Explaining Southern California's economy

Why are politicians fixated on a 'simple' tax code?

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kenteegardin/Flickr

Pictured: the advanced technology used to calculate the nation's taxes.

Herman Cain has his 999 plan. It's so much simpler than the excessively complex system we have now. Rick Perry just unveiled his 20-20 plan, which is also so much simpler than the excessively complex system we have now. And just today, I heard California Senator Dianne Feinstein support a recommendation, from Erksine Bowles and Alan Simpson's Deficit Commission, to reduce out current six tax brackets to three: 12, 20, and 27 percent (the top rate is now 35 percent).

Simplicity, it seems, sells. But why?

If anything, federal taxes are far easier to file than ever. I used TurboTax for the first time this year and, once I had gathered all my documents, the process consumed about an hour. In 1979, however, long before TurboTax came along, people managed to deal with 17 tax brackets, using a Bic ballpoint and calculator. In 1945, they confronted 24 brackets with nothing more than a No. 2 pencil, a pad of paper, a pack of Lucky Strikes, and stiff drink.

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Rick Perry's Bizarro World tax plan

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GOP Presidential Candidate Rick Perry

I honestly didn't think anyone could — or would — come up with a worse plan for U.S. tax reform than Herman Cain did with his 999 proposal. But Texas Gov. Rick Perry just released his "Cut, Balance and Grow" plan, which is also being referred to as the "20-20" plan, echoing Cain's 999. The difference is that Perry replaces Cain's 9 percent flat income and corporate taxes with a 20 percent flat tax for both. But there's more! And just in time for Halloween, it's...terrifying!

I'd like to call it stupid, but ridiculously stupid would be better.

The plan has four key pieces:

  1. Americans will be able to choose between the current tax system and the 20-percent flat tax. 
  2. Corporations will see their tax rate cut from an average of 35 percent under the current system to a flat 20 percent with Perry's plan.
  3. Federal spending would be capped at 18 percent of GDP, which Perry argues is the average since 1960. This will, he insists, balance the budget by 2020.
  4. Workers would be able to opt out of Social Security.

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Backtrack: All the Hermanomics you can handle

Florida Holds GOP Presidential Straw Poll

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Republican presidential candidate Herman Cain speaks prior to Florida's President 5 straw poll at the Orange County Convention Center on September 24, 2011 in Orlando, Florida. Cain won the straw poll with 37.11% of the vote.

Yesterday, the Patt Morrison Show took a closer look at Herman Cain's now-celebrated 9-9-9 plan. If you're curious about how a flat income, sales, and corporate tax would all work together, check out my post on the topic:

What's wrong with Herman Cain's 9-9-9 plan?

And if that's not enough Hermanomics for you, I've also provided a useful rundown on his plan to reform Social Security along the lines of what he calls the "Chilean Model":

Herman Cain says his plan to reform Social Security worked for Chile, but can it work in the USA?

There's no question that with his mantra-like tax plan, Cain has captured the attention of his opponents in the Republican presidental-candidate race, as well as the national media and no small number of voters — and taxpayers — who find taxes bewildering and would like an easy fix.

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Herman Cain says his plan to reform Social Security worked for Chile, but can it work in the USA?

Herman Cain is now polling alongside perpetual Republican kinda sorta frontrunner Mitt Romney. Today, KPCC's AirTalk did a segment on the sudden arrival of the Cain Train. Time to get up to speed on everything the pizza king stands for, and fast! Yesterday, it was the 9-9-9 plan to reform the tax system. Today, it's Cain's scheme to fix Social Security.

In the CNN/Tea Party Debate, Cain said his plan could copy the "Chilean Model" (see the above video). So what does that mean?

It means privatizing Social Security, as Chile did in the early 1980s. José Piñera, the Chilean government official who oversaw the conversion of his country's social security system from its classic model to one based on private investment accounts, explained how and why he did it, back in 1997 (his account now lives on the Cato Institute site).

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What's wrong with Herman Cain's 9-9-9 plan?

He repeats it in his distinctive stentorian cadence at every opportunity: "nine…nine…nine." Herman Cain has proposed a radical overhaul of the federal tax code and he's not afraid to stand behind it. The shocker was when voters in a recent Florida straw poll got behind it, too, handing 2012 GOP presidential candidate Cain an attention-getting win.

So, is 9-9-9 a plan that now needs to be taken seriously? 

No. It sounds good, but in practice it would basically shift much of the burden of providing federal revenue to the people who can least afford it right now. 

The plan would replace the current tax system with a 9 percent flat-rate personal income tax, a 9 percent national sales tax, and 9 percent corporate tax. It's estimated that, taken as a whole, it would reduce federal revenue to $1.8 billion from $2.16 trillion.

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