A Value Added Tax Would Decrease U.S. Competitiveness (Clinton Wants US in a VAT)

American Shareholders ^ | 5/17/10 | Anthony Lizan

[Andrea19]

...However, even a cursory look at our competitors’ tax trends disproves President Clinton’s statement. According to Dan Mitchell of the Cato Institute, most of our competitors did not replace other taxes or lower taxes as a share of GDP after a VAT implementation. In fact, most of our competitors raised taxes, which made them less competitive, not more. Take Greece for example. They enacted a VAT in 1997, and no one can seriously claim that they are better off because of it...

[Andrea19]

Even though he is no longer the president, would Bill Clinton still lie?

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[Man50D]

We already have a VAT with the income tax! Corporations, like individuals, have taxes levied on their income. The difference is taxes are a cost for businesses they pass onto the consumer at each stage of production along with the cost of complying with the tax code. The VAT being discussed will merely add a VAT on top of a VAT.

The far better approach is to pass The Fair Tax(HR25/S296) that will replace all federal income taxes with a national sales tax and abolish the IRS! Doing so will eliminate the VAT currently included in the price of everything we purchase. Fair Tax ping!

[dartuser]

Queue the Captain Obvious pics.

[rsobin]

Actually Clinton made some good points. He would like to see a VAT with cuts in income and corporate taxes. He failed to address social outlays though.

[puppypusher]

I suggest that good ole boy Clinton puts a value added tax on himself then we’ll be able to determine how well it works.

[I am Richard Brandon]

The idea that VAT will abolish the IRS is specious. VAT needs a HUGE army of inspectors to enforce its assessment and collection. Go to Europe folks - bureaucracies create and maintain themselves. It may have another name, but it will be the IRS.

[rfp1234]

A VAT of hydrofluoric acid.

[Man50D]

The idea that VAT will abolish the IRS is specious.

The Fair Tax is not a VAT! It will tax only once, at the point of sale while removing the embedded corporate taxes imposed at each stage of production with the income tax code.

[Bernard Marx]

Go to Europe folks - bureaucracies create and maintain themselves. It may have another name, but it will be the IRS.

I call the VAT the socialism tax. It can be increased stealthily, without public scrutiny, to support whatever level of taxation socialist politicians and bureaucrats want. There's no "bothersome" stuff like votes on tax increases or, God forbid, any chance for the public to object. It's the final necessary jigsaw-puzzle piece to turn America into a full-bore Euro-style welfare state. No wonder Clinton's clamoring for it.

[beethovenfan]

Clinton should be in a VAT - along with lots of carrots, onions, etc.

[SwedishConservative]

In principle, I believe there is merit in the VAT system. The way I see it, the sales tax puts the entire tax burden on the last step of the product chain, effectivly forcing the last reseller into an artificially weak bargaining position. VAT spreads the tax-burden across the entire value-chain (ie you only pay tax on the value you add to the product or service). The way I see it, it levels the playing-field. And I don't buy the "can be increased stealthily" argument either. VAT affects everybody to the same degree, from consumer all the way through the production chain so any movement in the VAT level is immediately visible to EVERYONE.

From personal experience, running my own business in Sweden (which has a VAT system) I find it to be the most transparent of all the different taxes we have. In my company tax returns, I have one box for the amount of VAT i take in, (25% VAT added onto my sales), and one box for the amount of VAT I pay out (25% VAT added onto my purchaes). One deducted from the other and that's the amount I owe (or am owed from) the government. Corporate tax, which still accounts for a significantly smaller part of my total tax burden, takes orders of magnitudes longer to calculate as I have to take any number of various deductions and semi-arbitrary rules into account.

[Man50D]

The way I see it, the sales tax puts the entire tax burden on the last step of the product chain, effectivly forcing the last reseller into an artificially weak bargaining position.

Consumers always pay the tax regardless if it is an income tax or sales tax. Businesses will be in the same position as now since the price of a good or service will change very little if at all, or in some cases may decrease, with the Fair Tax rate due to the embedded corporate income taxes of nearly 23% being replaced wit the 23% rate charged for the Fair tax. Moreover purchasing power will increase since taxes will no longer be deducted from paychecks, investments or savings.

VAT spreads the tax-burden across the entire value-chain (ie you only pay tax on the value you add to the product or service).

