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Special Report

Will Surge Continue for Herman Cain?

This is a rush transcript from "Special Report," October 13, 2011. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

HERMAN CAIN, R - PRESIDENTIAL CANDIDATE: Someone once said simplicity i s genius. And I think this is why I got so many arrows last night relative to 999, because it is a well-thought out, well-developed plan.

GROVER NORQUIST, AMERICANS FOR TAX REFORM: If you have with the income tax one needle in your arm drawing out blood, why would you take three needles and s tick them in on the promise that they'll only take as much as they used to take? I think the danger is they drain you three times as fast.

ART LAFFER, ECONOMIST: This plan is a very efficient way to collect the requisite revenues we need to run government. So I think it's a very good and efficient plan. But if I could do anything to stop future politicians from ever raising taxes, I would love to figure it out.

(END VIDEO CLIP)

BRET BAIER, ANCHOR: Art Laffer economist for President Reagan met with Herman Cain about this 999 plan and signs on to it. There you see the latest Wall Street Journal/NBC News poll that New Debit Card Fees Prompts Government Investigations raising eyebrows and the change from August to October. Look at that, the skyrocketing of Herman Cain.

Obviously, you've heard it, 999 is the plan. Here it is -- nine percent business flat tax, gross income less investments, business purchase and dividends. Empowerment zones will offer deductions for payroll employed in the zone. We'll talk about that.

Individual flat tax, nine percent. And there you see the gross income less charitable deductions. Also empowerment zones here. That's also an added feature to this.

National sales tax is nine percent on all purchases. Now, this is a big question mark with this plan.

We're back with our panel. Steve, it's getting a lot of attention. A lot of people are talking about it. The last debate essentially was about it, largely. What about this? And now you have Representative Paul Ryan saying he loves the plan. You have Herman Cain saying if he was elected he would consider Paul Ryan as vice presidential pick and also Senator Jim DeMint as vice presidential pick. I mean this -- this is interesting.

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: Did a good thing. Those are good people to mention, certainly, especially to generate additional enthusiasm among conservatives.

Look, I think where Herman Cain is trying to go with the 999 plan is where we need to go. And what is surprising if you look at the Republican field is how timid the other candidates have been about tax reform proposals at a time when this economy -- I mean you know, the super committee is debating tax reform, but Republican presidential candidates haven't made it a major issue in the way Herman Cain has and has done successfully.

The problems with the plan I think are ya know, keeping an income tax. If you're going to add a national sales tax you should do everything you can to eliminate the income tax, eliminate a business tax and move towards --

BAIER: Well, that is what he calls phase two.

HAYES: Right, 999 is actually the second phase of three-stage plan ending with a national sales tax, eliminating the IRS.

BAIER: Essentially the fair tax as it is talked about.

HAYES: Right and I think it would have been smarter, more radical certainly, smarter to go from just the incomes tax as we have it now to a national sales tax. People would say that wasn't doable, and the same people who are now criticizing him for saying this is too simple would be saying that was too complicated. It could never happen.

BAIER: Folks like Juan have said that this tax -- this plan would be regressive. Now Art Laffer, economist for President Reagan, who's no slouch when it comes to looking over economic plans, supports it fully and believes that it wouldn't be regressive because prices would go down based on companies taking -- now that's what he said tonight. That's what he said tonight.

(CROSSTALK)

JUAN WILLIAMS, SENIOR EDITOR, THE HILL: I'm listening to you.

BAIER: But you heard the interview.

WILLIAMS: Well I did. But he is speculating. He is guessing. The fact is when you look at the plan right now, especially for people who are buying essential items, ya know going to the store to get milk or something, that this would be a sales tax on top of your local and county and state sales taxes.

BAIER: But you wouldn't pay any payroll tax.

WILLIAMS: Well, that is right. But ya know, the question is for example, even on the corporate taxes what are you paying taxes on? Are you paying it on goods? Yes, says Herman Cain. But what about services, a law firm? I don't know. We don't know. And again, when it is score by independent budget analysts, they say it doesn't produce sufficient revenue to run the government, less revenue than we are getting now.

BAIER: Well, in part, they respond, the Cain folks respond that they don't dynamically score it. In other words, they don't take into account the generation of revenue that would come from simulating the economy so dramatically.

WILLIAMS: This is Laffer's point, I suppose --

BAIER: Yes.

WILLIAMS: -- but again, this is all speculative. Let's just look at the facts as they stand, and it just doesn't carry water.

Now say this, that if you look at the plan, the virtue of the 999 plan in addition to the terrific branding involved from a wonderful businessman, Herman Cain --

BAIER: Spirit Airlines has already taken that --

WILLIAMS: Ok, so I love that part of it. But if you look at it, apart from that part, people say to me all the time, for all my criticism of it, they say Juan, it is simple, it is coherent. I understand it. It is something to me that speaks of conservative virtue very centrally. I like him, and I like it for that point.

BAIER: Chuck?

CHARLES LANE, WASHINGTON POST: Well, I agree with Juan in the sense that I think it's terrific politics. It's easy to understand. It's attractive and so forth. But I have to say I have a lot of questions about it. I've been jotting them down as we've been talking. Eliminate the payroll tax. That means Social Security is no longer a social insurance program? It is a pure welfare program to be funded out of current general revenues. What about that? What does Herman Cain say about that? Ditto for Medicare, by the way. And what about this nine percent sales tax? Does that go to your utility bill? I did a back of the envelope thing with Steve before the show. We figured out that would make a federal gas tax of 30 cents a gallon if applied to a gallon of gas, which is higher than they're taking now. And by the way, it would increase as the gas price goes up.

BAIER: Well we have a lot of questions for Herman Cain on "Center Seat" when he sits here on the panel. There's also questions about internet sales. And that opens up a whole different door about whether --

(CROSSTALK)

BAIER: Sorry, finish your thought.

LANE: So it's simple on paper, but every single one of these questions we've just been discussing would have to be hashed out when the actual legislative process got going --

BAIER: But there is a hunger for that, isn't there?

LANE: Yes.

BAIER: -- a hunger for saying you know what, forget this stuff about deductions here, deductions there, paying the guy to do your taxes that can't figure it out, and make it simple.

LANE: And that is why some kind of tax reform is going to have to come next year or sooner --

HAYES: The U.S. tax code, federal tax code is 70,000 pages. We had the chairman of the tax writing committee in Congress not able to figure it out, the treasury secretary not able to figure it out, and the head of the IRS admit that he goes to somebody else to have his taxes done. You have 82 percent of the country that spends money in one way or the other on having its taxes done, whether it's the 60 percent that pays an accountant or the 22 percent that uses software to prepare their taxes. That is a huge problem.

BAIER: Ten seconds here, I want to go down the road. Does this surge continue for Herman Cain?

HAYES: I think it continues for a while.

WILLIAMS: Yes. And I think that if you look at numbers and the polls this morning, Tea Party people and strong conservatives are thrilled with Herman Cain.

BAIER: So you have a problem with numbers. Ten seconds.

(LAUGHTER)

LANE: I think it continues until Mitt Romney figures out how to stop it.

BAIER: That's it for the panel. But stay tuned for not exactly a comforting kicker segment.

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