9 + 9 + 9 = 27

By Jake Jakubuwski

 

9+9+9=27.

3X9=27.

Simple — everyday math, right?

But 27% added to whatever I’m already paying in Social Security tax, state sales tax and what I lose in “deductions”; means I am gonna have to pay more money to somebody.

I hate to start an article with an apology.  In this case, I feel I have to.

You see, I am not an accountant, bookkeeper or math wizard. I’m just a guy who has operated my own business, of one kind or the other, for nearly 50 years. I figure that gives me some sort of platform to base my ideas of what constitutes profit, what makes up a loss and whether or not I’ve got enough money left over at the end of the day, week, month or year to have made it all worthwhile.

There are some things, financial, that I take as givens.

You can’t sell for less then the cost of your merchandise plus the cost of your expenses and stay in business very long.

You can’t spend your way out of debt.

And, no matter how big the pile of whatever it is that you have, if you keep taking away from it and not replacing it; one day — it will be gone.

Another thing I’ve learned is this: If you’re in financial trouble, the cure, generally speaking is not simple, sweet-tasting or fun.

That’s what leads me to believe that the economic problems this country faces (from the White House to the lowest paid laborer in a packing house) some tough choices, that will require a lot of sacrifice on everybody’s part in order to get our financial house back in order.

Those choices might be so hard to make that they prove impossible to implement.

None of them will be simple. None of them will be easy. None of them will be popular.

The politicians from the top of the heap to the wannabes are spewing mouthfuls of rhetoric that is so convoluted; it’s gibberish to the average voter. Some of it sounds so simple, and so easy, it makes you wonder why no one thought of that before. Here’s a newsflash! Someone probably has. The new group just gussied it up in flowery language, added a new twist to it and kept their fingers crossed when they delivered their solution to the voters.

I know I’m being cynical, but all of these folks running for office today remind me of what my granddaddy had to say about shirttail relatives that came seeking a handout. He said they had a mouthful of promises and a handful of gimmie. That seems to sum up all rhetoric; at least in my mind.

Specifically, I’m wondering how we’re gonna pay for all the bailouts, pork barreling, and give-a-ways that Uncle Sugar has been throwing around like we have an endless supply of money to give away.

Unless I’m not understanding the situation, Uncle seems to think that we can speed recovery by pouring bucks on top of the pile where the bankers and other financial sharks can gobble it up but when asked how we’re gonna pay for it, Uncle tells us we can cut programs to the poor and  “straighten out Social Security.” In other words, they look for the fix and sacrifices at the bottom of the pile. It might only be me, but I just don’t understand that idea.

With a new crop of presidential wannabe’s running around mouthing all kinds of promises and espousing ideas that they claim are a nearly painless way of fixin’ what’s wrong with the economy. I have to wonder if they really think Americans are actually so stupid as to believe their guff, or they figure the majority of the electorate is just so fed up with the current crop of crooks and cretins that they’ll vote for anyone who they think sounds like they know what they’re talking about.

For instance: Herman Cain has a plank in his platform that he calls, “9-9-9”. Just on the surface of it, folks seem to like the idea as a real simple roadmap to fiscal responsibility and a way to sort of make everyone pay their fair share. I don’t believe a word of it — at least not the way I’ve heard Mr. Cain talk it up.

First off, this “fair share” drum is rather tattered and worn. From what I read and understand only about 6% of the taxpayers (including Joyce Lunchbucket and Joe the Plumber) pay their full tax rate on their actual earnings. Is there anything “fair” about that?

My take on Mr. Cain’s 9-9-9 deal is that businesses will pay a 9% rate on all of their income, period.  They will not get any deductions, tax incentives, set-offs or loss carry-overs. Does that mean McDonald Corporation pays 9% on their gross income and loses any incentives, or tax breaks, to support Ronald McDonald House, their scholarship funds and deductions for all the wages they pay as well as all of the hamburger, rolls, fries and drink cups they buy?

