesn’t reflect that.
Affordably scaled tax rates (Affordable Taxation) can be just as simple to administer as 9-9-9, reduce all of the same operational costs, are more fair, and better for economic growth.
P.S.: Connecticut stands with the Occupiers in working for the 99%.
occupyhartfordct.com
*Many hardworking small business owners take their income as cap gains currently because it’s a lower rate than wages. However, if you eliminated this imbalance (or even flipped it to benefit workers), owner/managers could pay themselves a salary for their work and only take gains on their investment when desired.