Herman Cain has been busy lately touting his 9-9-9 tax plan, which I wrote about on Monday. He has countered criticisms that his plan is regressive by noting that the current 15.3% payroll tax (which applies to the first $106,800 of income) would be abolished—lowering the tax burden for the working class.
This analysis leaves many questions, the most important of which is the issue of paying for Social Security and Medicare—which the payroll tax currently funds. Mr. Cain’s apparent solution to this problem would be to gradually move away from Social Security towards the Chilean model where employers contribute a portion of their payroll to a private account. But this change would not solve the problems with the program.