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Video: Fuzzy math behind Cain's 9-9-9 plan?

By Michael Isikoff National investigative correspondent
NBC News
updated 10/15/2011 8:17:34 PM ET 2011-10-16T00:17:34

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.

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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.)

Read more reporting from Michael Isikoff in 'The Isikoff Files'

Currently, the tax rate on long-term capital gains from the sales of stock is 15 percent for those in the 25 percent income tax bracket or higher — 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.

Cain's 999 tax plan is simple; you'll pay more

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.)

Video: Fuzzy math behind Cain's 9-9-9 plan? (on this page)

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.

Story: Cain's 'impossible dream' resonates with voters

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.

© 2013 NBCNews.com  Reprints

Explainer: The 2012 GOP presidential field

  • A look at the Republican candidates hoping to challenge Barack Obama in the general election.

  • Rick Perry, announced Aug. 13

    Image: Perry
    Sean Gardner  /  REUTERS
    Texas Gov. Rick Perry

    Mere hours before a major GOP debate in Iowa (and a couple of days before the high-interest Ames straw poll), the Perry camp announced that the Texas governor was all-in for 2012.

    Click here to see a slideshow of the Texas governor.

    While some on ground in the early-caucus state criticized the distraction, strategists applauded the move and said Perry was giving Romney a run for his money.

    Slideshow: A look at Gov. Rick Perry's political career

    He may face fierce opposition from secular groups and progressives who argue that his religious rhetoric violates the separation of church and state and that his belief that some groups, such as the Boy Scouts of America, should be allowed to discriminate against gays is bigoted.

  • Jon Huntsman, announced June 21

    Image: Jon Hunt
    Mandel Ngan  /  AFP - Getty Images file
    Outgoing U.S. Ambassador to China Jon Huntsman

    Huntsman, a former governor of Utah, made his bid official on June 21 at at Liberty State Park in New Jersey.

    Click here to see a slideshow of the former governor of Utah.

    He vowed to provide "leadership that knows we need more than hope" and "leadership that doesn’t promise Washington has all the solutions to our problems."

    The early days of his campaign were clouded with reports of internal discord among senior staffers.

    Slideshow: Jon Huntsman Jr.

    Huntsman, who is Mormon, worked as a missionary in Taiwan and is fluent in Mandarin. But his moderate credentials — backing civil unions for gays and the cap-and-trade energy legislation — could hurt him in a GOP primary. So could serving under Obama.

  • Michele Bachmann, announced on June 13

    Image: Michele Bachmann
    Larry Downing  /  REUTERS
    Rep. Michele Bachmann

    Born and raised in Iowa, this Tea Party favorite and Minnesota congresswoman announced during a June 13 GOP debate that she's officially in the running for the Republican nomination.

    Click here to see a slideshow of the Minn. congresswoman.

    Bachmann tells The Associated Press she decided to jump into the 2012 race at this time because she believed it was "the right thing to do."

    She's been criticized for making some high-profile gaffes — among them, claiming taxpayers would be stuck with a $200 million per day tab for President Barack Obama's trip to India and identifying New Hampshire as the site of the Revolutionary War's opening shots.

    Slideshow: The political life of Michele Bachmann

    But Bachmann's proved a viable fundraiser, collecting more than $2 million in political contributions in the first 90 days of 2011 — slightly exceeding the $1.8 million Mitt Romney brought in via his PAC in the first quarter.

  • Rick Santorum, announced on June 6

    Image: Rick Santorum
    Charlie Neibergall  /  AP file
    Former Penn. Sen. Rick Santorum

    A staunch cultural conservative vehemently against abortion and gay marriage, the former Pennsylvania senator hopes to energize Republicans with a keen focus on social issues.

    He announced the launch of a presidential exploratory committee on FOX News, where he makes regular appearances. He make his run official on June 6 in Somerset, Pa., asking supporters to "Join the fight!"

    Click here to see a slideshow of the former Pennsylvania senator.

    No stranger to controversy, Santorum was condemned by a wide range of groups in 2003 for equating homosexuality with incest, pedophilia and bestiality. More recently, Santorum faced criticism when he called Obama’s support for abortion rights “almost remarkable for a black man.”

    Slideshow: Rick Santorum's political life

    Since his defeat by Democrat Robert Casey in his 2006 re-election contest — by a whopping 18 percentage points — Santorum has worked as an attorney and as a think-tank contributor.

    A February straw poll at CPAC had him in twelfth place amongst Republicans with 2 percent of the vote.

