Armed Polite Society
Main Forums => Politics => Topic started by: Desertdog on May 27, 2009, 11:02:57 PM
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Add Value Added Tax but do not reduce sales or income tax, just what we need to send us into a greater depression than 1929.
Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look
Levy Viewed as Way to Reduce Deficits, Fund Health Reform
By Lori Montgomery
Washington Post Staff Writer
Wednesday, May 27, 2009
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/26/AR2009052602909_pf.html
With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax.
Common around the world, including in Europe, such a tax -- called a value-added tax, or VAT -- has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity.
At a White House conference earlier this year on the government's budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. A recent flurry of books and papers on the subject is attracting genuine, if furtive, interest in Congress. And last month, after wrestling with the White House over the massive deficits projected under Obama's policies, the chairman of the Senate Budget Committee declared that a VAT should be part of the debate.
"There is a growing awareness of the need for fundamental tax reform," Sen. Kent Conrad (D-N.D.) said in an interview. "I think a VAT and a high-end income tax have got to be on the table."
A VAT is a tax on the transfer of goods and services that ultimately is borne by the consumer. Highly visible, it would increase the cost of just about everything, from a carton of eggs to a visit with a lawyer. It is also hugely regressive, falling heavily on the poor. But VAT advocates say those negatives could be offset by using the proceeds to pay for health care for every American -- a tangible benefit that would be highly valuable to low-income families.
Liberals dispute that notion. "You could pay for it regressively and have people at the bottom come out better off -- maybe. Or you could pay for it progressively and they'd come out a lot better off," said Bob McIntyre, director of the nonprofit Citizens for Tax Justice, which has a health financing plan that targets corporations and the rich.
A White House official said a VAT is "unlikely to be in the mix" as a means to pay for health-care reform. "While we do not want to rule any credible idea in or out as we discuss the way forward with Congress, the VAT tax, in particular, is popular with academics but highly controversial with policymakers," said Kenneth Baer, a spokesman for White House Budget Director Peter Orszag.
Still, Orszag has hired a prominent VAT advocate to advise him on health care: Ezekiel Emanuel, brother of White House chief of staff Rahm Emanuel and author of the 2008 book "Health Care, Guaranteed." Meanwhile, former Federal Reserve chairman Paul A. Volcker, chairman of a task force Obama assigned to study the tax system, has expressed at least tentative support for a VAT.
"Everybody who understands our long-term budget problems understands we're going to need a new source of revenue, and a VAT is an obvious candidate," said Leonard Burman, co-director of the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, who testified on Capitol Hill this month about his own VAT plan. "It's common to the rest of the world, and we don't have it."
Seeking New Revenue
The surge of interest in a VAT is testament to the extraordinary depth of the nation's money troubles. While some conservatives have long argued that a consumption tax would provide a simpler and more efficient alternative to the byzantine U.S. income tax code, this time it's all about the money.
The federal budget deficit is projected to approach $1.3 trillion next year, the highest ever except for this year, when the deficit is forecast to exceed $1.8 trillion. The Treasury is borrowing 46 cents of every dollar it spends, largely from China and other foreign creditors, who are growing increasingly uneasy about the security of their investments. Unless Congress comes up with some serious cash, expanding the nation's health-care system will only add to the problem.
Obama wants to raise income taxes for high earners and impose new levies on business, but those moves would not generate enough cash to cover the cost of health care, much less balance the budget, and they have not been fully embraced by Congress. Obama's plan to tax greenhouse-gas emissions could raise trillions of dollars, but again, Congress is balking.
Key lawmakers are considering other ways to pay for health reform, including new taxes on sugary soda, alcohol and employer-provided health insurance. The last proposal could raise a lot of money -- nearly $1 trillion over the next five years, according to White House budget documents. But options on the table would raise a fraction of that sum. And while it might pay for health care, it would barely dent deficits projected to total nearly $4 trillion over the next five years and to grow rapidly in the future, as baby boomers draw on Social Security and Medicare.
