Posted on 04/13/2010 6:47:29 AM PDT by SeekAndFind
Paul Volcker fired the shot heard around the world-or at least around tax circles-last week when delivered some bad news for anyone paying taxes. It's time, he said, to consider one more: the value-added tax-the consumption tax used widely across the Atlantic.
"If at the end of the day we need to raise taxes, we should raise taxes," said the head of President Obama's Economic Recovery Advisory Board, adding that the VAT, as it's called, is "not as toxic an idea" as we once thought. In fact, the United States is the only developed country that does not have a VAT.
With the $1.5 trillion federal deficit and a soaring debt of more than $12 trillion, it is hardly surprising that pundits and politicians of various political stripes, including House Speaker Nancy Pelosi and N. Gregory Mankiw, economic advisor to President George W. Bush, are flirting with the notion of imposing a VAT tax.
"Unless the president revises his spending plans substantially, he will have no choice but to find some major source of government revenue," wrote Mankiw in the New York Times. "A VAT tax may be the best of a bunch of bad alternatives."
It may pack a less potent punch than a hike in income or corporate taxes, economists argue. The value-added tax, invented in 1954 by French tax authority Maurice Lauré, is collected by the government, in stages, as a product moves through the economy.
(Excerpt) Read more at money.cnn.com ...
For example, take a wool sweater. With a VAT, the sheep farmer and the clothing shop owner--and everyone along the chain in between--adds the tax to the price of their product. But here's the advantage: the price add-on is not cumulative to businesses and producers because everybody only ends up paying their portion of the VAT. At each stage, the buyer receives a tax invoice that is filed with the government tax collectors; the buyer then gets a refund for the tax already paid by the previous person in the chain. The government, of course, gets the entire sales tax; it just receives it in a piecemeal way. (For a good explanation of how it works, see Shawn Tully's article detailing the process.)
Tax experts and economists point to New Zealand, where a 12.5 percent goods and services tax applies uniformly to nearly everything with very limited exceptions-only rent paid for a private home, charitable contributions and interest earned are exempted. (The government offers clear details, too, on its website.)
“In New Zeland, it works in a very pure form,” says Eric Toder, an economist at the Tax Policy Center and a former consultant to the New Zealand Treasury. Toder analyzed the economic impacts of several different VAT tax models for the center, in this report. “The population likes it. People think it’s fair because it doesn’t exempt some folks and not others.”
In New Zealand, it contributes about 25 percent to the government’s bottom line, and the Tax Policy Center in December projected that a 5 percent VAT tax here would generate over $3 trillion in revenue by 2019. That’s not enough to cover America’s huge debt obligations, of course, but it’s a start.
The big questions will be whether or not politicians here can keep it as pure as New Zealand wool
We are NOT under-taxed. ANYONE suggesting this madness should be run out of town on a rail.
No thanks. I pay more than my fair share already.
NO! The big question is what right does the government have to extort money to fund unconstitutional boondoggles and vote buying schemes. CUT THE F***ING SPENDING. Don't raise the revenue.
This is the same rationale used in the Obamacare argument. Oh, come on.....everybody's doing it. When did we decide to govern using peer pressure as the template.
Proof we have adolescent minded adults running the country.
A VAT is still a tax. It takes money away from the people and gives it to the government. This means that the costs of goods and services will increase and the individual will have less discretionary income. It will result in a decline in our standard of living. Our efforts would be better spent on figuring out how to reduce government spending, including reforming the entitlement programs.
I’m leaving if they impose a VAT.
shot
Is that even on the table ?
The income tax is the Left's preferred tool for social engineering - they will never give it up. Any form of VAT would be an add-on.
No thanks.
Stop right there. We never "need" to raise taxes. There is always the choice of reducing spending below revenue levels.
Those who pretend there is no choice are totally without credibility and possibly should be sterilized to eliminate them from the gene pool.
I realize that. But WHAT IF we had the chance to do away with the 16th Amendment and replaced it with a pure VAT ? Would it be better ?
Tax experts and economists point to New Zealand, where a 12.5 percent goods and services tax applies uniformly to nearly everything with very limited exceptions-only rent paid for a private home, charitable contributions and interest earned are exempted. (The government offers clear details, too, on its website.)
Not to put a dent in Volkers genius, but met several Kiwi’s stationed in Singapore. They loved the station because they could afford to buy things like stoves, toasters, and other kitchen appliances in Singapore that were 3x more expensive in NZ. Their plan was to buy all their appliance needs in Singapore while stationed there in order to furnish their NZ kitchen. If this is progress then I am headed for Chile.
It won't and it's not.
NZ's GDP is $110.9 billion (2009 est.) compared to our $14.43 trillion (2009 est.) Only a fool would believe that our huge complex economy could use a small country such as NZ to emulate its tax system. NZ is a socialist country.
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