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Is Herman Cain's 9-9-9 Plan Good For Small Businesses?

By Edited Oct 29, 2015 0 0
Herman Cain speaking at CPAC 2011
Credit: http://www.flickr.com/photos/gageskidmore/5450023224/

Republican Presidential Candidate Herman Cane has topped the recent debates hawking his 9-9-9 taxation plan which includes a 9% Business Flat Tax, 9% Individual Flat Tax, and 9% National Sales Tax.  Some experts have haled it as the future of taxation while others have downplayed it, stating it is a fool's dream in this corporation-ran modern world of ours. 

No one can deny that our country is run by the multi-million dollar corporations.  They have the money to hire lobbyists and funds to throw at politicians to protect their profits.  These are the companies that will rise to the top if Cain's 9-9-9 plan is enacted.

But what about small businesses?  Over 92% of the companies in the United States are small businesses.  This includes the mom-and-pop businesses along Main Street, sole proprietors who run virtual or micro businesses, and inventors chasing the American Dream.  Will Cane's "flat tax" plan help them flourish or wipe them off the face of the economy?

There is very little information about the 9-9-9 plan.  Most of what you'll find on the internet is speculation and fear-mongering.  Herman Cain and his advisors have released an overview of the plan on their website but even this is not enough to quell the general public's fears of the new tax plan nor can economic experts calculate the true effect the 9-9-9 plan would have on individuals and small businesses.

As per Cain's website, the 9-9-9 Plan would create a simple "no question" tax policy.  Companies big or small would know exactly what they would be paying in taxes.  Cain predicts that this would help companies feel comfortable growing their business and hiring new people, literally jump-starting the economy.

Another important point about the 9-9-9 Flat Tax is that it is equal-opportunity.  Large corporations, like McDonald's and Microsoft, would be taxed at the same rate as your neighborhood diner, ensuring that every company pays what they should and wiping out tax laws loopholes that many corporations use now to get out of paying millions of dollars in taxes.

Cain has also stated that his 9-9-9 plan would lower taxes for many individuals and businesses and eliminates Capital Gains, Payroll & Self-Employment taxes.  He postulates that lowering or abolishing these taxes will allow for more money to be pumped back into the economy and jumpstart hiring in all areas of the country. 

Of course, all of this depends on the corporations and companies actually spending this extra money.  You have to remember that corporations revolved around their profit statements.  When you're dealing with large entities who have reached their peek growth potential and are now raking in the money, there is no guarantee that they will "reinvest" these tax savings into the economy.

If they can inflate their profit reports with these "savings" in taxes, they will.

There are other downsides to the 9-9-9 plan that could seriously hurt the small business.  One of these is the risk of the general public spending less.  Cain's 9% Flat Sales Tax would be added to existing state taxes, some which are already as high as 9%.  This would result in your customers having less money to spend.  If your company sells luxuries to the middle class, be very afraid of this taxation system.

Also, keep in mind that not only would the 9-9-9 Plan's Flat Business Tax be applied to your company's gross profit but also any and all purchases you make from other companies. So, if you run a diner on Main Street, not only would you have to pay 9% on the money you make, but also 9% every time you spend it.  This just doesn't make sense! 

Benefits are another big question when it comes to Herman Cain's 9-9-9 Plan.  If medical insurance is considered a "consumable" that you buy from another company, that too could be taxable.  If you think providing your employees with benefits is expensive now, just wait until you have to pay a 9% tax on top of them!

Also, there is to guarantee that the 9-9-9 plan will stay at 9%.  Two weeks after it is enacted, Congress could decide that the government isn't making enough money and decide to raise it to 10% or even higher!  Aren't you paying enough taxes as it is?

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Bibliography

  1. Bruce Bartlett "Inside the Cain Tax Plan." New York Times Blog. 11/10/2011. 12/10/2011 <Web >
  2. "999 - Herman Cain for President." Herman Cain for President. 12/10/2011 <Web >

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