Enter the VAT, one of the world's most popular taxes, in use in more than 130 countries. Among industrialized nations, rates range from 5 percent in Japan to 25 percent in Hungary and in parts of Scandinavia. A 21 percent VAT has permitted Ireland to attract investment by lowering its corporate tax rate.
The VAT has advantages: Because producers, wholesalers and retailers are each required to record their transactions and pay a portion of the VAT, the tax is hard to dodge. It punishes spending rather than savings, which the administration hopes to encourage. And the threat of a VAT could pull the country out of recession, some economists argue, by hurrying consumers to the mall before the tax hits.
A VAT's Bottom Line
What would it cost? Emanuel argues in his book that a 10 percent VAT would pay for every American not entitled to Medicare or Medicaid to enroll in a health plan with no deductibles and minimal copayments. In his 2008 book, "100 Million Unnecessary Returns," Yale law professor Michael J. Graetz estimates that a VAT of 10 to 14 percent would raise enough money to exempt families earning less than $100,000 -- about 90 percent of households -- from the income tax and would lower rates for everyone else.
And in a paper published last month in the Virginia Tax Review, Burman suggests that a 25 percent VAT could do it all: Pay for health-care reform, balance the federal budget and exempt millions of families from the income tax while slashing the top rate to 25 percent. A gallon of milk would jump from $3.69 to $4.61, and a $5,000 bathroom renovation would suddenly cost $6,250, but the nation's debt would stabilize and everybody could see a doctor.
Sales Tax Gains Momentum
Burman, who helped House Democrats craft an unsuccessful 2007 plan to repeal the alternative minimum tax, said he's received a number of phone calls from lawmakers interested in his idea, though "they can't quite imagine how to make it happen politically." Burman said the 25 percent rate has caused some sticker shock, and he's trying to figure out how to bring it down.
Graetz's proposal drew an endorsement from Volcker, who last year called it "a sensible plan for reform." (Volcker did not respond to a request for comment.) It also has piqued the interest of Conrad, the Senate Budget Committee chairman who argues that it could be modified to accommodate Obama's pledge not to raise taxes on families who make less than $200,000 a year.
"I think interest is quietly picking up," Graetz said. "People are beginning to recognize that the mathematics of the current system are just unsustainable. You have to do something. And a VAT has got to be on the table if you want to do something big and serious."
Still, the Senate Finance Committee declined to include a VAT among the options it is considering to pay for health reform. And even VAT supporters doubt the tax will find a place among the tax-reform proposals the Volcker panel has been asked to produce by Dec. 4.
Though the nation's fiscal outlook is grim, Burman said "the situation will have to get more desperate" before lawmakers are likely to consider a new levy aimed directly at the pocketbooks of every one of their constituents.
Most lawmakers are still looking for "a painless source of revenue" to overhaul the health-care system and dig the nation out of debt, Burman said. "Who knows?" he added. "Maybe the tooth fairy will bring that to them."
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That would be a mighty big straw on an already very heavily loaded camel.
I'm thinking I might have to find a way not to play very much if they manage to pull that scam on the country.
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Lemme see if I got this.
There's a tax on just about everything already, but it's figured into the retail cost of the item.
Then the locality and state add their own taxes on top. (Some states waiting till the cost of the locality tax is added to the retail price, then taxing the combined total.)
Now Uncle Billy wants to add another percentage on top of those - and it could either be a flat or sliding rate based on how high the now-subtotal comes to?
I just found out that I get zapped when I have sex. (Go look for the story if you are among the anointed. I'm not repeating it here.) Now I'm gonna get screwed again, which means I get zapped again?
Think I could get out of it by claiming being zapped is like being waterboarded? "Don't taze me, bro!" takes on a whole new meaning for me, and I don't like it.
stay safe.
skidmark
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The VAT is added each time something is done to the item that increases it's value.
value-added tax
NOUN:
Abbr. VAT
A tax on the estimated market value added to a product or material at each stage of its manufacture or distribution, ultimately passed on to the consumer.
