Video: Cain on 9-9-9: Some will pay more
Transcript of: Cain on 9-9-9: Some will pay more
MR. GREGORY: Good morning. Today we go inside the fight for the Republican presidential nomination. Our latest NBC News / Wall Street Journal poll out this week shows that Herman Cain is the front-runner, ahead of both Mitt Romney and Rick Perry . Mr. Cain , a businessman, syndicated columnist, radio talk show host and former CEO of Godfather's Pizza turned presidential candidate is the man of the moment , and he's joining us this morning as part of our Meet the Candidates series. Mr. Cain , welcome to MEET THE PRESS .
MR. CAIN: David , I'm delighted to be here.
MR. GREGORY: Your big idea is to throw out the tax code .
MR. CAIN: Yes.
MR. GREGORY: Tax reform is a way to create jobs and spur economic growth.
MR. CAIN: Yes.
MR. GREGORY: The reality of the 9-9-9 plan is this, I'll put it up on the screen, it is to have a 9 percent corporate income tax , 9 percent personal income tax , 9 percent sales tax . Everything else is gone.
MR. CAIN: Yes.
MR. GREGORY: The reality of the plan is that some people pay more, some people pay less. This is how The Washington Post reported it on Friday, we'll put it up on the screen. "Experts see surprise in Cain 's 9-9-9 plan. The '9-9-9' plan that has helped propel businessman Cain to the front of the GOP presidential field would stick many poor and middle-class people with a hefty tax increase while cutting taxes for those at the top, tax analysts say. ... " Roberton Williams , a senior fellow at the nonpartisan Tax Policy Center , is working on an analysis of Cain 's signature proposal. Although the plan's details remain sketchy, Williams said it would increase taxes for the poor and middle class , despite Cain 's statements to the contrary. "For starters, about 30 million of the poorest households pay neither income taxes nor Social Security or Medicare levies. 'So for them,'" he says, "'doing away with the payroll tax doesn't save anything. And you are adding both a 9 percent sales tax and 9 percent income tax . So we know they will be worse off.'" That's the reality, Mr. Cain . Without making a judgment about it, why do you think that's an acceptable reality for the overall goal of reform?
MR. CAIN: First, they're missing one very critical point about the sales tax . It wasn't even mentioned in that analysis that you read. On the price of goods, there are invisible taxes that are built into everything we buy. We'll simply -- those invisible taxes are going to go away. And we're replacing them with a 9 percent visible tax. For example, take a loaf of bread . The farmer pays taxes on his profits. The company that makes the flour, the baker, the delivery man. By the time that loaf of bread gets to the grocery store, there are a series of invisible taxes , which are also called embedded taxes . So, in reality, those taxes go away and so the price of goods don't go up.
MR. GREGORY: You're saying they actually go down?
MR. CAIN: Yes, they actually go down.
MR. GREGORY: Based on what?
MR. CAIN: Based upon competition. Competition drives prices down. For example, suppose one breadmaker says, "I'm going to charge $2.20 for a loaf of bread ," and the other one says he's going to charge $2.40 for a loaf of bread . Well, guess which one is going to win out based upon the quality being essentially the same?
MR. GREGORY: My question had to do, however, with the reality of this plan.
MR. CAIN: Mm-hmm.
MR. GREGORY: The wealthiest Americans would pay less, the poorest Americans and middle class would pay more. You don't dispute that.
MR. CAIN: I do dispute that. You are making -- you and others are making assumptions about what wealthy Americans would do with their money, and you're making assumptions about what the middle class and the poor. You can't predict the behavior. If wealthy Americans ...
MR. GREGORY: This isn't about behavior, Mr. Cain , this is about whether you pay -- if you don't pay taxes now, and you now have income tax and a sales tax , you pay more in taxes .
MR. CAIN: More people will pay less in taxes . More people will pay less in taxes when you consider all the taxes .
MR. GREGORY: Mr. Cain , we talked to independent analysts ourselves.
MR. CAIN: Yes.
