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

[October 21, 2011]  DETROIT (AP) -- Republican presidential hopeful Herman Cain is redefining his tax plan to allow some deductions, abandoning the zero-exemption feature of his "9-9-9" plan, which has helped win headlines but would have meant a tax increase for more than four-fifths of Americans.

After sharp criticism over his one-size-fits-all plan from Republicans and Democrats alike, Cain was set Friday to propose exemptions for businesses investing in "opportunity zones" as a way to give an economic jolt to rundown neighborhoods. He's also proposing new tax brackets to reflect different income levels.

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.

"We carved out a substantial amount from the aggregate 9-9-9 plan tax base -- enough to exempt those in poverty -- and we will work with Congress to best apply these in a way to break the poverty trap and replace it with positive incentives that encourage people to work and take risks in this economy," Cain said in remarks prepared for delivery Friday outside the once grand -- and now unused -- Detroit train hub.

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.

"We anticipated that attack, but I didn't tell them how I was going to fix it yet," Cain, a former pizza executive from Georgia, told Republicans on Wednesday in Las Vegas. "I wanted to wait until I get attacked on that for a while. We already have a plan for that. ... We're not going to throw the people at the poverty level under the bus."

On Friday, Cain was set to detail those tax incentives for businesses to develop areas in need of economic development, such as those facing high unemployment. But he was careful to differentiate them from other efforts, such as community development grants; Cain's plan relies on businesses to work together to create those environments in the neighborhoods, instead of relying on government spending and mandates.

"Opportunity zones, in conjunction with the 9-9-9 plan, will turn the whole country into one giant opportunity zone," Cain said in remarks prepared for a train depot that last saw Amtrak service in 1988.

"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."

His plan, however, was a significant adjustment from how it was initially proposed. In an interview last week, he suggested some leeway to boost economic development. For instance, taxes in struggling areas could be set at 3-3-3 rates, 3 percent in each category.

"Because you have a lot of African-Americans located in cities like Detroit -- disproportionately -- it would encourage businesses to stay in business there or to move there," Cain told CNN. "It would encourage people to work there, because if you live in the empowerment zone, you're going to pay a smaller percentage in taxes."

[Associated Press; By PHILIP ELLIOTT]

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