Cain's 9-9-9 plan: A solution or a slogan?

If you watched last night's GOP debate on the economy, you heard a lot on Herman Cain's "9-9-9" plan - both from Cain, who seemed to speak of virtually nothing else, and from the former Godfather's Pizza CEO's rivals, who attacked the plan as naïve and unworkable.

A big part of the appeal of Cain's proposal is its simplicity - you can explain it in a relatively straightforward sentence. Put simply, the 9-9-9 plan would replace the current tax code with a nine percent flat income tax, a nine percent corporate tax and a nine percent national sales tax. (There are other components to Cain's plan - he would eliminate capital gains taxes, estate taxes and corporate taxes on dividends as well as taxes on the profits of multinational corporations outside the U.S., and eliminate the payroll tax that funds Social Security and Medicare, for starters - but the candidate tends to focus on the easily digestible nines.)

Cain claims his plan is revenue neutral - that is, the United States would take in as much under his plan as it does under the current tax system. But an analysis by Bloomberg last week found that Cain's plan would actually have brought in $200 billion less in 2010 than the current tax system -- $2 trillion instead of $2.2 trillion.

Confronted with that finding in Tuesday's debate, Cain deemed it "incorrect," saying 9-9-9 will bring in more than $2 trillion because it "expands the base" in a way the Bloomberg analysis failed to take into account.

Cain tried to hammer home the simplicity of his plan at the debate, challenging rival Mitt Romney to "name all 59 points in your 160-page [economic] plan" - the length and complexity of which he contrasted with his own "simple, transparent, efficient, fair and neutral" 9-9-9 plan. But here he may have overplayed his hand. Romney responded that "simple answers are always very helpful, but oftentimes inadequate" - in other words, Romney seemed to be saying, it's great that you've come up with this catchy slogan, but that's not enough to deal with reality.

Still, a catchy slogan has its virtues, which is why Cain's rivals were so eager to pick it apart Tuesday night. Both Jon Huntsman and Michele Bachmann tried to diminish the proposal with memorable one-liners - Huntsman suggesting he "thought it was the price of a pizza" and Bachmann saying, "you turn the 9-9-9 plan upside down, and the devil's in the details." That seemed to be a suggestion that Cain's plan was actually "6-6-6" -- the number associated with the devil in the Bible.

There were also substantive criticisms. Bachmann and Rick Santorum argued that giving Congress the power to levy a nine percent national sales tax isn't realistic - people in states like New Hampshire simply wouldn't accept it, Santorum said - and would also open the floodgates to increasing taxation by Congress.

"The last thing you would do is give Congress another pipeline of a revenue stream. And this gives Congress a pipeline in a sales tax," said Bachmann. "...once you get a new revenue stream, you are never going to get rid of it."

Cain says he will keep the 9-9-9 plan from becoming, say, a 12-12-12 plan by mandating that Congress require itself to achieve a two-thirds majority in order to increase taxes. Yet "creating a legal requirement binding future Congresses to impose supermajority requirements on themselves to change tax law is likely unconstitutional," Talking Points Memo wrote on October 4. Senate rules could potentially be changed, but doing that would itself require a two-thirds vote - which isn't realistic in the divided chamber - and the Senate doesn't have the power to bind the House.

As Bloomberg noted last week, tax policy experts are casting the 9-9-9 plan unrealistic in part because it operates on the assumption that voters and lawmakers would be willing to fully phase out even enormously popular deductions and exemptions. (Americans would have to pay a nine percent sales tax on food and housing, for example - no exceptions. That would not only prompt anger, it would also potentially reduce consumption.) A national sales tax could also drive a large increase in under-the-table transactions, further curtailing government income.

But perhaps the most resonant objection to the plan at a time when many Americans are protesting on behalf of "the other 99 percent" in the "Occupy Wall Street" protests is that it amounts to a tax increase on the poor. The national sales tax component of the 9-9-9 plan is a consumption tax, which will hit Americans with the lowest incomes - who spend a higher percentage of what they make than wealthier Americans - the hardest. And those who are among the nearly half of Americans who didn't pay income taxes last year - but saw even a dollar in income - would see a tax hike under Cain. Meanwhile, the poorest would lose deductions and credits like the earned income tax credit.

Cain's proposed cut to the payroll tax would not be enough to offset the tax increase for many of the poorest Americans, Roberton Williams, a senior fellow at the non-partisan Urban Institute, told USA Today. Meanwhile, the highest-earners would see their tax burdens decrease significantly under Cain's plan.

Appearing on ABC Wednesday morning, Vice President Joe Biden highlighted this criticism, saying Cain's plan amounts to "standing on its head what Teddy Roosevelt, a Republican, had in mind when he proposed a national income tax that would be progressive."

On CBS' "Face the Nation" Sunday, Cain argued his plan wouldn't cause poor people to pay more in taxes, pointing to his planned payroll tax cut. "If you work that out for various income levels, they will have extra cash from that differential to pay the sales tax," he said.

Pressed on whether his plan is really fair, Cain said it was, "because you give poor people more opportunity to stretch their dollar and leverage their income based upon their decisions whether to buy new or used goods." Under Cain's plan, used good are not subject to the sales tax. (Also on "Face the Nation," Cain said that the used goods component of the plan won't be a " big negative" for new car sales, since people will "use up the existing used car inventory, because there's a limited number and eventually people are going to start buying new cars.")

In the New York Times Tuesday, former Reagan and George H.W. Bush policy adviser Bruce Bartlett wrote that "the Cain plan would increase the budget deficit without doing anything to stimulate demand, because rich people can already spend as much as they want and are unlikely to spend more even if their taxes are abolished."

"At a minimum, the Cain plan is a distributional monstrosity," he added. "The poor would pay more while the rich would have their taxes cut, with no guarantee that economic growth will increase and good reason to believe that the budget deficit will increase. Even allowing for the poorly thought through promises routinely made on the campaign trail, Mr. Cain's tax plan stands out as exceptionally ill conceived."