Although important details are ambiguous or missing, Mr. Cain’s broad outline of the 9-9-9 plan suggests that it is extremely regressive relative to the current system — that is, it would severely raise taxes on low- and middle-income households and substantially cut taxes on high-income households — or it would raise far less revenue than the current system, especially compared with revenue as the economy recovers over time, or it would be both regressive and revenue-losing.
The 9-9-9 plan is actually only Phase 2 of a three-stage plan. The first stage is a large reduction in the top income tax rate (which obviously applies only to the highest-income households), the elimination of capital gains taxes (almost all of which are paid by high-income households), and a decrease in the corporate income tax rate. The final stage is a national sales tax that replaces virtually all existing federal taxes.
All three stages are problematic. The first stage would result in immediate losses of government revenue, while benefiting only upper-income taxpayers. As for the third stage, I and others have shown that a national retail sales tax would be difficult to enforce, requiring high rates in order to bring in the same amount of revenue as the current system. After accounting for tax evasion, tax avoidance and the inevitable legislative erosion of the tax base, the rate required would be almost 50 percent, not the 23 percent that has been proposed previously.
The strength of Mr. Cain’s various plans is the elimination of virtually all tax subsidies. Yet it is neither necessary nor desirable to do so in a way that would decrease revenue and impose enormous burdens on low-income households while cutting taxes for the rich. The plans involves no sense of “shared sacrifice” and no sense that government should pay for the spending it does. This is not the path we want to take.
Sentiment inside the Beltway has turned sharply against China. There are many issues where the two parties sound more or less the same. Trump and others in the administration seem heavily invested in a ‘get very tough with China’ stance. It’s possible that some Democrats might argue that a decoupling strategy borders on lunacy. But if Trump believes this will play well with his core constituencies as his reelection campaign moves into high gear, he will probably decide to stick with it, if the costs and the collateral damage seem manageable. But that’s a very big if, especially if the downsides of a protracted trade war for both American consumers and for American firms become increasingly apparent.