What about Mickey D’s share of FICA (Social Security Tax) that they pay into the Treasury on behalf of their employees? Do they still have to pay that? Or is it “included” in the 9% tax?

If I understand the program, it’s going to affect General Motors, General Electric, AT&T, NBC, Sheila’s shop of Tonsorial Splendor, Mike’s Garage, Mom’s Apple Pie Shoppe and every other business inAmerica— regardless of size or income.

If a guy or gal is self-employed and are paying their own Social Security taxes, does the 9% Mr. Cain envisions cover that contribution as well, or is it in addition to it? If this “9” is just another tax that businesses of all sizes and income levels have to pay in addition to FICA, State, County and municipal taxes that they may be liable for — I don’t see the benefit. Actually I see it as regressive.

The idea of a “flat” income tax has been floating around for years. The idea has a lot of appeal because of its simplicity and the fact that it would yank half a zillion pages out of theUnited States Revenue Code. There have been at least a half a dozen variants discussed over the years without any notable success.

The next “9” is the 9% income tax that individuals would have to pay. Does that 9% pay the wage earners share of their Social Security; or is the FICA deduction in addition to the 9%? I believe that most wage earners that are currently in a 20% tax bracket probably wind up paying far less then 9% when their personal deductions, mortgage interest, child care fees and medical expenses are deducted from their gross income.

Those folks that currently fall below the poverty level are not paying any tax at all. Are they able to take a 9% hit on their already poverty-level wages?

Then comes the final “9”. The National sales tax of 9% which, as far as I understand it, is in addition to any state, county, city or municipal sales taxes. Ouch!

InNorth Carolinawe currently have a 7.5% sales tax. If Mr. Cain is elected and his 9-9-9 program is adopted, my sales tax goes to 16.5%! That also seems to mean that anything I buy to run my business: paperclips, ink cartridges, pencils, staples and a plethora of other stuff will cost me more. Those items become expenses that I can not longer deduct.

Does that same ‘sales” tax apply to GM, GE and Mickey D’s? If it does, that means cars, electric motors and hamburgers are going to cost all of us more. Which means, as far as I can see, another loss I have to absorb because I can’t claim it as a deduction.  What’s fair about that?

Another thought. If Staples buys computers from Dell, does Staples pay a 9% sales tax on them? If so, Staples is going to charge me more for the next computer I buy from them…

Why? Well, let’s say they have a computer that I can buy today for $500.00. That will change drastically under the 999 plan. If they pay Dell $375.00 for it, plus 9% Federal Sales Tax, then I pay that 9% as well. In which case, Staples will add a MINIMUM of $34.35 to that computer. So now, I will pay NC State sales tax on $534.35 at 7.5% PLUS the 9% Federal Sales Tax.

Another thing I’ve learned over the years is that if your cost of doing business increases — your selling price has to increase as well. Not simply by adding in only the extra cost but by adding in the extra cost PLUS a profit. If a business does not factor in a profit on their TOTAL costs of doing business that means they will make less gross profit at the end of the year. Doing that as a matter of course is a sure way to lose your business!

Here’s the really scary part of 999 as I see it: The first year it’s 9%. The next year, how much? Who knows?

I know something else from my years in business: Whatever Uncle Sugar does to help us out is going to cost us money because there is one immutable facet to the  Law of Financial Reality According to Jake:

“Nothing happens. Nothing gets sold. Nothing gets built, nothing gets repaired, nothing gets refurbished and nothing gets “overhauled” (Including the National Debt, the US Revenue Code, bureaucrat’s and politician’s salaries) that consumers and taxpayers don’t foot the bill for.”

 So, is Mr.Cain’s “999” idea just a catchy campaign slogan to entice voters and has no substance or value beyond that? Is “999” something he believes will work but has not given any meaningful thought to the actual impact of the program if it becomes law? Or, is it a smoke and mirror cure that that might kill the patient?

At this point, for me at least, the only thing 9+9+9 adds up to is 27% more money that will be coming out of my pocket.