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Europe's VAT Lessons-- Rates start low and increase (Perils of a 9-9-9 tax)
WSJ ^ | April 15 2010

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 ...


TOPICS: Business/Economy; News/Current Events
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1 posted on 10/20/2011 2:26:32 AM PDT by dennisw
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To: dennisw

The sales tax component of 999 isn’t a VAT. The end.


2 posted on 10/20/2011 2:28:58 AM PDT by Utmost Certainty
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To: dennisw

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

3 posted on 10/20/2011 2:33:51 AM PDT by dennisw (What good is a used up world and how could it be worth having - - Sting)
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To: dennisw

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.


4 posted on 10/20/2011 2:36:55 AM PDT by Spktyr (Overwhelmingly superior firepower and the willingness to use it is the only proven peace solution.)
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To: Utmost Certainty

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.


5 posted on 10/20/2011 2:37:22 AM PDT by dennisw (What good is a used up world and how could it be worth having - - Sting)
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To: dennisw

Cain’s plan is not a VAT.


6 posted on 10/20/2011 2:37:27 AM PDT by sneakers (EAT YOUR PEAS!)
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To: dennisw
He intends to pass the Balanced Budget Amendment.
He says this is the first step on the path to the Fair Tax, which would eliminate income tax altogether.
And he says there is no tax in existence which they cannot raise. We must be diligent to elect people who will not raise it.
His is the only plan which extends the tax base to include the 50% who pay no federal income tax now, not to mention those working under the radar who receive benefits but pay nothing (illegals).
This also eliminates the payroll tax which is 6%.
It's a really good plan, far better than Newt's or Romney's. They want to tweak the old system. He wants to "abolish and replace."
Go to cspan2.org and watch his speech to the Values Voters Summit. It's brilliant.
7 posted on 10/20/2011 2:39:14 AM PDT by athelass (Proud Mom of a Sailor & 2 Marines! My son has safely returned from deployment, Thank you Jesus!)
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To: dennisw

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.


8 posted on 10/20/2011 2:44:45 AM PDT by Utmost Certainty
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To: dennisw

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.


9 posted on 10/20/2011 2:45:15 AM PDT by Jonty30
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To: dennisw
My 9-9-29 plan
  1. 9% business flat tax
  2. 9% flat personal income tax
  3. 29% tariffs on all imports    
    Yep tax the foreigners for the right to sell their stuff in the great American marketplace. Prices will rise a bit but this will bring home lots of jobs and factories. This will encourage domestic oil production after the next Republican president nukes the EPA because we import 60% of our oil

10 posted on 10/20/2011 2:47:39 AM PDT by dennisw (What good is a used up world and how could it be worth having - - Sting)
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To: dennisw

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.


11 posted on 10/20/2011 2:49:06 AM PDT by 101voodoo
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To: Utmost Certainty

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


12 posted on 10/20/2011 2:51:48 AM PDT by dennisw (What good is a used up world and how could it be worth having - - Sting)
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To: Spktyr

Don’t trust that. More room for the rats to cheat


13 posted on 10/20/2011 2:52:21 AM PDT by EQAndyBuzz (I am a Cainiac)
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To: dennisw

Yawn. Inane protectionist policies.

You might want a crash course in this: http://en.wikipedia.org/wiki/Comparative_advantage


14 posted on 10/20/2011 2:52:21 AM PDT by Utmost Certainty
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To: dennisw

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 price—rather than being up front on receipt like a sales tax (which is only paid once, at point of sale).


15 posted on 10/20/2011 2:55:49 AM PDT by Utmost Certainty
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To: dennisw

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.


16 posted on 10/20/2011 2:55:56 AM PDT by ROCKLOBSTER ( Celebrate Republicans Freed the Slaves Month.)
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To: dennisw
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.

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.

17 posted on 10/20/2011 2:59:19 AM PDT by edpc (Former Normalcy Bias Victim)
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To: dennisw
GET IT RIGHT!

1. 9% business flat tax
2. 9% flat personal income retail sales tax
3. 29% tariffs on all imports

18 posted on 10/20/2011 3:01:35 AM PDT by ROCKLOBSTER ( Celebrate Republicans Freed the Slaves Month.)
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To: dennisw
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.

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.

19 posted on 10/20/2011 3:02:03 AM PDT by calex59
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To: 101voodoo

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!


20 posted on 10/20/2011 3:04:00 AM PDT by 30Moves
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To: Utmost Certainty
Sorry but no-sale on your dinosaur era theories of free trade. They just don't wash today. Free trade is a very strange Anglo-American obsession. How come high IQ nations like Korea, Japan and China laugh at such pie in the sky theories and certainly don't conduct business this way. They build and protect their industries and jobs
  1. Free trade within our 50 states---great idea! (and written into our Glorious Constitution*)
  2. Free trade in world markets? Only for chumps and losers/

 

*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;

21 posted on 10/20/2011 3:04:57 AM PDT by dennisw (What good is a used up world and how could it be worth having - - Sting)
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To: EQAndyBuzz

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.


22 posted on 10/20/2011 3:06:43 AM PDT by Spktyr (Overwhelmingly superior firepower and the willingness to use it is the only proven peace solution.)
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To: calex59

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


23 posted on 10/20/2011 3:08:40 AM PDT by dennisw (What good is a used up world and how could it be worth having - - Sting)
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To: 30Moves

A tax which is shared by EVERYONE is much more difficult to raise then taxes paid by only half of the citizens.