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And the threat of a VAT could pull the country out of recession, some economists argue, by hurrying consumers to the mall before the tax hits.
*head explodes*
The best way to get people to do something is to penalize them for doing it. ;/
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"Everybody who understands our long-term budget problems understands we're going to need a new source of revenue...
No, we don't need a new source of revenue if we don't create long-term budget problems by spending trillions of dollars. In a news story today, 90% of economists surveyed said they believed the current recession would end by the fourth quarter of this year. If true, that means that there's no need for spending trillions on a stimulus package that doesn't stimulate the economy anyway.
As for nationalizing health insurance...why? Why do we need to spend trillions of dollars turning our current health care system into the same crippled systems tried in other countries? The mantra has been that "40 million people in the US don't have health insurance," but the fact is that a substantial number of those people are young people who have elected not to purchase health insurance. The actual number of people who need health insurance but cannot afford it is likely 20 million or less.
Why, then, screw up the system for 280+ million people when 20 million can be helped with far fewer dollars?
There comes a point when, as was pointed out earlier, the tax burden will break the camel's back. Taxes in New Jersey, more specifically taxes on the "rich," have been going up and up and up. Well, lo and behold, there are now only 2,000 millionaires in NJ where there once were 3,000. Keep raising taxes on US citizens and the population of the US will shrink.
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Wait a minute, haven't they forgotten a wealth tax too?
I mean, let's really annihilate anyone who's made the mistake of being industrious and productive.
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And the threat of a VAT could pull the country out of recession, some economists argue, by hurrying consumers to the mall before the tax hits.
Welcome to my world people. :|
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Wait a minute, haven't they forgotten a wealth tax too?
I mean, let's really annihilate anyone who's made the mistake of being industrious and productive.
Socialists don't see it that way. They think in terms of "fair share" and that wealth is earned on the backs of the peasant workers.
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Thanks for reminding me. I keep forgetting that when I was putting money aside I was exploiting the masses. Self-denial and deferred gratification are a slap in the face to the worker state that subsists by the grace of the almighty Government.
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Thanks for reminding me. I keep forgetting that when I was putting money aside I was exploiting the masses. Self-denial and deferred gratification are a slap in the face to the worker state that subsists by the grace of the almighty Government.
Get back to the tractor factory, your break is over.
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Get back to the tractor factory, your break is over.
Tractor factories in Iowa pay pretty good, that might not be a bad idea.
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Welcome to the lands of barter, craigslist, cash is king and cottage industry.
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Welcome to the lands of barter, craigslist, cash is king and cottage industry.
Ain't that the truth.
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Socialists don't see it that way. They think in terms of "fair share" and that wealth is earned on the backs of the peasant workers.
Actually, they believe that they are more deserving of wealth than the people who worked for, earned, or created that wealth. They want to share the fruits of other people's labor.
When they gain positions of power in government, you have a kleptocracy - government by thieves.
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Liberals dispute that notion. "You could pay for it regressively and have people at the bottom come out better off -- maybe. Or you could pay for it progressively and they'd come out a lot better off," said Bob McIntyre, director of the nonprofit Citizens for Tax Justice, which has a health financing plan that targets corporations and the rich.
I can see this.... Once all of the rainbow farting gold brick crapping unicorns that Obama promised his constituents are paid for, it can only be good times for everyone. Once our National Rationed Health care is in place, how could we not have a utopia?
Welcome to the lands of barter, craigslist, cash is king and cottage industry.
Yep.
I'm seeing this VAT tax as the .gov trying to get their greasy dirty fingers in the internet sales pie. Don't be too suprised if some sort of mechanism isn't put into place to limit the amount of cash a person can pull from their accounts.
