• With: Mary Anastasia O'Grady, James Freeman, Kim Strassel, Matt Kaminski, Bret Stephens

    This is a rush transcript from "Journal Editorial Report," October 22, 2011. This copy may not be in its final form and may be updated.

    PAUL GIGOT, HOST: This week on the "Journal Editorial Report", from Herman Cain's 9-9-9 plan to Rick Perry flat tax proposal, is real tax reform finally possible?

    Plus, with many "Occupy Wall Street" protesters demanding relief from students loans debt, we'll take a look at what could be the next big taxpayer bailout.

    All that, and the death of Muammar Qaddafi, is it a vindication of Obama's policy of leading from behind?

    (BEGIN VIDEO CLIP)

    REP. MICHELE BACHMAN, R-MINN., PRESIDENTIAL CANDIDATE: If we give Congress a nine percent sales tax, how long will it take a liberal president and a liberal Congress to run that up to maybe 90 percent?

    GOV. RICK PERRY, R-TEXAS, PRESIDENTIAL CANDIDATE: Go to New Hampshire where they don't have a sales tax and you're fixing to give them one. They're not interested in 9-9-9.

    FORMER GOV. MITT ROMNEY, R-MASS., PRESIDENTIAL CANDIDATE: It's not going to be getting bushel basket that has apples and oranges in it because I'm going to pay both taxes.

    HERMAN CAIN, FORMER GODFATHER'S PIZZA CEO & PRESIDENTIAL CANDIDATE: No, no. I'm not --

    (CROSSTALK)

    ROMNEY: And the people in Nevada don't want to pay more taxes.

    FORMER SEN. RICK SANTORUM, R-PA., PRESIDENTIAL CANDIDATE:  Reports are now out that 84 percent more Americans would pay more taxes under his plan.

    (END VIDEO CLIP)

    GIGOT: Welcome to the "Journal Editorial Report." I'm Paul Gigot.

    Those were Herman Cain's rivals ganging up on the businessman in this week's Republican presidential debate, and attacking his 9-9-9 proposal as a tax increase waiting to happen. This, as Texas Governor Rick Perry gets set to release his own flat tax plan next week. So is real tax reform finally possible or does the Cain treatment await any candidate looking to overhaul the current tax system?

    Joining the panel this week, Wall Street Journal, assistant editorial page editor, James Freeman; columnist, Mary Anastasia O'Grady; and Washington columnist, Kim Strassel.

    Mary, those candidates piled on Herman Cain. All of them, every one of them opposed it. But Art Laffer, the economist, supported it in our pages this week. Who is right?

    MARY ANASTASIA O'GRADY, COLUMNIST: First of all, I think that Herman Cain obviously got attacked because he's spiking in the polls, people are worried about him, and this is the cornerstone of his campaign right now. It has a lot of good spiritual initiatives.

    (LAUGHTER)

    In other words, it's --

    (LAUGHTER)

    -- you know, it raises the issue of how complicated the tax code is. It attempts to simplify it, broaden the base, hose are all good things.

    GIGOT: Think it would help economically?

    O'GRADY: The problem with this code, this idea, I think, even though it says that it uncomplicates the code, look at the big debate about how complicated it is. Nobody seems to know exactly what it is. You have a corporate income tax where you have -- you pay taxes, but you're not allowed to subtract out wages. It's called a net profits tax, but apparently you pay it even if you don't have a profit so --

    GIGOT: Elements of perhaps a Value-Added Tax?

    O'GRADY: Yes. I think it's too complicated. And it has the other problem that some people will pay more taxes. That's going to be a political problem.

    GIGOT: James, that's true of any tax reform plan, some people will pay more and some will pay less because you're adjusting obviously for the loopholes and preferences that have been created. That's the entire point.

    (CROSSTALK)

    JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Yes, for the large part, that's inevitable.

    GIGOT: We want a more efficient, fairer, simpler tax.

    FREEMAN: I think what Mr. Cain is going to say, probably is already saying, and what Mr. Perry is going to say next week is, look, we're cutting out hundreds of billions of dollars every year in tax compliance costs. We're cutting out perhaps billions of hours of people figuring out their tax returns. I think you would get some economic benefits out of the Cain plan. You worry about, does it create the architecture to raise taxes later, but you --

    GIGOT: What do you mean by that?

    (CROSSTALK)

    FREEMAN: As Michele Bachmann said it that clip we played, what if Congress runs that sales tax from 9 to 20. What if we end up getting high income tax, which we have now, and high sales tax nationally? that's a problem. Initially, if you actually enacted it, just like what I expect to be the Perry plan, you have a lower rate, you have some simplicity versus the current system, you get more economic growth.

    O'GRADY: But why go to that problem when you go just go to the flat tax?

    GIGOT: Without introducing that sales tax.

    O'GRADY: Yes. And which is basically a consumption tax also. You take your income, you subtract out your investments and you pay tax on what's left. It's so much cleaner, simpler, not, -- you know, doesn't run the risk that James is describing.

    GIGOT: Kim, let's get you in here. You've got Jon Huntsman and Newt Gingrich also proposing tax cuts in rates. Jon Huntsman a major tax reform, bringing the top rate down to, I think, 23, 25 percent. What -- does this mean that among Republicans, at least, reforming the tax code is part of a new consensus and it's going to be part of whatever new president's agenda, if a Republican is elected?

    KIM STRASSEL, WASHINGTON COLUMNIST: Yes, I mean, I think you have to give Herman Cain credit for that, because there's probably no question that when Rick Perry puts out a flat tax, part was motivated by looking at success of Herman Cain, the enthusiasm people out there had for this idea - - just some sort of reform, in the polls, and so he's now putting out his flat tax. And as you said, what this does done is put focus on the fact that we have a lot of interesting tax proposals. You've got Newt Gingrich proposing an optional 14 percent flat tax. The Huntsman plan not only lowers the rates, but consolidates the brackets. If there's only three (ph), gets rid of credits and deductions. There's a lot of interesting thinking.