Value Added Tax Anyone?

[Tony1941]

Senator John Kerry is quoted on the VAT.

U.S. eyes sales tax
As deficits grow, Kerry says European-style fees may be fair
By Jay Fitzgerald | Friday, April 9, 2010 | http://www.bostonherald.com | Business & Markets

Photo by AP


U.S. Sen. John Kerry said yesterday he favors exploring the possible implementation of a new nationwide sales tax similar to ones now imposed throughout Europe.
The issue of a new “value added tax” in the United States emerged earlier this week when Paul Volcker, an economic adviser to President Obama, said the U.S. may need such a tax to close the nation’s long-term budget deficits.
Yesterday, the Congressional Budget Office acknowledged it’s studying a value-added tax, also known as VAT, at the request of unidentified congressional staffers. No dollar amounts were mentioned.
Kerry, a Massachusetts Democrat, stopped short of endorsing a value-added tax. But he made clear it should be on the table.
“The tax code remains too long, too complicated and too chock full of wasteful subsidies and giveaways that don’t make economic sense,” Kerry said in a statement.
“A big reform is overdue. We should simplify. You should look at and consider everything that would take some of the burden off of working people. We should definitely debate alternatives like the VAT, but the test of any idea should be fairness, progressivity and economic growth.”
The idea of a value-added tax - which in Europe taxes products at almost every stage of their development and final delivery to stores - was immediately criticized by Sen. Orrin Hatch (R-Utah), who called it a “job killing” tax.
“There doesn’t appear to be an end in sight to the massive tax hikes coming out of Washington,” he said.
While some conservatives oppose any new taxes, others say they’d prefer a national sales tax over an income tax that many people can now avoid.
But Jon Hurst, president of the Retailers Association of Massachusetts, said he fears a value-added tax would simply be used to fund new programs, such as the nearly $1 trillion health-care reform act approved last month by Congress.
“We’ve just passed a socialist health-care program and now we’re going for a European tax system to pay for it,” said Hurst, complaining a VAT is “extremely regressive and unfair to consumers.”


Article URL: http://www.bostonherald.com/business...icleid=1245809

BTW Tony1941 notes that the VAT acts as a sale tax which is considered to be a regressive form of taxation.
Foreign visitors would be exempt from the VAT just like tourists to Europe get the VAT rebated on exit.

Of course, please note that the VAT will not replace the income tax or any other tax.
Current VAT rates in Europe exceed 20%,

Well guys and gals, you cannot squeeze blood out of a turnip or a corpse.

We all should start learning the words of Swing Low Sweet Chariot.

And the Beyonce Version

We should sing Swing Low Sweet Chariot at the beginning of each Town Meeting.

[ggreenma]

My understanding was the VAT was to replace income tax. Can you point me to information on this?

Is there any reason that we would have to refund VAT to foreign tourists? I know that is common in Europe as a way to promote people to come and be tourists which is ultimately good for business.

I thought moving from income to VAT was a republican/conservative idea?

[Tony1941]

My understanding was the VAT was to replace income tax. Can you point me to information on this?

Is there any reason that we would have to refund VAT to foreign tourists? I know that is common in Europe as a way to promote people to come and be tourists which is ultimately good for business.

I thought moving from income to VAT was a republican/conservative idea?

You do a lot of thinking. Unfortunately, you seem to come up with the wrong attribution of ideas or are unable to comprehend basic economic theory.

1. For the next 10 years, the US government is facing 3 to 6 trillions of deficit spending. The world financiers will not fund this debt w/o a new tax source. The US could increase marginal income tax rates to run from 25% to 77% and generate the money generated by a 20% VAT which is much easier to collect.

2. If you do away with the progressive federal income tax and replace it with a regressive VAT source, the cost of government will be shifted to the $40,000 to $200,000 composite family (divide by 2 for singles). The over 200K class will save enough from the elimination of the income tax that they will come out ahead.