  • Mitt Romney, announced on June 2

    Image: Mitt Romney
    Paul Sancya  /  AP file
    Former Massachusetts Gov. and presidential candidate Mitt Romney

    The former Massachusetts governor and 2008 presidential candidate has spent the last three years laying the foundations for another run at the White House — building a vigorous political action committee, making regular media appearances, and penning a policy-heavy book.

    Click here to see a slideshow of the former Mass. governor.

    In April, he announced, via YouTube and Twitter, that he'd formed an exploratory commitee. Romney made his run official in Stratham, N.H., on June 2.

    The former CEO of consulting firm Bain & Company and the president of the organizing committee for the 2002 Winter Olympics in Salt Lake City, Romney frequently highlights his business background as one of his main qualifications to serve as president.

    Slideshow: Mitt Romney's life in politics

    To capture the nomination, Romney will have to defend the health care overhaul he enacted during his governorship — legislation that bears similarities to the Obama-backed bill despised by many conservatives. He'll also have to overcome the perception of being a flip-flopper (like supporting abortion rights in his 1994 and 2002 bids for office, but opposing them in his '08 run).

    In the first quarter of 2011, he netted some $1.8 million through his PAC "Free and Strong America."

  • Herman Cain, announced on May 21

    Image: Herman Cain
    Brendan Smialowski  /  Getty Images file
    Talk show host Herman Cain

    Cain, an Atlanta radio host and former CEO of Godfather’s Pizza, has support from some Tea Party factions.

    Click here to see a slideshow of the Atlanta radio host.

    An African-American who describes himself as a “citizen’s candidate,” he was the first Republican to form a formal presidential exploratory committee. He officially entered the race in May, telling supporters, "When we wake up and they declare the presidential results, and Herman Cain is in the White House, we'll all be able to say, free at last! Free at last! Thank God almighty, this nation is free at last, again!"

    Prior to the release of President Obama's long-form birth certificate, Cain rehashed the birther theory, telling a Florida blogger, “I respect people that believe he should prove his citizenship ... He should prove he was born in the United States of America.”

  • Ron Paul, announced on May 13

    Image: Ron Paul
    Cliff Owen  /  AP file
    Rep. Ron Paul

    In 2008, Texas congressman Ron Paul’s libertarian rallying cry — and his opposition to the Iraq and Afghanistan wars — did not fall on deaf ears. An idiosyncratic foe of the Federal Reserve and a passionate advocate for limited government, Paul mounted a presidential run that was characterized by bursts of jaw-dropping online fundraising.

    Click here to see a slideshow of the Texas congressman.

    Slideshow: Ron Paul

    He officially launched his 2012 campaign in New Hampshire, saying, ""The revolution is spreading, and the momentum is building ... Our time has come."

    In the first quarter of 2011, raked in some $3 million through his various political organizations.

  • Newt Gingrich, announced on May 11

    Image: Newt Gingrich
    John M. Heller  /  Getty Images file
    Former House Speaker Newt Gingrich

    The former speaker of the House who led the 1994 “Republican Revolution,” Gingrich remains a robust presence on the GOP stage as a prolific writer and political thinker. In recent years, Barack Obama has provided a new target for the blistering critiques Gingrich famously leveled at President Bill Clinton.

    Click here to see a slideshow of the former speaker of the House.

    In early May, he made his 2012 run official. "I have been humbled by all the encouragement you have given me to run," Gingrich wrote on Facebook and Twitter.

    But a month later, the campaign was practically in ruins — with his campaign manager, spokesman, senior strategists all resigning en masse. Most cited issues with the "direction" of the campaign. But Gingrich vowed to press on.

    Slideshow: Newt Gingrich

    Also at issue: Gingrich’s personal life could make winning the support of social conservatives thorny for the twice-divorced former lawmaker. In a damning interview earlier this year, Esquire quoted one of Gingrich’s former wives describing him as a hypocrite who preached the sanctity of marriage while in the midst of conducting an illicit affair.

    Additional obstacles include his recent criticism of Rep. Paul Ryan’s fiscal plan as “right-wing social engineering" and reports of a $500,000 line of credit to Tiffany’s, the luxury jewelry company.

  • Gary Johnson, announced on April 21

    Image:Gary Johnson
    Jim Cole  /  AP
    Former New Mexico Gov. Gary Johnson

    The former New Mexico governor took a big leap in late April, not by announcing an exploratory committee, but by actually announcing his official candidacy. “I’m running for president of the United States,” he told a couple of supporters and cameramen gathered for his announcement outside the New Hampshire State Capitol.

    He's a steadfast libertarian who supports the legalization of marijuana. He vetoed more than 700 pieces of legislation during his two terms as governor.

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