Friday, October 14, 2011

9-9-9 Would Legitamize A National Mandate on Anything

If 999 is passed it would place sales tax on all goods sold, and probably most services. Currently the Commerce Clause of the constitution is read by the courts as giving Congress power to enact laws regulating commerce on any goods or services that are sold or transported across state lines. 999 will tax all goods, including those that are sold only in the same state as they are manufactured in. Even if those goods are forbidden by law to be transported to other states they will still be within the jurisdiction of the federal sales tax implemented by 999. So if Congress can now levy a sales tax on a good or service that is made, sold, and consumed within a single state, then the Commerce Clause will be empowered to regulate any good or service that is made, sold, and consumed within a single state.

A further implication of this is that if the federal government has the authority to tax a good or service, even if it does not travel across state lines, like health insurance, then the government has the right to regulate that good or service in the form of a mandate.

If in the next session of the Supreme Court the court decides that the mandate in Obamacare is unconstitutional, and then if Cain is elected and gets 999 passed, this opens the door for a democrat president in the future to challenge the Supreme Courts ruling against a mandate.

Also, 999 would effectively kill what little power the courts still give to the 10th Amendment.


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29 comments:

craigs said...

I just read an analysis of 9-9-9 for four separate families with incomes of $35,000, $100,000, $500,000 and $1,000,000. The family of $35,000 paid $6000 more taxes under Cains plan. The family of $100,000 saved $1700. The family of $500,000 saved $100,000 in taxes and the family of $1,000,000 saved $200,000.
How would you like to run against Obama on this plan while year end Wall Street bonuses are being announced in the fall of 2012?

CraigS

Ohio JOE said...

While this is an interesting article Dan L, I respectfully fail the see the end point.

For example:
"So if Congress can now levy a sales tax on a good or service that is made, sold, and consumed within a single state, then the Commerce Clause will be empowered to regulate any good or service that is made, sold, and consumed within a single state." So the government should not tax income the is arrived from only one state? Is the sale tax really more or a mandate than an icome tax?

Ohio JOE said...

"How would you like to run against Obama on this plan while year end Wall Street bonuses are being announced in the fall of 2012?" With respect, my head is spinning. It is OK far Wall Street to get bail out money, but not bonuses?

DanL said...

OJ, that is a good question. Let me distinguish the difference between the income tax and a national sales tax. Income for work performed has never come under the jurisdiction of the Commerce Clause, whereas products and services sold have always been under the purview of the Commerce Clause. Whether or not that makes sense or seems fair is not relevant. What is relevant is how the courts would read this new tax code. And they would read it as expanding the powers of the commerce clause to regulate goods and services within states.

DanL said...

Craigs, I hope that you will write up an article on that analysis, with a link. I have been wanting to write some more thoughts about how this disparity of taxes would enlarge entitlement programs.

DanL said...

OJ, furthermore the constitution was amended to allow taxation of income. If 999 was passed as an amendment WITH a protection against levying sales taxes on goods and services produced and consumed within one state then it would not expand the scope of the commerce clause. But without such a protection explicitly written into an amendment there is nothing to stop a further expansion of the powers of the commerce clause.

Ohio JOE said...

"Whether or not that makes sense or seems fair is not relevant" I do not disagree with that part.

"What is relevant is how the courts would read this new tax code. And they would read it as expanding the powers of the commerce clause to regulate goods and services within states." I so not pretend to be a Constitutional lawyer, but I doubt that the courts would challenge the sales tax in and of itself. If it included other mandates and regulations, that might be a different story.

Anonymous said...

I'm glad you posted this, Dan.

What's funny is that every time Cain is presented with info showing what the plan would actually do, he just says the analysis is flawed. He can't keep doing that forever.

-Martha

Anonymous said...

OJ, I am not arguing that the courts would challenge a national sales tax. They wouldn't. The constitution authorizes Congress to raise revenue through taxes. I have never argued that a national sales tax is unconstitutional. I believe that a national sales tax would pass constitutional muster easily.

What I am arguing is that if passed, a national sales tax will enlarge the scope and power of the Commerce Clause to include commerce that isn't interstate, irregardless of whether that power was written into the new law or not. It will be an unintended consequence. The only way to stop this is if the new tax code is passed via constitutional amendment and with wording forbidding the expansion of the powers of the commerce clause.

DanL

Right Wingnut said...

Dan,

Doesn't the federal gas tax already expand the Commerce Clause in the manner that you're suggesting a national sales tax would? The camel's nose has been in the tent for quite some time now.

Ohio JOE said...

"What's funny is that every time Cain is presented with info showing what the plan would actually do, he just says the analysis is flawed. He can't keep doing that forever." Why not, Mr. Romney does that with regards to MAcare.

Ohio JOE said...

Well, thanks for clarifying that Dan L, I do not totally agree (rightly or wrongly,) but I think I understand your position a bit better.

craigs said...

