Posted on 03/19/2016 9:47:10 AM PDT by Jim W N
At [the Jan 14, 2016] GOP debate, Senator Marco Rubio accused Ted Cruz of sneaking a value-added tax (VAT) into his tax reform plan.
RUBIO: Here is the one thing I’m not going to do. I’m not going to have something that Ted described in his tax plan. It’s called the value-added tax. And it’s a tax you find in many [countries] in Europe.
…
CRUZ: Well, Marco has been floating this attack for a few weeks now, but the problem is, the business flat tax in my proposal is not a VAT. A VAT is imposed as a sales tax when you buy a good.
Rubio is right. Cruz’s business flat tax is a subtraction-method VAT. Businesses play a flat 16-percent tax rate on the difference between sales price and the cost of inputs purchased from other businesses—i.e., value-added.
How does it work? Consider a loaf of bread. Say the farmer sells the wheat to a miller for 25 cents. Assuming the farmer has no deductible expenses, the initial tax would be 4 cents (16 percent of her 25 cents of income). The miller grinds the wheat and sells flour to a baker for a dollar. His value added is 75 cents, which is subject to 12 cents of business flat tax. The baker sells the loaf of bread for $2 and remits another 16 cents of tax on her $1 of value-added. The total tax adds up to 32 cents, or 16 percent of the final sale price.
The VAT is different from state sales taxes because it is included in the [internal] price of the good rather than added at the cash register. That’s one reason why some conservatives object to it—Rubio cited Ronald Reagan. And why Cruz may be so defensive.
(Excerpt) Read more at forbes.com ...
The proposed VAT (or even a simple national sales tax) would be disastrous because it would ADD a new tax scheme to the already oppressive income tax. The 16th Amendment MUST be repealed before talk of a national sales tax and we should NEVER accept a VAT. Cruz is way off on this one.
So two major substantive problems with Cruz IMO:
1) his avoidance of settling his NBC eligibility status before being nominated so the Dems cannot DQ him and potentially win the general by default.
2) his proposed VAT
Just what we need. More hidden taxes.
OMG
Cruz is OUT.
He has never been a Governor, nor a business man, nor run anything but for office...usual politician, all talk and no show, all he has ever done is political stuff, he has never signed the front of a check in his life...
Common Core Tax.
Right, but Trump and all of them have a so-called “business tax” in their plan. There really is no such thing as a “business tax”, only a tax paid by the individual consumer through forced higher prices. (The true tax an individual pays is their income tax, the business tax, and inflation through government overspending.)
The problem with Cruz’s proposal is the VAT itself which multiplies the problems of a business tax.
Cruz is not a conservative, he is just playing one, because he thought that will get him nominated and elected president.
He is also not competent, as his VAT tax idea demonstrates.
Yep. Snake oil GOPe Republicans are big fans of “no taxes”, but imposition of “fees” in their stead. Then they campaign on how they “lowered taxes” while everyday people’s out-of-pocket burdens have somehow magically gone up. And finally, when you get them in a corner about it, they fall back on lawyery weasel words and will say, with a straight face, “that’s not a tax, it’s a [insert other word here]”.
Scumbags.
If we’re actually going to impose tariffs on foreign made goods to incentivise American-made products, that’s one thing. But doing nothing to stop the pain of globalization except imposing a VAT tax, is not going to do a damn thing to incentivise anything. Globalization will continue as planned, more jobs will go to third world countries, and on top of it, we’ll be afforded the “pleasure” of paying more taxes on our economy-destroying foreign garbage.
..Just what we need. More hidden taxes...
What a coincidence.
Canada has a VAT tax that runs 13-16%.
He sure as hell doesn't understand business. If nothing else, VAT is an administrative nightmare. Canada has a GST tax, so this jerk thinks a VAT is a really cool idea.
I'm fed up with our country being run by morons. And yet, we have another lawyer/politician running who thinks he has a clue; and his supporters who are even more clueless.
Jim, you are wrong. I recently admitted that his tax plan was a VAT, then my brother explained the VAT just as you explained it. Cruz’s plan is not a VAT. It is a business tax, similar to the payroll taxes, corporate income taxes, and many other business taxes that companies pay today. With Cruz’s tax plan you eliminate all taxes, and in its place you establish his flat business tax. I think personally his plan my actually lower prices. and that doesn’t even get to part where he helps importers and exporters.
Consider a loaf of bread. Say the farmer sells the wheat to a miller for 25 cents. Assuming the farmer has no deductible expenses, the initial tax would be 4 cents (16 percent of her 25 cents of income). The miller grinds the wheat and sells flour to a baker for a dollar. His value added is 75 cents, which is subject to 12 cents of business flat tax. The baker sells the loaf of bread for $2 and remits another 16 cents of tax on her $1 of value-added. The total tax adds up to 32 cents, or 16 percent of the final sale price.
What about that is not true about Cruz's plan?
I have thought this for a long time. This would explain his sneaky votes and his convoluted explanations. Am suspecting that Cruz is not his own man - he is run by others. All he really seems to want to do is debate...back to his college days.
Well other than all of the other taxes being removed, and by that logic we already are paying a VAT tax, its called the payroll tax, and the corporate income tax. You cannot tell me that when businesses pay the payroll tax, that they do not pass the expense unto the consumer already.
Same here. He was my #1 choice until one of Trump's blunt assessments about immigration got my attention about six months ago and I began to notice that Ted wasn't "all that." Since then, I've become convinced he was never so much a DC "outsider," as a peripheral GOP-e player who happened to rub other long-time members the wrong way. Now I consider him just another operative for the Bush and/or Romney contingents.
Mr. niteowl77
You are WRONG! WRONG! WRONG! Ted Cruz says that his tax on the value added by a business is not a VAT! He is proposing a “tax on the value added”, and a VAT is a Value Added Tax! Don’t you see the difference? COME ON! Get with the program!
I did a little searching on Cruz's tax plan (the personal one) to see if he was counting Social Security as total taxable income. Well, I never could find that answer but I did see that he wants to raise the SS age and redefine how the cost of living increases are figured - they are too high now - two years of 0 but too high.
It is going to be so easy for people - 10% will automatically be deducted from interest payments and dividends. After all, he is getting rid of IRS (so he said) so it's anyone's guess who gets to figure the 10k adult deduction and 4k everyone deduction since you have already paid 10% on every bit of income. And let's not forget mortgage interest and child care credits are staying but property taxes, local and state income taxes are eliminated.
That should wrap up the over 60's vote real well.
First of all, unless you can find the Forbes’ description incorrect, it IS a VAT. (Cruz fails to describe it much at all and in fact seems to be confused about it himself).
Now is sounds like you’re trying to justify a VAT, but a VAT is convoluted and allows the feds to invade, intrude, and interfere even more upon the internal workings of business. It is also a new tax code that would be ADDED to the existing income tax - totally unacceptable. You must FIRST repeal the 16th Amendment before proposing a new type of tax - a national sales tax but NEVER a VAT.
If so, then how do state and municipal expenses and payrolls get made? From the Federal handouts?
Sounds as though ALL local control is surrendered. NFG!
I find the Forbes description wrong. It assumes that the tax must be passed to the customer at the point of sale but does not take into account the savings from the removal of the previous tax.
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