Another election, another economic plan

The way I see it there are currently four potentially viable GOP candidates to challenge Obama in 2012: Romney, Cain, Perry, and Paul.

Of that group, Romney is essentially a Democrat, and is easily the most liberal of the group, so I have a hard time taking him seriously, much less supporting him. Paul has a lot of great ideas and ultimately I think is the “most right” of the bunch when it comes to how things should be, but therein lies his problem – his idealism gets in the way of practicality, which makes him both naive and politically unfeasible. Would I support him over Obama? Absolutely. But do I think he’s the best man to run against him? No.

So that leaves Cain and Perry, the two candidates who piqued my interest back when they announced and haven’t done anything yet to send me running for the hills. In the last debate, I wasn’t particularly impressed with either – Cain seemed too aggressive, even angry at times, and just kept hammering “999” like a traveling salesman. Perry, on the other hand, looked unsure of himself and entirely uncomfortable the entire time – certainly not the image of a calm and confident leader.

The big issue of the election, though, is the economy, and that’s what sets the two apart most clearly – now, that is, that Perry’s unveiled his plan. Cain’s plan is simple, and we’ve heard it often: 9-9-9, which is a tax reform plan that he suggests will be enough to get businesses revitalized all on its own. The basic idea is that he reduces income taxes to 9% for both businesses and individuals, and adds a 9% national sales tax. This would replace the entire mess of a tax code we have now. The good news: it would abolish the death tax, capital gains tax, and payroll taxes, and simplifies the paperwork significantly – no deductions, no special interests, just 9%. It’s an attractive suggestion.

But I don’t know if it’s worth the tradeoff. First, the income tax as it is now will lower the tax burden on those making a lot of money, and increase the tax on those making a little – and it also means that the 48% of the country not paying any taxes at all would have to start. This is obviously politically unpopular, but it could be manageable IF prices came down as a result of the changes, which would make things more affordable for those with a lower income, or if wages increased significantly and quickly as a direct result. But, I don’t know if that’s likely to happen, due to the third “9” in his plan.

That “9,” his national sales tax, is very nearly a VAT, though it technically isn’t one in the proposed form. A Value Added Tax is a special type of sales tax that is collected at each step of a product’s lifespan – from the sale of the initial raw material all the way to the finalized product’s purchase by the consumer. Each step adds a significant increase to the price of any given product, and the more complex the product, the larger the effect it have. Because it is built into the price, it is nearly impossible to determine how much of a product’s price is based on the tax and how much is based on the market – and then you add another tax on top of that “final” price. Europe has been doing this for a while now, and it’s driven their tax revenues through the roof.  If Cain’s sales tax becomes a VAT, it’s very hard to see how this will not add a massive burden to the average consumer – and ultimately, Cain wants to shift the entire tax burden onto this part of the plan.

Let me add that I do like the idea of moving taxes off of income tax entirely, doing away with that in favor of a national sales tax – I think the FairTax plan is still the best one I have heard, and that is where Cain wants to ultimately end up. His initial 9-9-9 plan is a transitional plan. The problem is that he wants to start the Federal sales tax BEFORE eliminating the income tax. Without cutting off the income tax as a source of Federal income, he leaves open the possibility of it remaining open indefinitely, and alongside a new revenue stream – the sales tax. We’ve all seen that governments are loathe to give up ways to take our money, so I’m not inclined to ever trust one to do so willingly. That makes this plan have a huge potential to backfire and make things worse, instead of better. Cain suffers in that regard from a bit of the Ron Paul naivete, I think.

So let’s look at the Perry plan, then. His focuses less on taxes and more on encouraging job creation. He wants to cut EPA regulations that are stifling current projects and open more projects in the energy sector, allowing drilling in Alaska and the Gulf of Mexico, alongside expanding projects in Ohio, West Virginia, and Pennsylvania while encouraging exploration in western states. Now the beautiful thing about this plan is that it is something that can easily be implemented quickly, and would immediately turn into rapid job growth. A lot of these projects are literally waiting on the government’s approval right now, and have thus far been turned down – Perry’s answer is to, basically, finally say yes. So he ignores the problems with the complicated tax code – not ideal! – but instead focuses on immediately getting jobs going by dialing down the regulation and opening up the markets that we’ve thus far kept closed. This is, I think, the best approach for our current situation.

Moving away from our current tax structure toward the FairTax is something I’d love to see happen, but I think our current economic situation is too precarious to undertake that particular journey right now. We need to get people working again, and quickly, and I think Perry’s plan stands a better chance of making that happen.

Given that, I’d say at this point my support is with Perry right now. I’d love to see Cain as his running mate, though, if for no other reason than to make sure Cain’s insistence on a reformed tax code stays firmly lodged in Perry’s ear.

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