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Just what the US needs. If such a thing passes, it will be the final nail in the US coffin. I think Obama's associates want this. Boys... prepare. This will kill the USA. Time to acquire gold and silver. This will put the entire world into war within a year and there is no predicting what the result will be.
What good is keeping GM or Chrysler in business when the whole country will crumble?
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Just what the US needs. If such a thing passes, it will be the final nail in the US coffin. I think Obama's associates want this. Boys... prepare. This will kill the USA. Time to acquire gold and silver. This will put the entire world into war within a year and there is no predicting what the result will be.
What good is keeping GM or Chrysler in business when the whole country will crumble?
Just quoting this so we can revisit it in a year and see how full of it you were.
Chris
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Time to acquire gold and silver.
The time to acquire gold and silver passed long ago, should have bought it when gold was under $400 an ounce and silver was under $5.
We're probably going to be headed into mass inflationary times, hopefully not on the proportion of Zimbabwe or post WWI Germany but I wouldn't be surprised if we hit 25-35% inflation for a couple years. I just hope wages keep up or we're forked.
-C
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I truly hope I am full of it, Mtnbkr. (That is a year after the legislation passes.) I doubt the legislation will pass.
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Just what the US needs. If such a thing passes, it will be the final nail in the US coffin. I think Obama's associates want this. Boys... prepare. This will kill the USA. Time to acquire gold and silver. This will put the entire world into war within a year and there is no predicting what the result will be.
What good is keeping GM or Chrysler in business when the whole country will crumble?
Massive increases in taxes will not kill the USA. Massive increases in spending and inflation might (but even that is highly unlikely). Massive increases in taxes or inflation will kill LIBERTY and innovation, but the country can survive under those circumstances. (I don't want to live under those circumstances, but I think plenty of countries have proved a country can survive under massive taxes or inflation.)
I am wondering how well the rest of the world would fare without the engine that is the US driving the world economy, though.
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The time to acquire gold and silver passed long ago, should have bought it when gold was under $400 an ounce and silver was under $5.
We're probably going to be headed into mass inflationary times, hopefully not on the proportion of Zimbabwe or post WWI Germany but I wouldn't be surprised if we hit 25-35% inflation for a couple years. I just hope wages keep up or we're forked.
-C
Yup. Probably won't be zomgteotwawki but I find it hard to imagine we aren't eventually going to reap what we sow.
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Folks were talking about the value added tax being in the neighborhood of 20% which is beyond belief. The US will never be the same and it will lead to massive inflation beyond the bailout. It seems that once taxes are enacted, they never go away. Politicians make a show of reducing the Federal income tax, but that is just a part of the tax story.
Frankly, I think inflation is what the politicans want (or need). It is likely the only way for the US to dig out of the debt that has been accumulated. Devalue the dollar and pay the old debt with devalued dollars. There is likely no esculation clause that tabs the debt to the value of anything stable. Even precious metals are subject to emotional up and down-swings in value. The problem is that the debt will still not be paid regardless. It's funny money and interest will simply be paid. The debt will just look like a smaller % of gross national product and life will go on... maybe....hopefully.
I don't think it is a bad time to buy gold. Certainly it was better when it was $400 an ounce. People say the same thing about ammunition. Throw in the inflation for a year or two and today's prices will seem low relative to postulated future prices. Ammuntion won't increase in price at the inflation rate. It will be more.
The USA is the dominant pin in the world market. China is slowing making end roads in this area. There problem is that they need such massive growth to employ the citizentry that it is almost impossible to do without the US population buying their products. So if the USA slides into a depression, the result on a worldwide basis is quite unpredictable. But in the past, it has led to broad regional war or world war in the 20th Century.
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I am wondering how well the rest of the world would fare without the engine that is the US driving the world economy, though.
