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Friday, October 14, 2011

Herman's Achilles' Heel

By Paul N. Marston from

There is a lot to like in Herman Cain's run for the White House. He is a solid conservative and his business experience gives him a big advantage in what it will take to get America back to work again. While it should not matter one bit, the color of his skin matters a great deal. There is no one else on the current political scene who could fundamentally transform American politics like Herman because he is the only one who can make a significant dent in the Democrat's hammer lock hold on black Americans. This is the group that is hurting the most from Obama's policies and Herman is the one who can help them the most. Black Americans who are willing to take a look at what Herman can do for them make up a decent percentage of that group. Herman will never get a majority of their votes in 2012 but all he needs is to convince 20% that he is a better bet than Obama and states like Michigan are suddenly in play.

Unfortunately, this is not likely to happen because unless Herman makes a major change in his proposals, he is never going to get the Republican nomination. The reason for this sad fact is because of one of those three nines in his 9-9-9 plan. People can easily be scared by a new proposal especially when it is so easy to demonize. Look at the ad showing Representative Ryan pushing Granny off a cliff for daring to suggest that some changes to Social Security are necessary to make it financially sound as a case in point. Once a person hears something they do not like in a proposal, they shut their ears to hearing anything else no matter how much sense the whole proposal might make. All a person has to understand is that Herman is proposing to put a 9% national sales tax on top of the state and local sales taxes which are in the 8 to 10% range already and they will stop listening.

The idea of a 17 to 19% sales tax on most things they buy is a total turn off. It will not matter to them that there will be no withholding on their paycheck any more or that corporations will lower their prices due to the huge tax savings for them so they can afford this new sales tax. They have already stopped listening and that is before the Democrats and the mass media never stop pounding on the subject of this huge new sales tax. Herman has to make a change to his plan or he is toast. He is even alienating conservatives because they rightly point out that giving Congress another revenue stream will just encourage more spending. If he drops the sales tax part, there is no way to fund the federal government on the other two nines. Thus a major overhaul is required to save his plan.

We suggest that he switch to a 15-15-15 plan and make the national sales tax a luxury tax instead. Luxury taxes go all the way back to the days of Alexander Hamilton who convinced the U. S. Supreme Court that such taxes, which in this case was on carriages, were constitutional (Hylton vs. United States, 1 Dallas, 171). Rather than try to list all of the items that will be considered a luxury which would always have to be tinkered with, he could adopt whatever price threshold would be needed to raise the required revenue. Certainly he would want the floor to never go below a $1,000 price tag but he might well be able to use a $5,000 floor if all the unnecessary parts of the federal government were eliminated. When the country was founded, we managed to get by with only four cabinet positions: attorney general, defense (war back then), state and treasury. All those other cabinet positions were established because the federal government decided to stick its nose into areas that none of the founders ever envisioned as being a federal responsibility.

There are simply too many problems with a flat national sales tax. What about people who have only Social Security for an income? They have no pay that will suddenly increase because of no withholding. Even if food and drugs are exempted from the sales tax, they will need a big increase in their Social Security benefits to keep them afloat. Then there are the people who are on welfare. They will need a big increase to pay this new tax. That means that the federal government will collect this new sales tax and have to pass a sizable chunk back to the states for increased welfare costs. There will be a sizable brokerage fee to pay the bureaucrats administering all of this and a whole new sets of rules and regulations for the states to follow which is always attached to any federal funds the states receive.

A luxury tax instead of a sales tax throws a bone to the Democrats. They always want to tax the rich people, although exactly who is rich seems to be a matter of opinion. The rich are the ones that purchase big ticket items and they will be paying a 15% surtax on most of what they buy. Herman might want to consider not applying this luxury tax to cars costing less than say $50,000 or homes costing less than $500,000 to help the languishing automobile manufacturers and the home builders out for a while. Herman can sell something like this but his 9-9-9 plan is a non-starter. If he wants to be President he needs to make changes and say that based on input he has received back from supporters, he is making some necessary changes to improve the chances of getting his plan enacted into law.