Surging Republican presidential hopeful Herman Cain's populist-sounding 9-9-9 tax plan would crush retirees, taking up to a third of their savings as they spend their way through retirement without any offsetting help from Cain's radically low 9 percent income tax.
Grover Norquist, president of Americans for Tax Reform, today told Whispers that the hit on retirees is just one problem with Cain's idea. The other major flaw: A temporary overlay on the tax code as a broader Cain plan is developed once he takes office, Democrats could stall reform and eventually raise taxes well above the trademark 9 percent.
Cain has won new political support with his straight-talking idea on how to change taxes. Under his plan, basic taxes would follow a simple formula: 9 percent on personal income, 9 percent on corporate income, and a new 9 percent sales tax, on top of what state and local towns charge. Cain has said that his plan will cut taxes on most Americans while raising more money than the current tax structure does.
But not everybody would benefit, especially those near or in retirement, says Norquist, who has yet to endorse any presidential candidates. He explained that under Cain's blueprint, retirees with no new income would not benefit in anyway from the reduced income tax. But they would be socked with a new 9 percent sales tax at a time when they are getting ready to spend some money on themselves. He said that could amount to about a third of a retiree's savings.
Explaining the new Cain sales tax, Norquist told Whispers, "For a 20 year old, what do I care if you steal my money when I earn it or you steal it when I save it? Same thing. But for somebody at or near retirement, you have just doubly whacked them and the benefit of getting rid of the income tax is not there for that person."
Norquist, however, isn't rallying support to shoot down Cain's idea. Instead, he has praise for Cain at least staking out a bold plan to reform the tax code.
"It's fine as a discussion point," said Norquist, whose group is famous for getting candidates to sign a no-tax pledge.
He added that Cain's plan, while unlikely to go anywhere or even pass Congress if the Republican is elected, gives tax reformers an idea to grab on to as they seek broader changes to the lengthy and confusing tax code. "It's really an expression of anger and frustration," said Norquist. And, he said, Cain's plan draws more attention to taxes and the possibility of taxes jumping to over 40 percent if the taxes pushed by the president go through and the Bush tax cuts aren't extended.