3. Moses did not mandate that the VAT be refunded to foreign travelers. Foreign nations have a simple policy, you screw my paisanos and I will double screw your residents. Consider what happen when the US raised Visa fees. Other governments doubled and tripled their visa fees for Americans.

4. As I told you before when you requested information on topics that can be easily researched "Get off your rump and do your homework.?

BTW
In 2004, Theresa Heinz Kerry paid an effective tax rate of less than 15% on income in excess of $13 million. I am quite sure that many millionaires have tax lawyers that can achieve the same results.

Senator Hatch is supposedly the leader of the conservative Republican caucus group.

[ggreenma]

You do a lot of thinking. Unfortunately, you seem to come up with the wrong attribution of ideas or are unable to comprehend basic economic theory.

I know that in the world of Tony, thinking=bad, but after doing some reading, the VAT taxes has absoutely been an idea bandied about in conservative think tanks. As you point out, a VAT is not a progressive taxes. But conservatives don't like the fact that a VAT tax turns out to be a very efficient taxing machine. As Europe has shown, it's easy to start with a very modest VAT tax rate and over time raise it. Conservatives like when taxes aren't hidden so they can rightfully make much political hay in an effort to make sure that people know what they are paying for taxes in order to put pressure on politicians to cut them.

But the question remains, ignoring the politcal a$$es on both sides of the isle, is some combination of VAT and a simplied tax code better then the ridiculously complex tax mechanism we have.

1. For the next 10 years, the US government is facing 3 to 6 trillions of deficit spending. The world financiers will not fund this debt w/o a new tax source. The US could increase marginal income tax rates to run from 25% to 77% and generate the money generated by a 20% VAT which is much easier to collect.

In 1998, this country was running surpluses. What has changed? Two wars, two major tax cuts, unfunded medicare prescription benefit and an economic meltdown. We could put ourselves back on the path to financial sanity without radical solutions like you suggest although we would still have to deal with financing our aging boomer population.

In 2004, Theresa Heinz Kerry paid an effective tax rate of less than 15% on income in excess of $13 million. I am quite sure that many millionaires have tax lawyers that can achieve the same results.

Exactly why we need tax reform.

[Ghostdog]

There will never be Tax Reform only more Taxes. If a VAT tax is added there is a snowballs chance in hell that the "Income Tax" will be eliminated. The politicians are addicted to the money. The more they have to spend the more they want. Both sides of the aisle have now crippled our childrens chances of keeping most of their future earned income. We have gone over the brink and now the people paying taxes are outnumber by the people who don't pay. Our children are doomed.

[rcweir]

Interesting to look at the historical income tax rates tables. I found this web site listing them from 1913-2010: http://www.taxfoundation.org/files/f...y-20091231.pdf

Our top marginal rate today is 35%. It has been as low as 7% (1913-1915) and has high as 94% (1944-1945). And it stayed about 90% after the war, until Kennedy, then down to 70% until Reagan. So the tax rates today are still, historically speaking, low. (But note that in 2011 the 35% rate jumps back to 39.6% unless Congress renews it)

Of course, this is only the rates in the tables, not what you actually pay, based on incomes, deductions, etc. It would be interesting to see what the average household tax burden, as a percentage of income, has been over this same time.

[Tony1941]

I know that in the world of Tony, thinking=bad, but after doing some reading, the VAT taxes has absoutely been an idea bandied about in conservative think tanks.

No Gary thinking=bad when lazy mentally challenged individuals misrepresent the facts in order to cheer for a particular political ideology.
The European countries for the most part can be characterized as democracies with socialist economic policies. Overall taxation on individuals is much higher than in the US via the VAT, gasoline and other taxes. Tax rates on corporations are all over the place.
I do not follow conservative or progressive think tanks latest views on taxation but it would seem to me that the think tank that espouses the VAT method of raising taxes would be representing high income individuals like Oprah, George Clooney, Whoopy, Leno, Big Pappy, etc. who would benefit from replacing the income tax with a VAT.