They won't do well:
1. No new drugs to extort from American drug makers at artificially low prices.
2. Fewer US .mil assets to keep all the regional wanna-be powers in check.
3. Smaller US market to sell their stuff to.
4. Fewer innovations to go after via industrial espionage.
5. American health care in the dumps for socialization and no longer the relief valve for countries with their own dysfunctional socialized medicine regimes.
I could go on...
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Folks were talking about the value added tax being in the neighborhood of 20% which is beyond belief.
Got source?
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AZRedhawk44, there's one in the op article:
And in a paper published last month in the Virginia Tax Review, Burman suggests that a 25 percent VAT could do it all: Pay for health-care reform, balance the federal budget and exempt millions of families from the income tax while slashing the top rate to 25 percent.
A quick back-of-the-envelope calculation suggests I will be a little worse off (to the tune of several hundred dollars per year) with a 25% sales tax, even if I'm totally exempted from income tax.
I'd really prefer the government spend less money, rather than take more and provide services of dubious value and reliability.
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A quick back-of-the-envelope calculation suggests I will be a little worse off (to the tune of several hundred dollars per year) with a 25% sales tax, even if I'm totally exempted from income tax.
VAT is not a sales tax.
http://en.wikipedia.org/wiki/Value_added_tax
Value added tax (VAT), or goods and services tax (GST) is a consumption tax levied on value added. In contrast to sales tax, VAT is neutral with respect to the number of passages that there are between the producer and the final consumer; where sales tax is levied on total value at each stage, the result is a cascade (downstream taxes levied on upstream taxes). A VAT is an indirect tax, in that the tax is collected from someone who does not bear the entire cost of the tax.
Maurice Lauré, joint director of the French tax authority, the Direction générale des impôts, was first to introduce VAT on April 10, 1954. Initially directed at large businesses, it was extended over time to include all business sectors. In France, it is the most important source of state finance, accounting for 52% of state revenues.[1]
Personal end-consumers of products and services cannot recover VAT on purchases, but businesses are able to recover VAT on the materials and services that they buy to make further supplies or services directly or indirectly sold to end-users. In this way, the total tax levied at each stage in the economic chain of supply is a constant fraction of the value added by a business to its products, and most of the cost of collecting the tax is borne by business, rather than by the state. VAT was invented because very high sales taxes and tariffs encourage cheating and smuggling. It has been criticized on the grounds that (like other consumption taxes) it is a regressive tax.
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I agree that my characterization of the VAT is somewhat inaccurate. However, without knowing much about the details, based on the statements in the article which suggest that the effect on the consumer is similar to a 25% sales tax, e.g. "A gallon of milk would jump from $3.69 to $4.61..."
Fully exploring the intricacies is impossible without knowing specifics, so I simply looked at the amount of money I spend on pure consumption (food, sundries, gas, ammo, etc.) in a year and multiplied by 25%. The total amount is a bit higher than what I pay in income tax.
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Are you assuming that you wouldn't STILL be paying income tax? I never considered it for a second. Taxes never go away.
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Again, I was going by the article. It says that the VAT would exempt 90% of families from the income tax.
I assumed I'd be in that 90%, but of course I could be wrong.
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Isn't the Fair Tax essentially the notion of replacing income tax by a sales tax or VAT?
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No source on the 20% figure. I have read it. I have also read the number 25%.
I'd like to see the entire current federal tax system scrapped and the Fair Tax enacted. This is not a value added tax. It is taxed at the buyer end of things on monies that are spend for goods or services. Value added taxes are enacted at the manufacturer level and as a result is another hidden tax. Federal and State taxes on gasoline, alcoholic beverages, and cigarettes/tobacco products are value added taxes as I understand it. You still pay state sales tax on cigarettes and liquor.
The Fair Tax approach would most likely be so much better. You spend money, you're taxed. You save money, no tax. No income taxes from paycheck prior to getting it. Huckabee was pushing this as part of his platform for the Republican nomination. The Fair Tax does not eliminate state taxes however.
What worries me is that they are just added another tax and leaving the old taxes in place.