Cain's 999 Plan Is Bad for Business (ContributorNetwork)

COMMENTARY | As a Republican candidate for president, and former CEO of Godfather's Pizza -- a company with $365 million in annual revenue -- Herman Cain is presumably pro business. At least one would expect him to be.

On the surface, his 999 plan seems to favor business as well, replacing the current 35 percent corporate income tax rate with a 9 percent flat tax. But as they say, the devil is in the details. The corporate tax rate may be lower, but Cain also eliminates most deductions, and the ones he keeps strongly favor some businesses over others.

Currently businesses are taxed on their profits -- basically income minus expenses. According to Cain's website, the 999 plan only allows some expenses to be deducted. Businesses will be taxed on "[g]ross income less all investments, all purchases from other businesses and all dividends paid to shareholders."

Glaringly absent from the list of allowable deductions is payroll. Payroll taxes are gone, but now businesses will have to pay income taxes on salaries. Does this sound like a good way to stimulate job growth? Currently employers pay 6.2 percent in payroll taxes, so this constitutes a tax increase.

It's also prejudicial against the service industries. If you make money primarily by selling the services of others, you will pay more in taxes than businesses in which payroll is a smaller percentage of their gross receipts.

Cain allows payroll deductions for businesses who hire from inner city "Empowerment Zones," initiating yet another form of institutional bias, favoring urban employers over rural ones.

Then there's the 9 percent national sales tax. Sorry retailers, your customers will be buying less because more of their budget will go for taxes. The 9 percent national sales tax plus state and local sales taxes will have some buyers paying more than 18 percent. Boy things are turned around this election cycle. Aren't the Republicans usually working to stimulate spending in a slow economy?

Remember folks, before you jump on the bandwagon, it's a good idea to check under the hood.

Source: http://us.rd.yahoo.com/dailynews/rss/gop/*http%3A//news.yahoo.com/s/ac/20111007/us_ac/10155697_cains_999_plan_is_bad_for_business

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