I’ve been receiving requests to show how the calculation is effected with social security rather than standard employment income. I have revised the calculator to take social security income into account.
Download my new 999 calculator here.
The assertion is true that many who are on social security will end up paying more in visible taxes with 999 because, under the current tax code, social security is untaxed up to $14,160 per person. 999 does not tax social security as income either. However, if those living off of social security spend all of what they earn on new goods, they will pay more through sales tax.
However, the counter-point is that prices for products theoretically come down because the 999 plan eliminates embedded taxes on the production of goods. For simplicity, roughly 28% of every dollar in a product’s price is the result of embedded taxes.
Here is an explanation from Herman Cain’s own mouth on Mike Huckabee’s show this weekend.
Let’s assume for simplicity that a shirt costs you $10. If 28% is embedded tax, the product could be sold for $7.20 and still be profitable for the business. In my opinion, it is doubtful that retailers will award the entire difference back to the consumer, so let’s say their marketing department decides to price it at $7.99 instead. At $7.99, plus 9% sales tax, you would end up paying $8.71. That’s still below the pre-999 sales price. Better yet, if you buy used goods (where possible), you wouldn’t even pay the extra 9%.
So, while the calculator would seem to imply a difficulty for those on social security, the principle illustrates the contrary. Bear that in mind as you run your personal tabulations.
Raising Cain 2012 
Help!
I am having trouble figuring out why Herman Cain’s 9-9-9 plan will eliminate embedded taxes? Won’t is simply reduce embedded taxes?
In his example, Mr. Cain talks about a loaf of bread. The baker is taxed, the man who sold the flour is taxed, and the farmer who grew the wheat is taxed. These are all embedded taxes. But won’t the same thing occur under Mr. Cain’s plan? The baker will pay a corporate income tax of 9%, the flour sell will pay 9%, and the farmer will pay 9%. Wouldn’t this also be an embedded tax?
Thanks in advance,
Average Joe
The key distinction, if you read page 8, is where the business tax takes place:
“Purchases by businesses would be exempt. Instead of individuals and businesses paying taxes via returns, revenue would be collected at the cash register…by taxing sales, but not the intermediate stages of production, a sales tax exempts initial savings and investment from tax.”
It also goes into great detail regarding how this benefits the US related to import/export.
Click to access 68670035-cain-analysis.pdf
The 28% “embedded tax” seems pulled out of the air. And, if a price for a shirt is $10 today, will it really be $8 tomorrow under 9-9-9. No way. And even hoping that “business” will pass on the savings to consumers is ludicrous.
Competitive forces will cause the price to drop. Companies can choose to keep the extra profit margin and risk losing market share or pass the cost reductions onto the consumer in the form of lower prices. Just look at gas station prices for an example. Do you ever see more than a few cents difference in the price of gas between stations located near one another? You don’t see this price disparity due the free market forces at work. Keep the price high and lose sales volume or lower price and maintain market share. Prices will come down due to these forces that are always at work.