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CNN Truth Squad: Does 9-9-9 add up to a value-added tax?

By Matt Smith, CNN
updated 3:20 AM EDT, Wed October 19, 2011

(CNN) -- Now that he's running in the top tier of national polls, Herman Cain's "9-9-9" tax plan came under immediate criticism from his rivals at a GOP presidential debate in Las Vegas on Tuesday night.

Rep. Michele Bachmann, a onetime Internal Revenue Service lawyer, charged the plan's 9% federal sales tax would amount to a value-added tax similar to those assessed in European countries.

"Because at every level of production you have a profit, and that profit gets taxed," Bachmann said. "Because you produce one portion at one level, and then you take it to the next supplier or vendor at the next level, and you have an exchange. That is a taxable event. And ultimately, that becomes a value-added tax. It's a hidden tax."

Nearly all the other GOP candidates who took part in Tuesday's CNN debate joined the criticism, but Bachmann's was the most detailed. Cain, the former Godfather's Pizza CEO-turned-radio talk-show host, shot back that the sales tax was a one-time retail charge.

"It's not a value-added tax. It's a single tax," he said. He continued, "Take a loaf of bread. It does have five taxes in it right now. What the 9% does is that we take out those five invisible taxes and replace it with one visible 9%."

So is Bachmann correct?

Cain's 9% sales tax is one leg of his tax plan, with businesses paying another 9% and individuals paying another 9% in total income. According to the details laid out on his Web site, businesses would be able to deduct "all purchases from other U.S.-located businesses, all capital investment and net exports."

His campaign says the 9% sales tax -- which Cain acknowledged would come on top of existing state sales taxes -- would replace the taxes "already embedded in selling prices." That appears to differ from a value-added tax, in which taxes are charged at each stage in the development of a product instead of at the moment when the product is sold.

But it's difficult to say definitively due to a lack of details. When CNN reached out to Cain's campaign before Tuesday night's debate for more specifics about his plan, we got no response. And the nonpartisan Tax Policy Center, which analyzed the 9-9-9 plan in a separate study, noted that it heard nothing back from the Cain camp, either.

The verdict: Incomplete.

CNN's Christopher Lett contributed to this report.

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