Tuesday, October 25, 2011

In Defense of Herman Cain: A progressive, flat, regressive tax.

       I was listening to the news on the way home from work, as is my wont, and they were discussing the oddly controversial 9-9-9 plan that Herman Cain has cooked up.  For those unfamiliar with it, his plan is to have all taxes boiled down to a nine percent income tax, a nine percent corporate tax, and a nine percent sales tax.  You know like in Sim City.  This post is not about whether I agree or disagree, or even what a valid opinion might be, or even if he stole the idea from Sim City.  Rather it is a vocabulary primer for the obviously under-educated media.
       You see they were calling Herman Cain's plan a "Regressive" tax.  Now I may not be the sitting chair of the political sciences department of a university; but I do know that a tax that is equal to nine percent of earnings, regardless of income, is not regressive.  It is flat.  One light argue that it is a regressive tax since the rich would miss that nine percent a lot less, but while that may be true, it is a misnomer.
       A regressive tax is one like they had in medieval times.  the poor pay a higher percentage of their income than the rich.  In this example of course the rich, being lords, pay nothing.  But this does illustrate what a regressive tax is.  Conversely a "progressive" tax is one where the rich pay a higher percentage than the poor.  This is the type that most Americans would consider "fair".  This is based on our long held belief in the "ability to pay principle".  The rich can afford to pay a higher percent because they have so much.  Ten percent tax on one million still leaves you nine hundred thousand.  Ten percent tax on one thousand dollars leaves you only nine hundred.  Don't be offended at these simplifications, remember this is for journalists to read, and if they could understand simple concepts, they would have useful occupations.
       Now it wouldn't bother me that this taxing plan was mis-categorized; except that Rick Perry's plan to have a "flat" twenty percent tax was called exactly that by the same media, in the same news story.  Possibly they like Perry better because he provides more sound bites.  I don't know.  I do know that the percentage involved does not matter unless it changes up or down by income level.  Nine percent for all is nine percent for all.  Twenty percent for all is twenty percent for all.
       So let's review:  if you plan to tax people at a flat rate of nine percent it is somehow a "regressive" tax, but if you raise that by eleven percent, up to twenty, it suddenly metamorphoses into a flat tax.  It must be the media's bias in favor of people who provide good audio clips.

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Keep it clean and well thought out.