Presidential candidate Herman Cain made over a dozen stock sales over the past year and a half that earned him between $230,000 and $1.3 million in capital gains — income that would not be taxed at all under his “9-9-9” plan, according to his own financial disclosure statement reviewed by NBC News.
Cain’s 9–9-9 proposal has kicked off fierce controversy spurred by criticism that it will primarily benefit wealthy Americans — in part by eliminating all taxes on capitals gains from the sale of stocks and bonds.
Former Reagan administration official Bruce Bartlett recently called Cain’s proposal a “distributional monstrosity” because “with no tax on capital gains, the rich would pay almost nothing” while taxes on the poor and working class would increase.
On Saturday, Bartlett said Cain, the former CEO of Godfather’s Pizza, is one example of the sort of wealthy investor who would reap the most benefits from his proposal. “No question about it,” said Bartlett. “The wealthier you are, the more your income is going to come from capital gains. And [Cain] is a wealthy man.”
On Saturday, Cain’s campaign did not dispute the figures on Cain’s income from stock sales, calculated from his disclosure statement filed with the Federal Election Commission on August 24, 2011.
But J.D. Gordon, his spokesman, said Cain under his proposal would still have to pay nine percent in income taxes — “the same as everybody else.” He added that the candidate’s plan to set uniform income tax rates and eliminate all capital gains taxes would expand the economy and create jobs by spurring new investment.
In an interview this week, Rich Lowrie — a Cleveland-area market analyst who serves as Cain’s chief economic adviser and helped craft the 9-9-9 plan — said there is nothing unfair at all about eliminating capital gains taxes for stock investors like Cain.
“If you want the same treatment as Herman Cain, it’s available to everybody,” he said in an interview. “All you have to do is work and follow the same path as Mr. Cain. That’s fairness.”
Cain is hardly the wealthiest of Republican presidential candidates. Mitt Romney’s financial disclosure, for example, shows that he is worth between $190 million and $250 million — far more than Cain — with tens of millions of dollars in reported income from capital gains. But Romney has not called for the elimination of all capital gains taxes — only for middle class families, a proposal that is similar to one supported by President Obama. (Texas Gov. Rick Perry has asked for an extension and not yet filed his disclosure statement with the FEC.)
Currently, the tax rate on capital gains from the sales of stock is 15 percent — and is slated to increase to 20 percent in 2013. It is impossible to know how much in capital gains taxes Cain has paid on his stock sales because his financial disclosure statement provides no information on how much he paid for the stocks he sold or when he purchased them. Gordon, his spokesman, declined to say whether Cain would release his income tax returns.
But Cain’s financial disclosure with the FEC shows that he has profited from a multifaceted business career that earned him $846,691 from a radio talk show, speaking appearances and directors fees on three corporate boards during the 20-month period covered by the statement (Jan. 1, 2010, to this August). His total net worth, according to figures in the statement, is between $1.85 million and $4 million.
The disclosure also shows that Cain has been an active investor in the stock market. His largest capital gains came from the sale of 5,738 shares of Coca Cola common stock. Cain reported income from that sale of between $100,000 and $1 million.
He also reported, on another occasion, a separate sale of 2,163 shares of Coca Cola stock for which he reported earning between $15,000 and $50,000. (The financial disclosure requires candidates to disclose their income from such sales only in broad categories.)
Cain also reported capital gains from the sale of 1,999 shares of Whirlpool stock that he valued at between $50,000 and $100,000; another sale of 2,000 Whirlpool shares (valued between $50,000 and $100,000); the sale of stock in Berkshire Hathaway — the firm headed by Warren Buffet (valued at between $5,000 and $15,000) and the sale of 2,000 shares of Sonic Wall Inc. (valued at between $5,000 and $15,000). He also reported smaller stock sales in seven other firms.
The abolition of capital gains taxes is hardly the only part of his proposal that has generated debate — and fierce criticism. Under the proposal, the new 9 percent uniform income tax rate would eliminate all exemptions and deductions, including those for child care, school tuition, health savings accounts and interest on home mortgages. There would also be a 9 percent business tax and a national 9 percent federal sales tax — with no exemptions, even for food and medicine. This would be paid by consumers on top of state and local sales taxes.
Lowrie said in the interview that the elimination of “hidden taxes” built into the tax code would free up market forces and quickly lead to sharp drops in prices, resulting in no net increases paid by consumers when they go shopping.
But critics say the new sales taxes would hurt lower-income consumers the hardest. Edward Kleinbard, a professor of tax law at University of Southern California, has calculated that a family of four with an income of $50,000 could face a tax hike of more than $5,000.
“Anybody who works for a living and has an income below six figures a year is going to find him or herself very sorry that they live in a 9-9-9 tax environment,” Kleinbard said.
Copyright 2013 by The Associated Press. All Rights Reserved.