On the implications of Cain’s 9-9-9 idea

It’s 9% on individuals, business, and sales. Good ring to it; nice sound bite; what could be wrong? Ross Kaminsky says it gives the government too many tools that can be misused.

First up is Hauser’s Law. That posits that maximal government revenue occurs at a bit under 20% of national income. This idea doesn’t consider sales taxes or state taxes.

Second up is a lesson from Milton Friedman: “In the long run government will spend whatever the tax system will raise, plus as much more as it can get away with.”

Third are the lessons from history:

“If the United States implements a national sales tax without simultaneously eliminating the income tax and eliminating its constitutionality we will be doomed to the persistent lower growth and higher unemployment that has characterized Europe relative the United States for most of the last half century.”

Candidate Cain says there is no risk that the government will inflate his 9-9-9 plan in the future. History says this assertion is highly suspect. Sales taxes are very seldom decreased and very often increased. In addition, they can be subject to the ‘loopholes and credits’ problem that plagues any kind of taxes. That is the sort of effort that, for instance, could be (and is in some places) used to regulate food availability to steer you towards what the government thinks is proper behavior.

The point Kaminsky raises is that of checks and balances. Making it easier for the government to do something and it will indeed head that direction. When it comes to taxes, revenue raising needs to be concentrated so that it is easier for the people to see. That means one way or the other, not both.

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