With an election year looming in the United States, a number of candidates are seeking to secure the support of the country’s two main political parties. One of the contenders for the Republican nomination, Herman Cain, is placing a great deal of emphasis on the role of taxes in funding government activities. Critics are panning the plan while others are saying it has merit and could go a long way toward strengthening the financial infrastructure of the nation. In fact, there are both benefits and liabilities to be found in Herman Cain’s 999 tax plan that should be examined closely before accepting or rejecting it out of hand.

One aspect of the 999 tax plan that has drawn attention from business and individual taxpayers is the revamping of the tax structure to allow the assessment of flat taxes rather than the sometimes complicated system of tax breaks, incentives and deductions that are currently in place. With this approach, businesses would still receive some breaks off the flat tax imposed for gross income, including breaks for purchases made from other US based businesses, net exports and capital investments made within the country. The idea is to create a situation in which businesses have both the incentive and the resources to create more jobs.

For individuals, a flat tax rate would also apply, with the opportunity to reduce that amount by contributing to charities. The idea is that if citizens contribute more to charities that in turn will relieve some of the stress on the nation’s government-sponsored welfare support programmes. In addition, when paired with the incentives for businesses to create more jobs, more people go back to work and can afford to buy the goods and services produced, increasing the standard of living for those who are currently subsisting at or below the poverty level.

Opponents to the idea of flat tax note that the proposal may offer incentives to some businesses, but changes in tax laws and tables would eliminate more than enough incentives to offset any gains. If that is true, then there is no additional motivation to pull back functions that have been outsourced internationally and not much to entice companies to open new facilities and hire more employees.  

In addition, there are some opponents who remain unconvinced that the 999 plan would produce enough revenue to keep the national government going, even allowing for a reduction in some government services. There is also some scepticism about the plan, since it is usually presented in a simple format, noting the highlights, but not providing much in the way of actual verbiage that would go into establishing the functional day to day working of the plan. While sounding very good at first glance, there is a need for more information and closer scrutiny before the 999 plan could really capture the imagination of a majority of US voters.