How can Cain say his plan helps with jobs when he eliminates the ability for businesses to deduct the cost of wages?
dude, please: gross income = revenue - cost of goods sold
wages are included in "costs of goods sold", and gross income is simply your profit (in any) AFTER cost of doing business (which includes wages) but BEFORE deductions
But it's all in what Cain makes deductible in the "cost of goods sold" part of the equation. The plan allows companies to deduct purchases from other companies (and dividends) from the cost of goods sold, but mentions nothing about a deduction for wages. That certainly effects sole proprietors, who can currently count such wages as separate businesses expenses from benefits they pay on behalf of and to their employees when calculating their tax liability. It doesn't effect manufacturers in the same way, since they include wages in the cost of goods sold when they file--but it certainly does give manufacturers an incentive to reduce their tax liability by purchasing a machine from another company to produce a good rather than hiring or raising the wages of a worker to produce the same good. It's at least doubtful whether the half-share the company would save under Cain's plan by not having to submit the payroll tax would be enough to counteract the disincentive to hire a worker or pay them more created by Cain's identified deductible expenses. So, whatever other perks it might have, particularly for companies with large amounts of revenue, it's hard to see how the tax plan does much for workers looking for jobs.
