The plan is nothing if not bold, throwing out the current tax code and replacing it with three new taxes: a 9% flat rate personal income tax with no deductions except for donations to charity; a 9% flat rate tax on net business profits; and a new 9% national sales tax.

The plan abolishes the current payroll and estate taxes, as well as those on capital gains and dividends. All capital expenses of businesses would be expensed in the year of purchase and foreign profits could be repatriated without a tax penalty. The plan is designed to raise as much revenue as the current tax code, and the Heritage Foundation estimates it would not increase the budget deficit. 

The plan’s chief virtue is its sharp reduction in marginal tax rates, to 9% from 35% for businesses and top-earning individuals. Another benefit is that it would eliminate the current double taxation on savings and investment. When this is combined with expensing of capital investment and the sales tax on retail sales, Mr. Cain’s plan would in effect convert the federal tax system into a de facto consumption tax.

In an instant, the U.S. would have the lowest corporate tax rate among our major trading partners, from the second highest today. All of this would provide a significant boost to U.S. domestic investment and global business competitiveness. If Americans want more jobs, this plan would produce them in a hurry.

The simplicity of 9-9-9 is also a selling point, as is its elimination of loopholes. Businesses, for example, would deduct all of their legitimate business expenses (except wages paid) from their gross receipts. The provisions that have allowed companies like General Electric to pay little or no federal income tax would be gone.

The main beneficiaries of the current tax code are already howling in protest, notably the housing lobby. But this is not a reason to oppose the plan. The U.S. economy has over-invested in housing thanks to tax and other subsidies. Any tax reform worth its name will have to reduce this favoritism that robs scarce capital from the rest of the economy.

With a low 9% tax rate, deductions like the one for mortgage interest become much less attractive in any case. The key to an immediate housing recovery is to let prices find a bottom, while the key to a durable housing industry is a growing economy that lifts personal incomes. In the 1980s, Ronald Reagan cut the after-tax value of the home mortgage deduction by more than half—by cutting the tax rate to 28% from 70%—but home sales and values surged.

The real political defect of the Cain plan is that it imposes a new national sales tax while maintaining the income tax. Mr. Cain’s rates are seductively low, but the current income tax was introduced in 1913 with a top rate of 7% amid promises that it would never exceed 10%. By 1918 the top rate was 77%.

European nations began adopting national sales and value-added taxes on top of their income taxes in the 1960s, and that has coincided with the rise of the entitlement state and slower economic growth. Consumption tax rates usually started at less than 10%, but in much of euroland “the rates have nearly doubled and now are close to 20%,” according to a study by the Cato Institute’s Dan Mitchell. Because a sales tax would raise huge sums with small increases in the rate, we would see regular campaigns like “a penny to fight poverty,” or “one-cent for universal health care” that would be politically tough to defeat.

The politics of a national sales tax is bad enough on its own. A 9% rate when combined with state and local levies would mean a tax on goods of 17% or more in many places. The cries for exemptions would be great. The experience of the so-called Fair Tax that would impose a 23% national tax rate isn’t favorable, as even Jim South Carolina’s DeMint learned when he nearly lost his first bid for the Senate after Democrats attacked the sales tax.

Mr. Cain’s campaign argues that the after-tax price of, say, potato chips or a new TV will be no higher even after the 9% tax because current prices have current taxes embedded in them. “We rip out the bad taxes (lowering prices) then put the sales tax back in,” writes Rich Lowrie, a top economic adviser to the Cain campaign in an email. “It is not an add on tax. It is a replacement tax.” That is right economically, but it’s a hard political sell to a family that sees the tax on its grocery bill.

Part of Mr. Cain’s appeal is his willingness to challenge political convention, and he certainly has with his tax proposal. Voters like that he isn’t a lifetime politician but a successful business owner who has met a payroll and created jobs. But his endorsement of a sales tax on top of the income tax is a political gamble that would eventually finance an even larger entitlement state. Better to reform the devil we know—the income tax—than to introduce another devil and end up with ever-rising rates of both