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Publication date: 18 November 2014

Ted D. Englebrecht, Xiaoyan Chu and Yingxu Kuang

Dissatisfaction with the current federal tax system is fostering serious interest in several tax reform plans such as a value-added tax (VAT), a flat tax, and a national retail…

Abstract

Dissatisfaction with the current federal tax system is fostering serious interest in several tax reform plans such as a value-added tax (VAT), a flat tax, and a national retail sales tax. Recently, one of the former Republican presidential candidates, Herman Cain, initiated a 999 tax plan. As illustrated on Cain’s official website, the 999 plan intends to replace current federal taxes with a 9% business flat tax, a 9% individual flat tax, and a 9% national sales tax. We examine the distributional effects of the 999 tax plan, as well as the current system it intends to replace, under both annual income and lifetime income approaches. Global measures of progressivity and bootstrap-t confidence intervals suggest that the current federal tax system is progressive while Cain’s 999 tax plan is regressive under the annual income approach. Under the lifetime income approach, both the current federal tax system and Cain’s 999 tax plan show progressivity. However, the current federal tax system is more progressive. The findings in this study suggest that Cain’s 999 tax plan should be considered more seriously and further analysis of the 999 tax plan is warranted.

Details

Advances in Taxation
Type: Book
ISBN: 978-1-78441-120-6

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