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October 15, 2011
Cain the Tax-Code Killer
By Larry Kudlow
Herman Cain is the only GOP presidential candidate who wants to kill the tax code. That's right. Put a knife in it. Junk the entire system.
And people are cheering as he rises in the polls in his quest for the nomination.

Cain's 9-9-9 plan is not perfect.

But then again, the good should never be the enemy of the perfect.

Rep. Paul Ryan gives the plan a thumbs-up.
Supply-side mentor Art Laffer tells me it would be "far, far better than the current system."
And Chris Chocola, president of the free-market Club for Growth, calls it "a truly revolutionary tax reform that would amount to a massive job-creating tax cut on investments, savings and income."
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For his part, Cain argues that the sales tax nine would pick up revenue and help to lower the rate for everybody, especially the middle class.
His economic adviser Rich Lowrie told me in a CNBC interview that the sales tax is a replacement tax, not an add-on tax like you'd find at the state level.
This is a key point. Lowrie said, "All we are doing is pulling out taxes that are invisible. We're cutting the rates. We're putting them back in at lower rates."
Lowrie is referring to the payroll tax, which in the Cain plan will go from 15 to 9 percent. That constitutes a net tax cut and a good deal more transparency regarding costs and prices that are embedded in the current code.
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Liberals oppose the sales tax because they say its regressivity will hurt middle- and low-income people.
But the Cain plan partially deals with this by exempting everybody below the poverty line.
Cain also states that sales of existing goods would be exempt.
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Nevertheless, a mammoth drop in marginal tax rates for individuals (35 to 9 percent, or 18 percent including the sales tax) and for businesses (also 35 to 9 percent) would supply an incredibly strong economy-wide growth incentive.
Lowrie argued further that the 9-9-9 plan will add $2 trillion to U.S. gross domestic product, create 6 million jobs, increase business investment by a third and lift wages by 10 percent. "And if you fold all that growth together," said Lowrie, "federal revenues go up by 15 percent."

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