Herman Cain's 9-9-9 plan has certainly captured the nation's attention. And along with the attention, it has become a target for every other Republican candidate to shoot at in the hope of dislodging Cain from first or second place in the polls.
But rather than deal with the details of the plan itself, let's look at overall environment in which any discussion of tax reform must take place: first, public support for replacing the current tax code is very high. The code is almost incredibly complex and burdensome, requiring 75,000 pages just to set it forth, or 8,000 pages more than just 2008. I don't know that anyone has made a thorough examination in terms of how much of it came about as the result of pressure from special interests and lobbyists, but I think that it's intuitively obvious that most favorable tax treatments in the code are the result of some kind of pressure from some group that benefits from the favorable treatment. In simple terms, we can reasonably conclude that the most favorable tax treatments are in fact favors, doled out in in regulatory form in exchange for favors initiated in financial or political form. That makes them at least ethically suspect if not downright corrupt. A tax code so riddled with ethically suspect special deals is a major contributing factor to the well-documented decline in trust and confidence that Americans have in both our governmental and our political institutions.
Second, there are too many flaws to fix. Every special provision has its defenders, and most of those defenders will show up in Congressional and Senatorial offices screaming like banshees to save their little part of the code. Therefore, Herman Cain's promise to throw out the entire code as the first step in tax reform resonates powerfully, and should be commended.
What would a good replacement for the tax code look like? How would it differ from the current state? To begin with, it must meet the most fundamental ideal in the American value system: it must be fair. This is a nation begun with a declaration that all of us were created equal. Therefore, in order to be in keeping with that ideal, equality in the tax code is a paramount objective. No one likes to pay taxes, whether we are talking about the eighteenth century or the twenty-first. At the same time, we all recognize that there are things that only government can do, other things that we want government to do, and that government cannot exist without revenue, which comes from taxes.
Therefore, in order to be true to the ideals stated in the Declaration of Independence, for taxes to be fair, there is a presumption of equal tax treatment for equal circumstances. The idea that one person, or one corporation, can get off paying less in taxes than a similar person or corporation simply because one of them has a cleverer tax accountant is morally indefensible, yet that is in fact the basis for a tax advice and preparation industry that costs a half a trillion dollars a year to maintain. That's between one third and one half of our entire national annual deficit. So requirement number one is that a replacement tax system must be fair.
Second, it must be simple. That's the surest guarantee of fairness.
Third, it must be transparent. Transparency is an overused and often abused term these days, but in tax reform, it is particularly apt. The tax code must be clear, not opaque. Ordinary citizens should be able to read the tax code and figure out what it means.
Finally, it should not encourage counter-productive behavior. A good example of counter-productive behavior is to raise taxes on the wealthy to such an extent that they either choose to earn less or use their wealth to move to a jurisdiction with lower taxes.
Herman Cain's 9-9-9 plans meets each one of these four tests. That's the secret to its popular support. Its support is not primarily based on who benefits and who gets hurt. That's the way politics is typically played, but I would argue that it's the lowest form of politics — simply buying votes. Virtually all of the criticism of the 9-9-9 plan comes in that form. Critics ask, "How does it affect lower-income Americans? How does it affect seniors?" They assume that each demographic group either supports or opposes a given tax change strictly based on whether they reap some kind of new financial benefit or pay some new cost. This sells the American taxpayer short. Americans are, and ought to be, capable of a higher level of evaluation — an evaluation based upon the kind of deals we've been discussing. Herman Cain's tax reform plan meets those ideals.
Never before have I seen any candidate's tax reform become the subject of such enthusiasm that it gave rise to spontaneous public chants, yet every time Herman Cain speaks, you can hear folks chanting 9-9-9. That enthusiasm doesn't come from the nines; it comes from the ideals of fairness, simplicity, transparency and not attempting to use the tax code to engineer behavior. They are far more important than any of the nines themselves.