MR. GREGORY: We're not just reading newspaper clips here.
MR. CAIN: Understand.
MR. GREGORY: They tell us, they've looked at this, based on what's available of the plan, and it's incontrovertible.
MR. CAIN: David ...
MR. GREGORY: People -- there are people who will pay more.
MR. CAIN: That's right . Some people will pay more, but most people would pay less is my argument.
MR. GREGORY: Who will pay more?
MR. CAIN: Who will pay more? The people who spend more money on new goods. The sales tax only applies to people who buy new goods, not used goods . That's a big difference that doesn't come out.
MR. GREGORY: For those 30 million Americans who don't pay income tax ...
MR. CAIN: Mm-hmm.
MR. GREGORY: ...including 16 million elderly Americans , you can see they would, in fact, pay more.
MR. CAIN: Not the elderly. That's two different groups. Let's talk about the elderly. You don't pay taxes on your Social Security income . It replaces the tax -- the capital gains tax . Many of the elderly make money off of their investments. They won't pay that. Tax on dividends and tax on income generated from investments, you only pay once. So, in that sense, it helps the elderly.
MR. GREGORY: The other defect in the plan comes from fellow conservatives who say, "You've got some problems here." This is what The Wall Street Journal said about it this past week. "The real political defect," the Journal writes, "of the Cain plan is that it imposes a new national sales tax while maintaining the income tax . Mr. Cain 's rates are seductively low, but the current income tax was introduced in 1913 with a top rate of 7 percent amid promises that it would never exceed 10 percent. By 1918 the top rate was 77 percent. The politics of a national sales tax is bad enough on its own. A 9 percent rate when combined with state and local levies would mean a tax on goods of 17 percent or more in many places. The cries for exemptions would be great."
MR. CAIN: Don't combine it with state taxes . This doesn't address state taxes . If you add them together, yes, you'll get that number. This is a replacement structure. These are replacement taxes . They're not on top of anything.
MR. GREGORY: Mm-hmm.
MR. CAIN: We replace capital gains tax . We replace the payroll tax . We replace corporate income tax , replace personal income tax , and replace the death tax . It is a replacement tax structure.
MR. GREGORY: But where do state taxes go? You're saying they're going to be repealed?
MR. CAIN: If you -- with the current structure, you have state taxes , right? So with this new structure, you're still going to have taxes -- state taxes . That is muddying the water.
MR. GREGORY: How so?
MR. CAIN: Because today, under the current tax code , state taxes are there if they have it. If they don't have a state taxes , they don't have it. It has nothing to do with this replacement structure for the federal tax code .
MR. GREGORY: But that doesn't make any sense to me. If I'm already paying state taxes , and I have a new Cain administration national sales tax , I've got more state taxes .
MR. CAIN: No you don't.
MR. GREGORY: How so?
MR. CAIN: David , David .
MR. GREGORY: You're not saying they're going away.
MR. CAIN: Your state taxes are the same. Your federal taxes , in most cases, are going to go down. That's muddying the water.
MR. GREGORY: The Wall Street Journal says you have one on top of the other. There's a combined levy.
MR. CAIN: That is not correct, David .
MR. GREGORY: Right.
MR. CAIN: Let's try this one more time. State taxes are there today. The current tax code is a 10 million word mess. You have probably 100 -- you have thousands of loopholes and tricks and what I call "sneak attaxes" in the current code. State taxes today, whatever they are, zero or some number, has nothing to do with replacing the tax code . Nothing.
MR. GREGORY: The godfather, forgive the term, of tax reform in this town, Grover Norquist , said at this point he would advise Republicans to vote no on 9-9-9, and the reason is he doesn't like new revenue streams. And that's what you're creating with a sales tax .
MR. CAIN: Well, in the current tax code , there are sneak attaxes and ways that the American people get taxed that we don't even know about. What 9-9-9 does, it makes it very visible, so that the American people can hold the feet of Congress to the fire. That's the thing that we have that the current tax code does not have.