Value Added Tax...

[jackson33]

The Value Added Tax (VAT) is being highly talked about for the US, to cover current and pending expenses for the Federal Government. To the consumer, it simply would raise (inflate) the price on all goods purchased or the price paid to the distributor of any item, built into the cost, then the Federal, probably the IRS. There is no discussion on it replacing any current Tax, thereby being an additional tax.

 

Of course there is nothing new in this, with a good many Countries already using this program to raise revenues for Social Programs, a couple at 25%*, 12 of which are 20% up to 25%, today.

 

*http://www.nationmaster.com/graph/tax_val_add_tax_sta_rat-value-added-tax-standard-rate

 

A couple thoughts on this;

 

In the US, most every program, from Welfare to SS on to contracted pay raises are based on 'Inflation', which is based on the 'Consumer Price Index' (CPI), which is the average cost of certain goods to the consumer. That is if the inflation rate goes up 4% during a year period, the following years benefit, pay and so on, will be automatically raised at least 4%, in some cases these increases are 'inflation+annual amounts'.

 

It would be my opinion, to raise additional revenues to cover the projected deficits, including programs that are already in progress (not including HC), in the US there would be a need to START with a 20% VAT, to compensate, however some are suggesting 10 to 15%. I don't believe other consequences are being considered (the above), the cost to manage and enforce the program or the actual loss in consumption which anything less than 20% would be progressively meaningless to the increased revenues required.

 

Current public opinion, is certainly opposed to such a tax, but it is being considered and the US Congress would have the authority to enact this program. More important in the US, most our tax obligation to Government, currently goes to State or Local authorities, which would lose revenues, based on consumption or an available base for taxing.

[ParanoiA]

Good god, 20%? Added? Just to be meaningful?

 

The VAT is particularly disgusting and I would like to see a lot of protesting about it. I would support shifting the tax structure and eliminating income taxation, which is incredibly invasive to our privacy and way too easy and tempting to vote the burden on a minority. But as an added tax? Screw that.

 

It will never go away. If it did all the good the taxocrats claim it will, and we paid off our debt and balanced the budget, then we'll get the appeals to how much good it could do to keep it and "we're already used to the tax" so no need to eliminate such a "success".

 

How many have experience with this at the state level? How many "temporary" taxes have you seen eliminated after it satisfied its ends? It's just like the ole conservatives and their "small government" diatribe, while they never shrink government.

[Sisyphus]

I'm missing something. What proposal are you talking about? Where do you get the 20% figure?

[ParanoiA]

That was my reaction to jackson's comment that "...in the US there would be a need to START with a 20% VAT...anything less than 20% would be progressively meaningless to the increased revenues required."

 

The rest of my post is directed toward the proposal.

[the tree]

The VAT in the UK is 17.5% and that raises plenty enough money. But bearing in mind that lots of states in America already have a Sales Tax of up to 10%, you can't really have both of those going at a time (seriously, 29.25% tax on sales would be far, far too much for anywhere and 32% would just be silly).

 

If the choice were between tax on sales and tax on income then income would be the better choice since it'd be easier to stagger and people who spend a tiny proportion of their income wouldn't be exempt.

[Pangloss]

I don't see congress ever passing a straight-up VAT because of the impact on the poor, which of course would be instantly labeled "disproportionate" and "unfair" (even though they probably pay no income tax).

[ParanoiA]

I don't see congress ever passing a straight-up VAT because of the impact on the poor, which of course would be instantly labeled "disproportionate" and "unfair" (even though they probably pay no income tax).

 

I don't know. I've always advocated a national sales tax in place of an income tax and the compelling exception for the poor, to me anyway, was the exclusion of food, clothing, and maybe shelter. That way it's even handed, in that everyone enjoys that exception instead of a privileged minority, though obviously helping the poor the most since it directly effects their necessities.

 

If they were to offer that exception, I could see it gaining momentum.

[jackson33]

The U.S. should consider using a European-style value added tax to help bring the deficit down, said White House adviser Paul Volcker in response to a question from CBS MoneyWatch.com at a panel discussion in New York City Tuesday night. “We have to think about really revamping the tax system,” said Volcker, who’s best known for successfully beating down inflation while serving as Ronald Reagan’s Federal Reserve chairman. The VAT, a levy on all the goods and services you consume, is not a “toxic idea,” he added. [/Quote]

 

http://moneywatch.bnet.com/economic-news/article/vat-will-the-us-adopt-a-value-added-tax/411133/

 

VAT, as reintroduced under by the Paul Volcker Economic Panel, is basically only one method of many that are being proposed and in combination the VAT itself could be effective at less drastic amounts. The only mention here is the ease the tax can be raised with a starting point of 5%. With out a definition, what all consumable product is meant for taxation, it's hard to estimate the what revenue would de drawn from the consumer. For instance; Lumber/Glass/Wiring and all required to build a new home or business would almost have to involved, but what about the home itself. If services are involved, all the provider buys to perform a service would be taxed, obviously passing those cost on, but would they in turn be required to add 5% or whatever to the service charge. This is laid out below, with How VAT works...

