October 19, 2011
The existing U.S. federal tax code is a monstrosity. According to the IRS, Americans spend more than 3% of GDP on compliance costs each year. The deductions and exemptions in the existing code favor some industries over others and some behaviors over others. Why should Google and GE pay only a few percent of their profits in taxes when Wal-Mart has to pay nearly 40%? Why should a financier pay a lower tax rate than a doctor?
Unsurprisingly, many people have called for replacing the tax code with something simpler and more fair. One alternative that has recently been featured in the news is the 9-9-9 plan devised by Republican presidential candidate Herman Cain.
How does it compare to the current system? What are its assumptions? Are the criticisms justified? Would it accomplish its objectives?