Cain tweaks 9-9-9 tax plan to allow exemptions

AP News

10/22/2011 12:24:05 AM - AP News

Republican presidential hopeful Herman Cain on Friday redefined his tax plan to exclude the poorest Americans and to allow some deductions, abandoning the zero-exemption feature of his "9-9-9" proposal that helped win headlines but would have meant a tax increase for 4 out of 5 Americans.

After sharp criticism over his one-size-fits-all plan from Republicans and Democrats alike, Cain proposed no income taxes for Americans living at or below the poverty line. He also proposed exemptions for businesses investing in "opportunity zones" as a way to give an economic jolt to rundown neighborhoods such as the one he visited in hard-hit Detroit.

Standing in front of a massive abandoned train depot with broken windows and barbed wire, Cain blamed regulation for the crumbling of the nation's cities.

"When I look at this building behind me, I see opportunity _ if we get capital gains out of the way. There are a lot of people in this country that have money, and capital gains is a wall between people with money and people with ideas," Cain told reporters after a campaign speech. "Because taxes and regulations have gotten so bad, people with money don't want to take risks."

Cain said America needs to renew its optimism and take those risks.

"I believe the American people are saying they want to move this shining city on a hill back to the top of the hill where it belongs," he said, borrowing some of President Ronald Reagan's favorite rhetoric.

Yet many of Cain's proposals for sites such as this one were likely to earn him more skeptics.

Cain's plan suggested minimum wages block low-skill workers from finding work and proposed that they be eliminated in already struggling areas. His plan also suggested that building codes and zoning in such areas should be reviewed; if businesses can make a case the regulations are hurting the economy, they may qualify for waivers.

Organized labor was guaranteed to oppose his proposal that projects funded with taxpayer dollars could pay non-union wages.

"America is ready for solutions, not more rhetoric," he said. "The American dream has been hijacked, but we can take it back."

Cain has seen a meteoric rise in recent weeks as Republican voters have moved from one candidate to another, looking for an alternative to former Massachusetts Gov. Mitt Romney.

Stumbles, however, have plagued Cain. He initially said he would negotiate for the release of U.S. prisoners from terrorists, then reversed himself. Unclear comments on abortion forced another clarification. And then he seemed to undercut his signature tax plan.

Up to now, Cain has touted a plan to scrap the current taxes on income, payroll, capital gains and corporate profits and replace them with a 9 percent tax on income, a 9 percent business tax and a 9 percent national sales tax.

But the plan seems to be unraveling. Cain's shift on zero exemptions comes after an independent analysis showed his tax plan would raise taxes on 84 percent of U.S. households. The Tax Policy Center, a Washington think tank, said low- and middle-income families would be hit hardest, with households making between $10,000 and $20,000 seeing their taxes increase by nearly 950 percent.

Households with the highest incomes, however, would get big tax cuts. Those making more than $1 million a year would see their taxes cut almost in half, on average, according to the analysis.

Cain's rivals seized on the disparity and were relentless during Tuesday's debate; President Barack Obama also decried it.

"It never felt so good being shot at," Cain laughed as he outlined new exemptions for Americans living in poverty and tax incentives for businesses to develop areas in need of economic development.

"Some of the most attractive features will be zero capital gains tax, immediate expensing of business equipment and no payroll taxes are factory-installed in the 9-9-9 plan for the whole country to benefit," Cain said.

He insisted he had not changed positions, though.

"We simply chose not to talk about this piece earlier," he told reporters. "We didn't want to put it all out there at once."