 

 

I'm missing something. What proposal are you talking about? Where do you get the 20% figure? [/Quote]

 

sisyphus; As mentioned the 20% was my own figure, not any particular advocate or adversary of the idea. I'm more than open for other opinions, on what the figure might be to cover at least 1 to 1.2T$ foreseeable annual deficits, much less reducing the current 12.8T$ National Deficit. From OP;

 

It would be my opinion, to raise additional revenues to cover the projected deficits, including programs that are already in progress (not including HC), in the US there would be a need to START with a 20% VAT, to compensate, however some are suggesting 10 to 15%. [/Quote]

 

 

Good god, 20%? Added? Just to be meaningful? [/Quote]

 

P; I certainly hope you don't think I'm promoting VAT, since in fact I feel if implemented, it would be the final nail in the US Economy coffin. Raising the cost to produce American Products, even 5% would place them out of range to compete overseas, if you consider their already paying these taxes in other markets. (Disclaimer; I'm assuming raw materials are also taxed)

 

What I feel is the added cost for Government to implement a VAT, with the added people required to administer and ENFORCE the program, no doubt an added department with in the IRS, will cost the same if drawing 5-10-20%*. Then regardless the beginning or progressive amount over time (it will happen) those increases will be offset by increases in anything based on INFLATION.

 

*How VAT works...

A) Supplier 1 charges €100.00 plus 20% VAT (€120.00) to Supplier 2. B) Supplier 1 pays €20.00 VAT to the Government VAT tax office. C) Supplier 2 charges €150.00 plus 20% VAT ( €180.00) to Customer. D) Supplier 2 pays VAT €30.00 to Government and Claims Back VAT €20.00 paid to Supplier 1 (net payment of €10 = 20% on the €50.00 ‘value added’ by Supplier 2. E) Customer pays €180.00 to Supplier 2 (€150.00 for product and €30.00 in VAT). F) Customer* Claims Back from Government €30.00 in VAT paid to Supplier 2.....

 

Because it is complicated, it is tedious, it requires a long administrative process and the return is somewhere in the future, many associations do not take the steps necessary to recover all of the VAT they are entitled to. One solution is to make sure you educate yourself, plan well ahead and take the necessary steps to register. Another solution is to use the services of a Professional Conference Organizer (PCO) to manage the delegate/exhibitor and supplier handling including the VAT issues for you. You gain the financial benefit because the PCO is already established and knowledgeable on how to recover your VAT as part of the overall conference budget.[/Quote]

 

http://www.agshq.com/files/public/VAT_How_does_it_work.pdf

 

P; The Flat Tax or Fair Tax are designed to replace ALL other taxes, including the IRS and it's cost. VAT is designed as a hidden tax (added to cost of product), IMO a self induced devaluation of currency or controlled inflation, a National Sales Tax would be almost impossible to enforce, if acceptable to any of the 50 States, much less a majority (Congressional Legislation)

 

I don't see congress ever passing a straight-up VAT because of the impact on the poor, which of course would be instantly labeled "disproportionate" and "unfair" (even though they probably pay no income tax).[/Quote]

 

Pangloss; I see Congress loving this idea, maybe even both parties. The people on Welfare, SS, would get massive raises in their benefits, Government Employees, Union Worker or any workers (INCLUDING All Congress people and their staff) would get increases in their wages via increase inflation.

[Pangloss]

I've always advocated a national sales tax in place of an income tax and the compelling exception for the poor, to me anyway, was the exclusion of food, clothing, and maybe shelter. That way it's even handed, in that everyone enjoys that exception instead of a privileged minority, though obviously helping the poor the most since it directly effects their necessities.

 

If they were to offer that exception, I could see it gaining momentum.

 

I agree that any sort of sales-tax-based revenue program should be tailored at the product level rather than the income level of the purchaser. But that's a pretty tall order -- lotta stuff out there for folks to buy. Seems like it'd take a big new bureaucracy to manage it.

 

Also, it'd just be a matter of time before we heard complaints along the lines of "Why do I have to pay the same tax rate for a game for my Playstation as Warren Buffet?" That IS fair, IMO, and appropriate too (if you can't afford it don't buy a Playstation), but you KNOW there would be complaints.

[Moontanman]

The sales tax idea seems to be a reasonable thing to discuss, taxes are a strange thing to begin with, you see so many people torqued out of shape over income taxes but from my point of view paying income taxes has never been a problem. I've seen people sit around and get themselves whipped into an absolute frothing at the mouth because they figured out they would pay a few hundred dollars more this year than next in taxes on $45,000, money they never get to begin with. Pissed at anyone they think might be getting government assistance but never blink at sales taxes.

 

For more people who have taxes taken out as payroll taxes would seem to be something you never miss since you never had the money to begin with. What kills me financially is local taxes, if I manage to buy myself a decent car, say $20,000, i pay sales tax of several hundred dollars on it when i buy it and then every year after that i pay taxes on the car as well, several hundred dollars again, over and over each year! then i have to buy tags and inspection and on top of that insurance, every year, so owning a car is meaningless if you become unemployed and don't think they give you a break if you can't afford those taxes and fees, they will take your car and leave you on the side of the road miles away from home with a ticket that will also cost you several hundred dollars.

 

Same thing for property, every year I pay taxes on the things i already payed taxes on when i purchased it. Fail to pay taxes and the property can be taken away from you.

 

Payroll taxes have never seemed a burden, sitting around bitching about what you could have brought home if not for payroll taxes is silly. i simply budget what i net, gross pay is meaningless if you never had it to begin with. But local taxes can be a real problem. I have to pay taxes on cars, property and If for some reason my income had changed i might not be able to drive that car i bought, making it difficult to earn a living to begin with.

 

A sales tax based system might work but if they go like local taxes and keep taxing the same things over and over after you buy them i would have areal problem with such a system.

Edited April 23, 2010 by Moontanman