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Tag: 999 Plan

Cain’s Tax Plan Again

When I’m wrong, I’ll admit that I am wrong. Apparently, I was wrong in my assumption regarding Cain’s 9-9-9 Tax Plan. There are some items that I overlooked – one of which was the fact that I would no longer pay Payroll taxes of 7.65%. This was pointed out by Bob – thanks, Bob. I dug a little further and discovered I would no longer have any deductions, except charitable and, since I don’t live in the inner city, I don’t receive a tax credit for that.

When I did my original comparison, I just took my salary – what I earn from my employer – and used those figures. I only used the standard deduction and the personal exemption for the current figures. For my spending, I went through the checkbook and took out all of my spending for the month of September.

Here’s what I did this time.

I’m used September’s figures for spending. I’m added in the Payroll taxes for both the current plan. I used my actual deductions – divided out by 12 – from my last year’s income tax return. Since Cain’s plan allows for charitable deductions, I subtracted my charitable deductions from his plan.

This time it worked out that I currently pay $2,890 more in taxes now than I would under Herman Cain’s plan. Since the only criteria I was using for this plan was how it would affect me – and only me – then I have to say, it is a good plan.

Sorry, but I do.

However; here’s what I wrote the last time:

Here’s what I recommend – don’t take my word on whether or not you like the Cain Plan. Do the math for yourself. Figure out exactly how much more or how much less you’ll pay in taxes. Come to your own conclusion. That’s what we should really be doing anyway. Checking out the plans and weighing our options.

I stand by that recommendation. You should figure out whether or not this is a good plan for you.  But, actually do the math and figure it out – don’t just guess or believe what someone else writes.  Too many people will believe whatever someone emails them.  Somedays, I wonder if laziness is the real reason we’re in this mess.

Now, that I have said that, a consideration should be made for whether or not this is a good plan for the country. I’m not sure that it is. Cain has stated that the country will gain more in revenue from this plan than we do currently. I just don’t see how that is possible. If I’m saving nearly $3,000 per year, shouldn’t everyone in my situation be saving that amount? Will we really gain enough on those people who will pay more to make up the difference for those who will pay less? It’s just a thought.

Herman Cain’s 9-9-9 Tax Plan

When it comes to taxes and being told what’s going to cost me more money and what’s going to save me money, I generally don’t believe the Press, or the person touting the plan.  What I do believe is taking what I pay in taxes now and comparing that to the new plan.

This is what I did when comparing the “savings” Paul Ryan’s plan touted.  This is what I have done with Herman Cain’s plan.

Now, there is something I’d like to add.  Mr. Cain has not made public a lot of details about his plan.  It is possible that I am making incorrect assumptions.  I am listing the assumptions that I have made before the comparison – if anyone knows for a fact that the Cain plan doesn’t do any one of these, please leave a comment and I will make adjustments.

  • No deductions: personal exemption, neither Medical nor the Standard Deduction.
  • Taxes on everything: food, gas, clothing and bills such as electric and cable.
  • Even though when I purchase my next home or car – and only if Cain’s plan passes – I would pay a 9% sales tax on the home or car, I did not include this in my car payments, nor in my mortgage payments.  I made the assumption that the 9% tax would not be retroactive.  Therefore; in my total spending, I did not include my mortgage nor car payments.

I picked last month for my spending.  I figured September is a typical month for me.  Some months I might spend more and some months, I spend less.  For comparison purposes, I included Paul Ryan’s plan in my chart.

 

Current

Ryan’s Plan

Cain’s Plan

Salary

$5,416.67

$5,416.67

$5,416.67

Insurance Deduction

$253.44

$0.00

$0.00

Personal Exemption

$291.67

$316.67

$0.00

Standard Deduction

$483.33

$1,041.67

$0.00

Taxable Income

$4,388.23

$4,058.33

$5,416.67

Federal Income Tax

$784.18

$1,014.58

$487.50

National Sales Tax

$0.00

$0.00

$399.09

Total Tax

$784.18

$1,014.58

$886.59

%

17.87%

25.00%

9.00%

This is based on one month’s salary and all the spending for the household.  In the month of September between bills (cable, electric, cell phone, etc.), food, household items and misc. items (books, software), I spent $4,434.30.

As you can see, I currently pay – each month – $787.18 in Federal Income Tax (after deductions, which really aren’t taken out until the end of the year, but I wanted this to be a fair comparison – apples to apples).  Under the Cain Plan, I will only have $487.50 taken out of my paycheck for Federal Taxes.  That’s a savings of $299.68.  That sounds pretty good.

But, wait – there’s more…

Once the addition of the sales tax on $4,434.30 of goods and services is paid, my federal tax bill is raised by $399.09 – almost $100 more than the initial savings.  This brings my total taxes under Herman Cain’s plan up to $886.59!  Clearly, the Cain Plan is not a winner for me.

Let’s deal with the critics on this.  I’m sure some people are saying, “Just spend less.”  Hmmm, nice idea, but then what’s the point?  If, in order to save taxes, I slow down my spending, then for what am I working?  What’s my motivation for earning more money?  What do I get and how does the economy get rolling along if I cut my spending in half?

Let’s say I only spend the essentials – cut out the extras, like eating out or my passion for books – what happens then?

Well, I would save $52.80 in taxes each month.  And, sure, I could sock the extra money away in savings, but who wants to live like that?  I don’t drive up to Brookfield every single day to not enjoy the money I spend.  I sock away savings and money for retirement, but then I enjoy life.

And, how will I pay for that next car?  Sure, I could use my savings, but when the average car price is around $20,000 an extra 9.0% in sales tax is really going to make a huge difference.  That adds – without any other taxes or licensing fees – and extra $1,800 to the price of my new car.

Perhaps, Cain’s plan won’t take food or, maybe, cars will be exempt.  Wouldn’t that be subsidizing certain industries and isn’t that one of the ways we ended up in this mess in the first place?

Here’s what I recommend – don’t take my word on whether or not you like the Cain Plan.  Do the math for yourself.  Figure out exactly how much more or how much less you’ll pay in taxes.  Come to your own conclusion.  That’s what we should really be doing anyway.  Checking out the plans and weighing our options.

Happy Calculating!

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