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Herman Cain: How Did He Do?

Herman Cain was on Meet the Press this morning. David Gregory interrogated him about his 9-9-9 plan, and accounts of their exchange differ. The liberal-leaning Hill says that Cain “struggled Sunday to push back increasing criticism that his 9-9-9 tax reform plan would hurt low-income and middle-class Americans.” Ann Althouse, on the other hand, thought Cain “nailed Meet the Press:”

I thought David Gregory really lost his cool early on, as he was questioning Cain about 9-9-9. If you watch the video, you can see he’s agitated and grimacing in a way that really lacks the usual polished journalist quality. …

How does Cain deal with this barrage of disbelief from Gregory? He stands his ground and explains his program….This discussion got me thinking about the positive side of switching to sales tax.

Reading the transcript, what strikes me is how slow-witted Gregory was. Repeatedly, Cain makes a simple, clear point, but Gregory doesn’t seem to get it. This became almost painful during an exchange about state sales taxes:

MR. GREGORY: The other defect in the plan comes from fellow conservatives who say, “You’ve got some problems here.” … “The real political defect,” the Journal writes, “of the Cain plan is that it imposes a new national sales tax while maintaining the income tax. … A 9 percent rate when combined with state and local levies would mean a tax on goods of 17 percent or more in many places. The cries for exemptions would be great.”

MR. CAIN: Don’t combine it with state taxes. This doesn’t address state taxes. If you add them together, yes, you’ll get that number. This is a replacement structure. These are replacement taxes. They’re not on top of anything.

MR. GREGORY: Mm-hmm.

MR. CAIN: We replace capital gains tax. We replace the payroll tax. We replace corporate income tax, replace personal income tax, and replace the death tax. It is a replacement tax structure.

MR. GREGORY: But where do state taxes go? You’re saying they’re going to be repealed?

MR. CAIN: If you–with the current structure, you have state taxes, right? So with this new structure, you’re still going to have taxes–state taxes. That is muddying the water.

MR. GREGORY: How so?

MR. CAIN: Because today, under the current tax code, state taxes are there if they have it. If they don’t have a state taxes, they don’t have it. It has nothing to do with this replacement structure for the federal tax code.

MR. GREGORY: But that doesn’t make any sense to me. If I’m already paying state taxes, and I have a new Cain administration national sales tax, I’ve got more state taxes.

MR. CAIN: No you don’t.

MR. GREGORY: How so?

MR. CAIN: David, David.

MR. GREGORY: You’re not saying they’re going away.

MR. CAIN: Your state taxes are the same. Your federal taxes, in most cases, are going to go down. That’s muddying the water.

MR. GREGORY: The Wall Street Journal says you have one on top of the other. There’s a combined levy.

MR. CAIN: That is not correct, David.

MR. GREGORY: Right.

MR. CAIN: Let’s try this one more time. State taxes are there today. The current tax code is a 10 million word mess. You have probably 100–you have thousands of loopholes and tricks and what I call “sneak attaxes” in the current code. State taxes today, whatever they are, zero or some number, has nothing to do with replacing the tax code. Nothing.

Gregory was similarly oblivious when Cain explained why his plan wouldn’t lead to big price increases:

MR. GREGORY: The reality of the plan is that some people pay more, some people pay less. … “Roberton Williams, a senior fellow at the nonpartisan Tax Policy Center, is working on an analysis of Cain’s signature proposal. Although the plan’s details remain sketchy, Williams said it would increase taxes for the poor and middle class, despite Cain’s statements to the contrary.

“‘For starters, about 30 million of the poorest households pay neither income taxes nor Social Security or Medicare levies. So for them,’ he says, ‘doing away with the payroll tax doesn’t save anything. And you are adding both a 9 percent sales tax and 9 percent income tax. So we know they will be worse off.’” That’s the reality, Mr. Cain. Without making a judgment about it, why do you think that’s an acceptable reality for the overall goal of reform?

MR. CAIN: First, they’re missing one very critical point about the sales tax. It wasn’t even mentioned in that analysis that you read. On the price of goods, there are invisible taxes that are built into everything we buy. We’ll simply–those invisible taxes are going to go away. And we’re replacing them with a 9 percent visible tax. For example, take a loaf of bread. The farmer pays taxes on his profits. The company that makes the flour, the baker, the delivery man. By the time that loaf of bread gets to the grocery store, there are a series of invisible taxes, which are also called embedded taxes. So, in reality, those taxes go away and so the price of goods don’t go up.

MR. GREGORY: You’re saying they actually go down?

MR. CAIN: Yes, they actually go down.

MR. GREGORY: Based on what?

MR. CAIN: Based upon competition. Competition drives prices down. For example, suppose one breadmaker says, “I’m going to charge $2.20 for a loaf of bread,” and the other one says he’s going to charge $2.40 for a loaf of bread. Well, guess which one is going to win out based upon the quality being essentially the same?

MR. GREGORY: My question had to do, however, with the reality of this plan.

MR. CAIN: Mm-hmm.

MR. GREGORY: The wealthiest Americans would pay less, the poorest Americans and middle class would pay more. You don’t dispute that.

MR. CAIN: I do dispute that.

Cain is making a very important point here, but Gregory just isn’t sharp enough to get it and follow up in a meaningful way. I am not sure whether Cain’s 9-9-9 plan is a good idea or not, but the level of sophistication that David Gregory can bring to the conversation to too low to be helpful.

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