Can Cain Sustain the Big Mo?
In general, wealthier Americans spend a smaller share of their income than middle income or poorer Americans. This is particularly true among the very wealthiest people who invest a considerable share of their income. This means that the 9% sales tax will be close to a 9% income tax for many lower income people, while for wealthy people, the 9% sales tax will amount to less than 9% of income, or in some cases, far less than 9% of income. In essence, higher income people will pay lower average tax rates than the lowest income people.
Cain has argued that low income people will have some of their income excluded from the 9% income tax, and also contends that 9% is less than the 15% Social Security/Medicare tax that is now paid by all working people. However this is artificial, since the employee only pays half of that, and the remainder is paid by the employer, who is not obligated to provide the other half as additional income to the employee under Cain’s approach.
For many Americans, the plan will amount to an 18% overall income tax burden, with the sales tax effectively being a second 9% income tax. This approach is more regressive than Steve Forbes' simple flat tax from the 1996 GOP contest.
As for how much revenue the plan will raise, a lot will depend on details that have not yet been explained. How much is excluded from the income tax for lower wage earners? What items are not subject to the sales tax? Cain has not helped his cause by revealing little more than to repeat 9-9-9 when asked for such details, and identifying only one advisor who helped him create the plan.
There is, of course, the possibility that such a plan, with permanent lower tax rates, would be stimulative and help create jobs, and grow the economy (and tax revenues) more effectively than all of the Obama short-term fixes and patches. But that is not a certainty.
So far, Cain’s appeal among conservatives has not been matched among all voters in polls that look at head-to-head matchups with President Obama. Here, Romney runs better, with more appeal to independents. But Cain is a new phenomenon, and Republicans have been looking at the race and the candidates far more closely than other Americans. Romney is far better known nationally than Cain, and if Cain survives through the early contests, he will get a closer look and could build his support. There are few African Americans in the GOP primaries, but they make up 13% of the national electorate. Were Cain the nominee, he figures to do far better with this group than Romney.
The next few weeks will be critical for Cain. Can he raise a lot more money? Can he get organizers for Iowa, a caucus state, and New Hampshire, the first primary state, where voters like to be personally courted? Can be put some flesh on the bones of 9-9-9? Can he become more comfortable talking about Afghanistan and other foreign policy issues? Can he broaden his team to give a hint at how he would govern? Cain’s sudden rise has likely surprised him as much as everyone else. He now has an opportunity to become a serious contender, or the gaps will become more obvious, and he will fall off.