Skip to comments.Europe's VAT Lessons-- Rates start low and increase (Perils of a 9-9-9 tax)
Posted on 10/20/2011 2:26:28 AM PDT by dennisw
One trait of European VATs is that while their rates often start low, they rarely stay that way. Of the 10 major OECD nations with VATs or national sales taxes, only Canada has lowered its rate. Denmark has gone to 25% from 9%, Germany to 19% from 10%, and Italy to 20% from 12%. The nonpartisan Tax Foundation recently calculated that to balance the U.S. federal budget with a VAT would require a rate of at least 18%.
VATs were sold in Europe as a way to tax consumption, which in principle does less economic harm than taxing income, savings or investment. This sounds good, but in practice the VAT has rarely replaced the income tax, or even resulted in a lower income-tax rate. The top individual income tax rate remains very high in Europe despite the VAT, with an average on the continent of about 46%.
As Americans rush to complete their annual tax returns today, there is still some consolation in knowing that it could be worse: Like Europeans, we could pay both income taxes and a value-added tax, or VAT. And maybe we soon will. Paul Volcker, Nancy Pelosi, John Podesta and other allies of the Obama Administration have already floated the idea of an American VAT, so we thought you might like to know how it has worked in Europe.
A VAT is essentially a national sales tax that is assessed at each stage of production, with the bill passed along to consumers at the cash register. In Europe the average rate is a little under 20%. In the U.S., a federal VAT would presumably be levied on top of state and local sales taxes that range as high as 10%. Some nations also exempt food, medicine and certain other goods from the tax.
(Excerpt) Read more at online.wsj.com ...
The sales tax component of 999 isn’t a VAT. The end.
Above chart shows VAT TAXES ALWAYS BEING JACKED UP same as your state and county sales taxes have been---
VAT is not exactly a national sales tax but close enough for me. And definitely close enough for Federale Gov't drones who feed on your taxes at the public trough. In Europe they always went up to fund ever growing socialist schemes. Our Democrats have in mind reparations, income redistribution and European style socialist schemes like national health care
One simple solution to these problems would be to require a 60% majority of the voting populace to agree to any tax hikes, and that any approved tax hikes would automatically expire after 4 years and have to be voted on and approved by 60% (again) to be reinstated.
Alas and alack the little people so often mistake a VAT tax for a sales tax. Ever wonder why? Because they are very similar. Close enough for me. A VAT sure isn’t an income tax. It is a tax on stuff I buy and amazingly enough so is a sales tax.
Cain’s plan is not a VAT.
A sales tax and a VAT are quite different from one another, and you’re spreading misinformation by insisting they’re effectively the same.
As you can read from the very article you posted: “A VAT is essentially a national sales tax that is assessed at each stage of production”
Whereas a normal sales tax is a tax that’s only assessed once, at the point of retail sale.
The solution is to keep the tax in the open, like Canada did.
We’ve had our GST since 1992 and it hasn’t gone up.
No government dares to raise it.
WTH?? Can someone PLEASE tell me WHY a national sales tax, VAT or any tax at all cannot ALSO be raises at any time?
Why is this suddenly an issue? Are people just stupid or gullible and believe whatever an opponent of change tells them?
Geez, no wonder this country is so f’d up.
Europeans pay the VAT tax at the cash register same as I currently pay my state sales taxes. Not much difference. Regardless of how the tax is assessed, the end buyer pays both, VAT or sales tax, at the cash register
Don’t trust that. More room for the rats to cheat
Yawn. Inane protectionist policies.
You might want a crash course in this: http://en.wikipedia.org/wiki/Comparative_advantage
Yeah, but with a VAT the producer gets hit with a tax at -every- production stage of a good. Further, the VAT is embedded in the sale pricerather than being up front on receipt like a sales tax (which is only paid once, at point of sale).
Any propagandist demonizing the proposed national one-time retail sales tax, by referring to it as a VAT, is simply a lying pile of crap, including the WSJ.
They're not the same thing at all. Using your comparison above, you may as well say a sunrise and sunset are the same, since the sun is at the same point on the horizon.
9% business flat tax
flat personal income retail sales tax
3. 29% tariffs on all imports
The major difference between the two, and it is a big one, is that a vat is initiated at the manufacturer and at each level of sales the tax is increased, so by the time it gets to retail it has blown up quite a bit. A sales tax, which beats the he** out of a vat or income tax, is only applied at the retail level. The 999 plan would eliminate(ok, that is the hard part)the income tax, the corporate tax, and the sales tax we have now. Don't think we have a fed sales tax now? Guess again. We do have one on lots of items. Once the 9-9-9 plan has been in effect for a while the fair tax would take over.
The way to beat increases in taxes is to make sure your amendment(and it would have to be an amendment in order to dump the income tax)requires a 75%(not 60%, that is too low)vote in order to raise taxes, and both houses would have to vote on it.
When you say a VAT and a sales tax are one and the same(or close enough)you simply don't know what you are talking about. Plus, a national sales tax, with the correct safe guards, is far superior to an income tax. Everyone has to pay it, as long as they buy something they will be paying taxes. No more deductions for the rich or anyone, no free ride for the 47% who don't pay taxes now.
A flat tax, as some people are pushing for, is what we had to begin with and would eventually lead right back to a progressive income tax and all the evils inherent in that system.
I think Cain said that to raise the tax it would have to be a 2/3 vote - difficult - and it would be out in the open so the people would know about the proposed hike before they passed it “so you can see what’s in it.”
