As I’ve said before, Reagan-era economics guru Arthur Laffer’s praise for Herman Cain’s 9-9-9 plan is reason enough for me to take a very serious look at Cain’s ideas (and did 9-9-9 ever get a workout last night in Vegas!).
One of the reasons Cain’s idea is so intriguing—and even as they attacked it, GOP candidates thanked Cain for putting forward something bold—is that it proposes throwing out our current tax system.
Arthur Laffer himself explains this morning in the Wall Street Journal why our current system is such a disaster:
It used to be that the sole purpose of the tax code was to raise the necessary funds to run government. But in today's world the tax mandate has many more facets. These include income redistribution, encouraging favored industries, and discouraging unfavorable behavior.
To make matters worse there are millions and millions of taxpayers who are highly motivated to reduce their tax liabilities. And, as those taxpayers finagle and connive to find ways around the tax code, government responds by propagating new rules, new interpretations of the code, and new taxes in a never-ending chase. In the process, we create ever-more arcane tax codes that do a poor job of achieving any of their mandates.
Laffer believes that Cain’s plan could both bring in as much revenue as the current system and spur economic growth. For one thing, it is so simple that businesses wouldn’t need to retain a battery of lawyers and accountants to make sure they are in compliance with tax law (Cain is no doubt right when he says accountants don’t like his plan!).
One of the least popular features of 9-9-9 is the consumption tax. Laffer acknowledges this:
Still, a number of my fellow economists don't like the retail sales component of the 9-9-9 plan. They argue that, once in place, the retail rate could be raised to the moon. They are correct, but what they miss is that any tax could be instituted in the future at a higher rate. If I could figure a way to stop future Congresses from ever raising taxes I'd do it every day of the week and twice on Sunday. Until then, let's not make the perfect the enemy of the good.
As we saw last night at the GOP debate (where, by the way, Cain didn’t do a very good job of defending 9-9-9), the other candidates have serious criticisms. That’s fine. They are all talking about the right thing—thanks in part to Herman Cain.