24 posted on 10/20/2011 3:13:55 AM PDT by 101voodoo
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To: ROCKLOBSTER

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


25 posted on 10/20/2011 3:15:13 AM PDT by dennisw (What good is a used up world and how could it be worth having - - Sting)
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To: dennisw
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

Oh, how about a potential of hundreds of percent vs 9%.

Wiki!?!?

26 posted on 10/20/2011 3:15:26 AM PDT by ROCKLOBSTER ( Celebrate Republicans Freed the Slaves Month.)
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To: dennisw

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.


27 posted on 10/20/2011 3:18:15 AM PDT by Utmost Certainty
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To: 101voodoo
A tax which is shared by EVERYONE is much more difficult to raise then taxes paid by only half of the citizens.

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

28 posted on 10/20/2011 3:19:28 AM PDT by dennisw (What good is a used up world and how could it be worth having - - Sting)
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To: FReepers; everyone; All


DONATE NOW, MONTHLY IF YOU CAN!

WHAT WOULD YOU DO WITHOUT FREE REPUBLIC?

29 posted on 10/20/2011 3:30:08 AM PDT by onyx (You're here on FR so, support it! Compiling New Sarah Palin Ping List! Tell me if you want on it!)
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To: Utmost Certainty

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


30 posted on 10/20/2011 3:30:26 AM PDT by dennisw (What good is a used up world and how could it be worth having - - Sting)
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To: dennisw
You don't need to go to Wiki- its made real simple here in two big pictures.
31 posted on 10/20/2011 3:35:18 AM PDT by wistful
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To: dennisw

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
Also: http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6575883/China-has-now-become-the-biggest-risk-to-the-world-economy.html


32 posted on 10/20/2011 3:40:10 AM PDT by Utmost Certainty
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To: dennisw

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.


33 posted on 10/20/2011 3:43:10 AM PDT by Soul of the South (When times are tough the tough get going.)
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To: Spktyr

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.


34 posted on 10/20/2011 3:43:57 AM PDT by wastedyears (Attaaack Waaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaatch)
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To: athelass

He wants to abolish the current system and replace it with the same thing, in fewer words.

No more income tax at all.


35 posted on 10/20/2011 3:46:06 AM PDT by wastedyears (Attaaack Waaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaatch)
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To: Utmost Certainty

What’s wrong with wanting to protect the country? We’ve been blown wide open for far too long.


36 posted on 10/20/2011 3:49:16 AM PDT by wastedyears (Attaaack Waaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaatch)
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To: wastedyears

Nothing wrong with wanting to protect the country, but obstructing free trade isn’t the way to do it.


37 posted on 10/20/2011 3:59:19 AM PDT by Utmost Certainty
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To: dennisw

Dennis,

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.


38 posted on 10/20/2011 4:00:44 AM PDT by mazda77 (and I am a Native Texan)
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To: Utmost Certainty
The Corp 9% is the VAT part. With no reduction for labor costs or non-US product purchases, it has to all be passed on, with a profit added, to the next company, and the next, and so on. By the time the product gets to the retail customer ALL those taxes plus profit have been stacked up and inflated into the price.

That IS a VAT!

39 posted on 10/20/2011 4:04:20 AM PDT by Beagle8U (Free Republic -- One stop shopping ....... It's the Conservative Super WalMart for news .)
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To: Beagle8U

Wrong.


40 posted on 10/20/2011 4:14:11 AM PDT by CSI007
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To: dennisw
There is a huge difference. A value added tax (VAT) is added at each stage of production. A sales tax is only at the final transaction between consumer and retailer.

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.

41 posted on 10/20/2011 4:20:55 AM PDT by Angry_White_Man_Syndrome
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To: CSI007

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.


42 posted on 10/20/2011 4:21:16 AM PDT by Beagle8U (Free Republic -- One stop shopping ....... It's the Conservative Super WalMart for news .)
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To: Angry_White_Man_Syndrome

See post 39


43 posted on 10/20/2011 4:22:50 AM PDT by Beagle8U (Free Republic -- One stop shopping ....... It's the Conservative Super WalMart for news .)
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To: Beagle8U

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.


44 posted on 10/20/2011 4:22:55 AM PDT by Utmost Certainty
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To: Beagle8U

Oh, and: http://999calculator.net/

Be sure to click the red button near the bottom labeled “IS THE SALES TAX A VAT?”


45 posted on 10/20/2011 4:25:29 AM PDT by Utmost Certainty
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To: Utmost Certainty

“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.”

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.


46 posted on 10/20/2011 4:28:50 AM PDT by Beagle8U (Free Republic -- One stop shopping ....... It's the Conservative Super WalMart for news .)
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To: Beagle8U

I have to leave for an appointment, but will return later today.


47 posted on 10/20/2011 4:31:08 AM PDT by Beagle8U (Free Republic -- One stop shopping ....... It's the Conservative Super WalMart for news .)
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To: calex59

Cain has also said that he’d like to eliminate those hidden taxes and put everything upfront.


48 posted on 10/20/2011 4:52:59 AM PDT by Jonty30
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To: dennisw

If you have to lie and call 9-9-9 a VAT to make your argument, you’re losing.


49 posted on 10/20/2011 4:54:26 AM PDT by ziravan (You don't have to be a rocket scientist to be President. . . but it helps!)
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To: dennisw
Define corporate income taxes then. Who pays them and what effect do they have on the price of goods and services?

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.

50 posted on 10/20/2011 5:10:17 AM PDT by Mygirlsmom ("Get ready for an aberration of historic proportions" ...H Cain.."to correct the last one" MGM)
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