Federal tax policy and current developments

Federal Tax Current Event

The current Republican leadership race has seen Herman Cain as a front-runner for leadership of the Republican Party and thus, a potential presidential candidate for the 2012 election. One of the main components of his campaign is his proposal of a flat taxation plan for citizens of the United States, known as the "9-9-9" tax plan. This plan proposes to replace the current federal tax code with a flat taxation plan of 9% national sales tax, 9% personal income tax, and 9% corporate tax across the board for all Americans. In the article "Herman Cain's murky 9-9-9 tax plan," the author argues that this plan simply would not fiscally work out and that it would lead to an unfair distribution of the tax burden (Hitzlik, 2011).

Hitzlik argues that flat taxation plans such as the one proposed by Cain tend to not result with their positive intended outcomes, and he questions why such tax plans continue to be proposed when their effectiveness has not been appropriately demonstrated (Hitzlik, 2011). Furthermore, having every citizen pay the same percent proportionate to their income in taxes has not proven to be an effective solution for creating fairness and stimulating the economy (Hitzlik, 2011).

A historical summary is provided by the author, in which he notes the several failures in proposed flat tax programs in the United States since the 1930s. The discussion starts with a description of democratic tax program proposed in the 1930s that was intended to more fairly distribute wealth. The plan sought for taxes to essentially eliminate any income over $1 million and any accumulated wealth over $3 million. The money that would have been raised through this plan was intended to be directed towards guaranteed annual incomes, free college tuition, old-age pensions, and homestead grants (Hitzlik, 2011). Around the same time another proposal was put forth by a Socialist author than ran for governor of California who sought to end poverty in the state through the replacement of sales and property taxes with high income taxes directed towards the wealthy. This proposal would have seen less revenue raised than the existing taxation structure, therefore deeming it a highly ineffective solution to the problem of poverty (Hitzlik, 2011).

Hitzlik (2011) then directs the discussion towards unsuccessful flax tax plans proposed in the 1990s. One of these plans was put forth in a presidential campaign by Steve Forbes, which centered on the idea of replacing various deductions and brackets within the tax code with a flat tax of 19%. This plan was seen as fair only insofar as it treated all income earners equally. However, the wealthy would have been greatly advantaged by this flat tax because it would greatly reduce their taxation from their existing rate, which was around 40% (Hitzlik, 2011). However, this plan wasn't completely a flat tax, as the tax rate was somewhat incremented according to income level, with exemptions applying to low-income earning families (Hitzlik, 2011).