But conservatives don't like the fact that a VAT tax turns out to be a very efficient taxing machine. As Europe has shown, it's easy to start with a very modest VAT tax rate and over time raise it.

Conservatives are against efficient government, a rather interesting point. I believe that the point of those people you label conservative against the VAT is that it can be increased over time. MA started out with a 3% sales tax to fund education. It now stands at 6.25% and it hurts MA business located near the NH border. What is even funnier is that if your purchases are individually valued under $1,000 you pay a lower "use tax rate" when you declare your out of state purchases on your MA income tax, than if you bought them in MA.

In 1998, this country was running surpluses. What has changed? Two wars, two major tax cuts, unfunded medicare prescription benefit and an economic meltdown.

The so called wars are really police actions from which states like MA with large military/industrial complexes and few residents on active duty has benefited greatly.

I missed the major tax cuts, from 1998 to 2008 my federal taxes more than doubled.

Barney Frank (Fannie and Freddy Mae) and Dowd of CT seem to have been major players in the meltdown.
The Wall Street bonuses being given out by various financial institutions are obscene. Strange item is that the Democrats in 2008 received more money than the Republicans from Wall Street players.

I guess we should take the old folks to the tar pits. The fact is that the Democratic and Republican politicians prohibited Social Security from negotiating discounts. There are many documented instances that the VA, which is not prohibited from negotiating discounts, getting drugs at 40 to 80% lower prices than Social Security.

The importation of drugs from Canada and Europe was also prohibited supposedly to guard against drug counterfeiting. There are several documented instances were drugs manufactured in the US were exported to Canada where the drugs sold at retail 30 to 40% lower than in the US.
It would appear that big Pharma is being taken care of.

We could put ourselves back on the path to financial sanity without radical solutions like you suggest although we would still have to deal with financing our aging boomer population.

If you read my post, I did not suggest any solutions. I pointed out that the revenue from a 20% VAT could be obtained via an increase in the marginal income tax rates.

I cannot speak for the aging boomer population but they voted for Carter,Clinton and Obama so IMHO they should reap the fruits of their political beliefs.

Personally, I spouse a control on expenditures and a zero base budgeting approach.
Too many federal, state and local government programs get a life of their own.
For instance
1. Are Westford Library services needed?
2. Can the school and public libraries be consolidated?
3. Can we contract ambulance services like Chelmsford and Lowell do and get $60K to $400K/year from the ambulance services?
4. Should we replace curb side garbage pick up and go to a transfer station set up?
5. Do we need 50+ police officers to provide for public safety?
6. Can we provide adequate fire services with two stations vs. three stations?
7. What is the impact of eliminating the WA Athletic Director position?
8. What is the impact on educational programs in going from 21 to 1 (actual) to 25 to 1 staffing in K-8?
9. What is the impact on educational programs in going to a straight 6 period 50 minute period at WA?
10. What is the impact of regionalization of police, fire and educational services ?
11. And so ON

[ggreenma]

This post was one of the smartest tony posts I have seen. There is a saying that we believe that people we agree with are smart and those that don't agree with us are dumb. Today.... I think you are the smartest man in Westford. :-)

The European countries for the most part can be characterized as democracies with socialist economic policies. Overall taxation on individuals is much higher than in the US via the VAT, gasoline and other taxes. Tax rates on corporations are all over the place.
I do not follow conservative or progressive think tanks latest views on taxation but it would seem to me that the think tank that espouses the VAT method of raising taxes would be representing high income individuals like Oprah, George Clooney, Whoopy, Leno, Big Pappy, etc. who would benefit from replacing the income tax with a VAT.

...and lets not forget corporate executives, CxO's and hedge fund managers.

