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The tax foundation report is good.

I have tried to figure out that Trump is referring to when he says he’s going to enact a big tax on imports from Mexico the way they do on out exports to Mexico. The only way I make sense out of this is that he, too, is for a VAT.

Since the US is maybe the only major player in international trade that doesn’t have a VAT, we’re hit pretty bad. To simply the pictures, let’s say we exporting agricultural product to Mexico that is 100 percent made in America. Therefore, the entire amount is subject to Mexico’s VAT, while their products come into this country free of VAT.

By enacting a VAT of about the same size as the other countries of the world, we get free trade that is fair trade.

Furthermore, most goods are complex in terms of their origin. A Ford car made in Mexico might have 40 percent content from China, 20 percent content from the US, 20 percent content from other countries, and be only 20 percent made in Mexico in terms of content. All the content coming into Mexico gets hit with the VAT and those payments are off-sets or deductible from the VAT on the export of the car to the US.

Similarly, American timber sent to Japan pays the VAT, and then the Japanese company that turns it into chopsticks deducts that VAT from the VAT on the chopsticks.

Everything seems to come together, except the following: what about the impact of a VAT on the cost of living? The really big question is whether the VAT will be an ADDED tax or a SUBSTITUTE tax? The Democrats salivate over having a VAT on top of all the taxes we currently pay.

In the Cruz and Rand Paul plans, the VAT and new income tax substitute for the Social Security tax (employee and employer), current personal and corporate income tax, capital gains tax and inheritance tax.

As a concept this looks very attractive. Very fair. Very efficient (in terms of how much paperwork is required). Very high level of compliance. Real financial privacy. Big increase in the incentives to work and to hire, and to save and to invest. But, we should make sure that this concept is thoroughly investigated to make sure to works out to everybody’s credit.

I believe your interpretation isn’t far off, as far as I can tell...Trump wants both the current system and a VAT type system.

Cruz wants to replace the current system.

Although Trump is talking about reducing the taxes in the other system, the danger of having the two tax systems will be the greed of the government to jack up the rates under both systems. Government revenue must be restricted.

I would fear not Trump’s tax plan while he was in office, I would fear who comes next as President. This would be a field day for a Democratic President.