DanL
The source was today's edition of The Daily, delivered to my IPad 2.The Daily is Murdochs IPad newspaper.But her is a little more detail:

Scenario One
Current System
Family with income of $35,000 with one wage earner spending $15000 on items subject to a consumption tax
Payroll Tax.......$1978
Income tax.......( $3449 ). Credit
Net Sales Tax..$ 0
Total Taxes...........( 1471 ). Credit

Cain Plan
Payroll Tax.......$ 0
Income Tax......$ 3150
Sales Tax.........$ 1350
Total Taxes..........$4500

Family pays $ 5971 more under 9-9-9

Opposite Scenario Two
Family has two wage earners, one earns $900,000 and second earns $100,000 . They spend $100,000 on items subject to national sales tax

Current Tax Plan
Payroll Tax.............$23,186
Income tax............$310,632
Net sales tax......... $ 0
Total taxes..................$333,817

Cain 9-9-9 Plan
Payroll Tax................$ 0
Income tax...........$ 90,000
Sales Tax............$ 14,400
Total taxes...............$ 104,400

This family has it's taxes reduced by. $ 228,787

The other two income brackets in between show the same trend. The more you make, the greater the tax savings
Obviously, it can be evened out a bit with Congressional tweaking which , if remotely successful, would add several thousands of pages of adjustments to the plan or a subsequent Fair Flat Tax, which would end up as messy as what we have.....with a third tax in the loop
CraigS

Total tax...........( $1471 ). Credit

DanL said...

Thanks CraigS.

craigs said...

Take a look at the history of the VAT in the U.K. It started at about 10% over thirty years ago........and is now at 20%.
The saving grace is that essentials like toilet paper and condoms are taxed at a lower 5%
Not sure if Cain envisions any alternative rates, but his plan is a bit Draconian for the poor and lower middle class

CraigS

DanL said...

RW, no the federal gas tax is not equivalent to a national sales tax with regards to the argument I am making here.

Crude oil is transported across state lines via trucks, ships, and pipelines. The same goes for refined gasoline and diesel. Furthermore, there are many other chemicals used in the refining of oil into fuel that are transported across state lines. Finally, all the oil companies as well as the gasoline station franchises are parts of multistate corporations. Each one of these criterion that I have cited would place the finished product, gas, within the scope of the commerce clause as an interstate product.

DanL said...

CraigS, I so agree with everything you have said here today. I have only started realizing how bad 999 is within the last couple of days, and I must say that I am alarmed. Yes, it is draconian, that is the exact word that has been going through my mind the last 48 hours or so. I hope to write more about it today if I can find time.

DanL said...

OJ, I appreciate have a reasonable and respectful discussion with you today on this.

Right Wingnut said...

Dan, The same can be said for most everything puchased at the retail level. Raw materials are shipped across state lines. Finished products are shipped across state lines. Most retail entities are franchises or part of large multi-state corporations. I know you went to law school. I did not, but I'm having a hard time seeing the distinction here.

By the way, I don't like 999 for a multitude of reasons.

DanL said...

RW, the title of my article is that 999 would legitimize mandates of anything. Health insurance is NOT sold across state lines. That is the strongest argument that can be made as to why it is unconstitutional to mandate people to buy it. But if it can be taxed by a national sales tax then it would be fair game to the Commerce Clause and therefore would be legitimate to mandate its purchase by everyone.

DanL said...

RW, you are correct that most things are made and transported across state lines. And yes, the Commerce Clause has been given too much power by the courts. But the passage of 999 would empower the Commerce Clause to regulate those aspects of our lives that it doesn't yet regulate.

craigs said...

Here is a perfect debate rejoinder for Romney for next Tuesday:
Look across at Herman Cain and say

" Herman, I've looked at your tax plan. I've analyzed your tax plan. It's a great plan............for you and me"
Then, Romney looks directly at the camera.
" But, it's a bad plan for the millions of low income Americans struggling to make ends meet in a difficult economy. Raising taxes on the poor to help the wealthy spend more is not an American tax plan I can support"

FINIS.........end of 9-9-9

CraigS

Right Wingnut said...

Craig,

I think Mitt should let Obama and Pelosi use that line of attack.....unless he wats to bleed a few hundred thousand more conservative votes.

Ohio JOE said...

"unless he wats to bleed a few hundred thousand more conservative votes." I am begining to think the Romneyites don't want to win over Conservatives. They seem to think that there are enough Centrists.

Anonymous said...

This post is very well thought out. Thank you for your efforts, DanL.

OJ, please stop wording your comments about conservatives in such a way as to leave me out. It is highly offensive. I AM A CONSERVATIVE--not your enemy. It is true that I support Mitt Romney, and you do not. Please stop labeling everyone who disagrees with you as not being sufficiently conservative. That is the tack Rush et al have been taking, and it really, really angers me. You may not think my candidate is properly conservative, but that does NOT make me less conservative than you!

AZ

craigs said...

OJ
In all deference, Conservatives are in a minority nationally and in many states.The largest bloc of voters are independent moderates in the center.Losing a couple hundred thousand conservatives ( not likely ) and picking up a million independents, especially with open primaries, is a good trade off

CraigS

Ohio JOE said...

"The largest bloc of voters are independent moderates in the center." Unless you are in New England, this is not the case.

leighrow said...

Cains 999 plan will negatively impact growing middle income families,seniors,fixed incomes and lower income and Obama's campaign will be hitting on this all day long. Cain also has to realize that there are conservatives and economists(I have read many articles opposed)that are absolutely opposed to instituting a national sales tax with an income tax and deem it as dangerous if you have an Obama like administration.

Cain could squeak through the GOP nomination with his charm and his 999, but
I can't see how Cain could possibly win the General election with this plan. He will go down faster than the titanic and election night will end early.

Doug NYC GOP said...

Grerta job DanL and CraigS on your intrepid reporting and analysis of this plan.

I like Cain and I think he sincerely wants to to the right thing with reforming taxes, but this plan may not be the way to achieve it.