“In the price of things is the embedded cost of all taxes,” he says. “We will be exporting goods without the taxes built into them and hitting imports with the sales tax. It will level the playing field.”
Independent economists who have studied Cain's 9-9-9 plan say the plan would take the nation into uncharted waters. The US has never had a national sales tax except for gasoline. It’s not clear what would happen to state and local services. States and municipalities would be carrying a new burden since they would have to pay the tax too. And, economists say the plan would favor those with high incomes.
“I can understand how a presidential candidate may want to start out and go a different way,” says John Silvia, chief economist at Wells Fargo Securities in Charlotte, N.C. “But, we have to know how we’re going to get from here to there – there are a lot of implications for this.”
One of the major implications would be moving the nation away from consumption. That may not be so bad, says Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pa. “The more we save and invest, the stronger our economy would be.” But, he quickly adds, “It’s not exactly what I would do, but I sympathize with the spirit.”
If you cut down on consumption, retailers fret it would cost them sales and the nation jobs.
“Every CEO says the reason they’re not hiring is because they’re not seeing demand,” says Rachelle Bernstein, a vice president and tax counsel at the National Retail Federation, a lobbying group, in Washington. "An additional tax on consumer spending will negatively impact that already weak demand."