I like the plan because it severely restricts lobbyists and gets rid of the social engineering built into the tax code and mostly because ENDS the cronyism “carve outs” for their political donors and friends.
I can’t afford an alpaca to be able to get the tax break for raising alpacas!
*Article 1 - The Legislative Branch
Section 8 - Powers of Congress
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;
Maybe, but they’d need 60% of the voting populace. Not 60% of the people that show up, but 60% of all persons eligible to vote.
The 999 most certainly has a personal income tax of 9% http://www.hermancain.com/999plan
I am going to the VAT wiki and see what the big deal is when freepers like you say it is so much different than a sales tax
A tax which is shared by EVERYONE is much more difficult to raise then taxes paid by only half of the citizens.
I have no problem with that! You obviously know the honorable history of tariffs in America and how with the institution of the income tax in 1913, income taxes started to gradually replace tariffs as primary funding for the Federale Gov’t in DC
Also the Federal Reserve was started in 1913. What a coincidence! That these two Progressive ideas became reality as tariffs were phased out
Oh, how about a potential of hundreds of percent vs 9%.
Japan’s been in a 15-yr recession, and China’s economy is systemically rotten with malinvestment. I hardly think these are worthy examples to follow.
Correct but state and county sales taxes have gotten jacked up all the time in the last 40 years. A way is always found. You give the Federales a national sales tax to play around with, no telling what they might do
Japan is doing just fine. Are you silly enough to think it has declined into a Spain or Portugal? China has turned into an economic powerhouse over the last 30 years via exports. We owe them a few trillion, not the other way around.
The only recent event that dented Japan has been that earthquake and tsunami
I didn’t say Japan was a Spain or Portugal. Here: http://en.wikipedia.org/wiki/Lost_Decade_(Japan)
As for the “economic powerhouse” of China: http://www.telegraph.co.uk/finance/china-business/8821094/Chinas-debt-spree-returns-to-haunt.html
Free trade to the founding fathers meant the freedom of the individual to buy from and sell to any country. It did not mean slashing tariffs on imports while other countries maintain restrictions on imports. In fact, the federal government in the 19th century was funded primarily by tariffs.
For those who believe high tariffs are an impediment to economic growth, look at the US economy from 1865 to 1900. Consider the US economy in the 1980’s before the lowing of tariffs in the 1990’s.versus the US economy today. The dismantling of trade barriers under Clinton and Bush has not resulted in economic prosperity for the US. In fact it has resulted in the loss of the manufacturing sector and millions of middle class jobs. Bring back the tariffs and quotas of the 1980’s, lower taxes on profits derived from US manufacturing to zero, and reduce the government regulatory burden. You will see a booming economy as manufacturing returns to the USA.
I’ve always been a fan of putting everything up for a national public vote. If it’s not related to war or a natural disaster, it can wait.
And Congress would spend less time at DC as well.
He wants to abolish the current system and replace it with the same thing, in fewer words.
No more income tax at all.
What’s wrong with wanting to protect the country? We’ve been blown wide open for far too long.
Nothing wrong with wanting to protect the country, but obstructing free trade isn’t the way to do it.
You had better start doing a lot more homework than just reading talking points. I did and it was called a college paper on economics when the Flat Tax was being discusses and A VAT IS NOT ANYWHERE CLOSE to the sales tax component of the 999 plan. (keypoint to remember is “THIS” sales tax plan)
As said before, those who try to propagate this lie are either ignorant, stupid or politically disingenuous. Because of the nature of this site, I would say you are the latter but you still have the opportunity to prove me wrong, in a number of ways.
That IS a VAT!
Manufacturers will not have to pay a 9% tax on the materials they buy to produce a product. Under a VAT they would. Retailers will not have to pay a 9% tax on products they buy to sell to the consumer. Under a VAT they would. Do you consider the sales tax a state has now a VAT? The best thing about the 9-9-9 plan is everything is out in the open and the voter can see the direct impact on the price they pay or their paycheck each week. This will make it politically much harder to raise taxes, because everyone will be affected immediately by any increase in any on the rates.
Please explain how it is different than a VAT? When the 9% Corp stacks everything down the line, then the retail customer pays it all PLUS 9% on the total it is a VAT.
See post 39
I was only addressing the 9% sales tax component of the plan, which is not a VAT.
You’re already paying a 35% corporate tax + compliance costs (paying tax attorneys, etc.) under the current tax code. 999 drops the corporate rate to 9% AND jettisons all the taxocracy of the current code. Sorry, but that sounds great to me.
Oh, and: http://999calculator.net/
Be sure to click the red button near the bottom labeled “IS THE SALES TAX A VAT?”
“Youre already paying a 35% corporate tax + compliance costs (paying tax attorneys, etc.) under the current tax code. 999 drops the corporate rate to 9% AND jettisons all the taxocracy of the current code. Sorry, but that sounds great to me.”
Damn few companies pay an effective 35% today, and none of them under the current system are paying the tax on their labor costs and non-USA materials. 999 = total fail.
I have to leave for an appointment, but will return later today.
Cain has also said that he’d like to eliminate those hidden taxes and put everything upfront.
If you have to lie and call 9-9-9 a VAT to make your argument, you’re losing.
Further, tell me why it is ok to have a system where government hands out favors to some corporations who pay little or no tax while their competitors do not have that luxury and what that does to the price of goods and services.
Finally, defend income tax as the "fairest" method of taxation when many wealthy individuals have little or no "income" at all, and those here illegally are operating in a cash economy where they are not taxed either.