Conservatives are against efficient government, a rather interesting point. I believe that the point of those people you label conservative against the VAT is that it can be increased over time. MA started out with a 3% sales tax to fund education. It now stands at 6.25% and it hurts MA business located near the NH border. What is even funnier is that if your purchases are individually valued under $1,000 you pay a lower "use tax rate" when you declare your out of state purchases on your MA income tax, than if you bought them in MA.

We are in full agreement.

The so called wars are really police actions from which states like MA with large military/industrial complexes and few residents on active duty has benefited greatly.

As you point out, we greatly benefit by becoming addicted to government dollars being poured into our industrial/military complex which then create jobs and economic activity. But having companies addicted to government spending is no better then having individuals addicted to government spending.

I missed the major tax cuts, from 1998 to 2008 my federal taxes more than doubled.

If the tax rates either stayed flat or declined, you must have either lost some major deductions or had some amazing pay increases/bonuses!

Barney Frank (Fannie and Freddy Mae) and Dowd of CT seem to have been major players in the meltdown.
The Wall Street bonuses being given out by various financial institutions are obscene. Strange item is that the Democrats in 2008 received more money than the Republicans from Wall Street players.

I am not going to defend Frank or Dodd, but don't we have enough laws on the books? Although I think we could use some financial reform, in general, the executive branch had plenty of power to regulate, but instead pushed the notion of an ownership society and the notion that unfettered capitalism raises all boats and so chose to relax regulation and to not regulate new financial instruments such as Credit Default Swaps. Yes, congress failed as well, but the executive branch could have done much to stem the oncoming financial crisis.

I guess we should take the old folks to the tar pits. The fact is that the Democratic and Republican politicians prohibited Social Security from negotiating discounts. There are many documented instances that the VA, which is not prohibited from negotiating discounts, getting drugs at 40 to 80% lower prices than Social Security.

The importation of drugs from Canada and Europe was also prohibited supposedly to guard against drug counterfeiting. There are several documented instances were drugs manufactured in the US were exported to Canada where the drugs sold at retail 30 to 40% lower than in the US.
It would appear that big Pharma is being taken care of.

Just an example of how both democrats and republicans both favor corporations over citizens. They each have their own favorite industries leaving us, the US citizens, to fend for ourselves. The net result is stupidity like having us subsidize the drugs the rest of the world uses.

I cannot speak for the aging boomer population but they voted for Carter,Clinton and Obama so IMHO they should reap the fruits of their political beliefs.

Well, they also voted for George W. Bush too.

Personally, I spouse a control on expenditures and a zero base budgeting approach.
Too many federal, state and local government programs get a life of their own.
For instance
1. Are Westford Library services needed?
2. Can the school and public libraries be consolidated?
3. Can we contract ambulance services like Chelmsford and Lowell do and get $60K to $400K/year from the ambulance services?
4. Should we replace curb side garbage pick up and go to a transfer station set up?
5. Do we need 50+ police officers to provide for public safety?
6. Can we provide adequate fire services with two stations vs. three stations?
7. What is the impact of eliminating the WA Athletic Director position?
8. What is the impact on educational programs in going from 21 to 1 (actual) to 25 to 1 staffing in K-8?
9. What is the impact on educational programs in going to a straight 6 period 50 minute period at WA?
10. What is the impact of regionalization of police, fire and educational services ?
11. And so ON

I certainly agree on the zero based budgeting approach, but I think it is up to the people being served to decide on what they want to fund. If the people of Westford decide that students should be picked up for school by hummer limousines, that is perfectly fine, just be willing to accept that you need to fund that service with major taxes. The argument should NOT be about more or less taxes, it should be about making sure every dollar is spent efficiently and about what level of services are desired. Fair enough, it is tough to get government to spend dollars efficiently, but thats what every citizen should be doing as a government participant and as a government watchdog. But its not that government intrinsically likes to run things inefficiently, its that all people run things inefficiently. I have worked at 18 different companies ranging from tiny to humongous and the waste, inefficiency and incompetence could be seen in almost every one of them. Dilbert is funny only because he shines a light reflecting some level of truth.