Transcript: No More Income Tax?

This is a partial transcript from "Your World with Neil Cavuto," March 4, 2005, that was edited for clarity.

NEIL CAVUTO, HOST: Tax what we spend rather than what we earn? It is called a consumption tax (search). It would mean that you'd get every penny in your paycheck and Fed chief Alan Greenspan (search) just said it could spark the economy. So is it a good idea?

Well, Herman Cain says yes. Herman is the former chairman of Godfather's Pizza, but he never gained a pound when he worked there. He's the current CEO of The New Voice, Incorporated. Soon he'll have a best seller to come out.

Herman, good to have you.

HERMAN CAIN, CEO, THE NEW VOICE: Thanks. Happy to be here.

CAVUTO: Why do you think this is a good idea when many people say it hurts the little guy more?

CAIN: It doesn't hurt the little guy for the following reasons. In the actual legislation that's already been introduced — it's been introduced in the House and the Senate — there is a provision up to the poverty level where you don't pay any sales tax.

Secondly, it helps the little guy, the people that don't make as much money, because used goods and services are not taxed. Now, my dad bought a lot of used stuff, in order to get us to the point where he could buy some new stuff.

And so there are tremendous advantages when you tax what people spend and not what they earn.

CAVUTO: Do you want to junk the income tax altogether?

CAIN: Totally.

CAVUTO: Really?

CAIN: Now, I respect Mr. Greenspan, but I don't agree trying to blend.

CAVUTO: You can't do both.

CAIN: NO, you don't do both. That's like giving a loaded gun to a 3-year-old, pointing it at their head and saying, "Don't pull the trigger." You don't do that.

I mean, let's look at what's happening in Congress right now. You know, the spending that's going on and a lot of the other things. They cannot be trusted with both of those.

I would not personally support trying to do both. But this national sales tax, the fair tax, as it's called, it's been studied, and it's been around for a long time.

CAVUTO: Could it raise more money then typically raising income tax?

CAIN: Absolutely.

CAVUTO: But some people fear it will stifle.

CAIN: No, that is totally false. There were studies early in the development of the fair tax, which they did some modeling which shows that it would actually stimulate the economy. It would unleash...

CAVUTO: Would it make you buy more? A $25,000 car if you had a 20 percent tax on it?

CAIN: Well, keep in mind that the average worker would get a 30 percent increase in take-home pay, a 30-percent increase in take-home pay. This is not a broken record. You have to say that, because the 23 percent sales tax that you would pay is what you would pay on all new goods and services. And just like people buying...

CAVUTO: What about food?

CAIN: That's taken care of in the allotment that you get up to the poverty level. And everybody gets it. Whether you are rich or poor, you deserve not to have to pay sales tax on your basic necessities of food.

CAVUTO: What do you make of the president's push for something like this to get the tax (ph) going. I think he's at Notre Dame at this hour. He's also making a push for getting Social Security fixed up. But maybe it's just my imagination, but he seems to be losing his mojo here. What do you make of that?

CAIN: First of all, he is the first president in a long time that has been willing to take on something as big like the Social Security structure, and the tax code because we've known that we've had some issues here for a long time. So, we have to commend him for that.

My disappointment is with Congress, who's not following. You know, there's an old saying: lead, follow or get out of the way. Now, unfortunately, too many of them, especially on both sides of the aisle, they won't follow, they won't lead and they won't get out of the way. So what he is doing is exactly what he has to do, to get the American people...

CAVUTO: But what if he doesn't get this? I mean, you know, there are some in Congress, even Bill Frist, the majority leader, who seemed to backtrack from that statement that said this couldn't be voted on until maybe next year. What's going to happen now?

CAIN: Well, I think that with the president doing his 60 stops in 60 days, I think that's going to help. Secondly, I think that the more people understand about the facts of what he is proposing with respect to the personal retirement accounts, they really haven't...

CAVUTO: Most people are afraid of the stock market, you know.

CAIN: Well, here's the thing. This is the biggest misconception. A personal retirement account is not a single stock. You invest in a mutual fund. Look at the system that Congress uses.

CAVUTO: Why don't they have you espousing it?

CAIN: I would love to.

CAVUTO: I'll tell you what. I love, you know, a lot of the president's team — but they're botching this P.R. deal.

CAIN: Well, let me tell you. See, here's the thing. It's not a single stock. Now here's what a lot of people are just beginning to realize. Federal workers and congressmen and senators, they have a personal retirement account system.

CAVUTO: That's right. They do.

CAIN: It's called a thrift savings plan.

CAVUTO: They love it.

CAIN: Now, they like to go out and say, well, you know, people in the investing in the stock market, that's not going to be a good idea, but the fact is all they have to do is select plan A, B, C or D.

CAVUTO: That's right.

CAIN: And that's all the people are asking for.

CAVUTO: We should tell them you give us your program.

CAIN: That's what the president is trying to get for everybody.

CAVUTO: Herman Cain. Always fun. Thank you very much. Appreciate it.

CAIN: It's my pleasure. Thank you, Neil.

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