web_geek Wed Oct 05, 2011 5:55 pm
ANALYSIS: Cain’s ’999′ Plan Would Cause Largest Deficits Since WWII, While Increasing Taxes For Most Americans[...]
– For the income tax portion: In 2007, total Adjusted Gross Income on all income tax returns was $8.7 trillion. Since Cain’s plan would exempt investment income, but would have no other deductions, that brings taxable income down to $7.4 trillion. A flat 9 percent tax would therefore have yielded about $665 billion in income tax revenue.
– For the corporate tax portion: In 2007, there was a total of $1.3 trillion in reported corporate income subject to tax. A flat 9 percent would have yielded $112 billion in revenue.
– For the sales tax portion: I used generally accepted estimates of the revenue generated from a value-added-tax (see here and here, for example). Those estimates suggest that a broad-based 5 percent tax on goods and services would generate about 2 percent of GDP in revenue. That implies that a 9 percent tax in 2007 would have generated about $500 billion.
– Together, then, the 9-9-9 plan would have generated a bit less than $1.3 trillion in total federal tax revenue. That may sound like a lot, but it’s only 9.2 percent of GDP. In 2007, we actually collected 18.5 percent of GDP in tax revenue. In other words, the 9-9-9 plan would cut federal revenue in half!
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