You forget the VAT being discussed will be on top of the current income tax thereby dramatically increasing the tax burden to a point most people will be unable to afford.

VAT affects everybody to the same degree, from consumer all the way through the production chain so any movement in the VAT level is immediately visible to EVERYONE.

VATs are not visible! The tax is embedded at each stage of production so no one ever sees the rate being charged. That is the problem with the income tax. All the embedded corporate income taxes included in the prices of everything we purchase today are never seen. The Fair Tax will itemize the tax rate on the receipt for all to see.

[SwedishConservative]

Consumers always pay the tax regardless if it is an income tax or sales tax.

Of course consumers always pay the tax in the end, but that's only because consumers pay for EVERYTHING in the end, including the production cost. VAT versus sales-tax are just different ways of allocating the the actual gathering. I argue that VAT is more level as it distributes the gathering across the value-chain rather than taking everything out at the last step.

You forget the VAT being discussed will be on top of the current income tax thereby dramatically increasing the tax burden to a point most people will be unable to afford.

Agreed, adding a new tax without removing or lowering existing taxes is very bad, but that is more to do with total tax burden than VAT vs sales tax specifically.

VATs are not visible! The tax is embedded at each stage of production so no one ever sees the rate being charged.

I don't agree with your premise. VAT is not embedded (or hidden), quite the opposite. It's printed on every receipt and every invocice. As a consumer, every product or service I buy, I know exactly how much of that is VAT. As a business, I know exactly how much value I've added to the chain and how much tax this is incurring. VAT has nothing to do with the product or service, only how much value gets added to it. In that sense, it's not embedded, it's completely external.

I also don't agree with equating VAT with income tax, but that's more of a semantics argument. The real issue is that with a point-of-sales tax, the retailer takes the entire brunt of the tax-gathering burden. He is forced to factor in the entire sales-tax cost when negotiating with his wholesellers which puts him at a disadvantage from the start. In a VAT system, the collection-burden is shared all the way back so taxes aren't a factor in the B2B relationship. If I decide to sell at cost (marketing campaign or whatever reason) my individual tax burden is 0, since I haven't actually added any "value" to the chain. With a sales-tax I'm forced to mark up prices AT LEAST equivalent to the sales tax level to break even.

[Man50D]

I argue that VAT is more level as it distributes the gathering across the value-chain rather than taking everything out at the last step.

In other words multiple taxation as opposed to taxing only once with The Fair Tax. Again, you miss the fundamental point between the two. The former will be imposed in addition to the income tax. The latter will replace the income tax.

Agreed, adding a new tax without removing or lowering existing taxes is very bad, but that is more to do with total tax burden than VAT vs sales tax specifically.

The socialists are purposely pushing to impose the VAT in addition to the income tax otherwise in order to collect more money from the people. Consequently the increase in the overall tax burden and the VAT are inextricably linked.

I also don't agree with equating VAT with income tax, but that's more of a semantics argument.

It's much more than semantics. People still have to pay a tax at each stage of production whether its via the income tax or the VAT being discussed. The end result is the same.

[chainsaw]

Keep in mind when looking at the figures below that they do not include our State Sales Tax, Property Taxes, and taxes and fees you see in your telephone and internet bills. A VAT, or Value Added Tax would be in addition to our other taxes, not in lieu of!

SOMETHING TO THINK ABOUT BEFORE WE AGREE TO A VAT FOR THE USA

Current European tax rates:

United Kingdom

Income Tax: 50%

VAT: 17.5% TOTAL: 67.5%

Germany

Income Tax: 45%

VAT: 19% TOTAL: 64%

France

Income Tax: 40%

VAT: 19.6% TOTAL: 59.6%

Greece

Income Tax: 40%

VAT: 25% TOTAL: 65%

Spain

Income Tax: 45%

VAT: 16% TOTAL: 61%

Portugal

Income Tax: 42%

VAT: 20% TOTAL: 62%

Sweden

Income Tax: 55%

VAT: 25% TOTAL: 80%

Norway

Income Tax: 54.3%

VAT: 25% TOTAL: 79.3%

Netherlands

Income Tax: 52%

VAT: 19% TOTAL: 71%

Denmark

Income Tax: 58%

VAT: 25% TOTAL: 83%

Finland

Income Tax: 53%

VAT: 22% TOTAL: 75%

If you’ve started to wonder what the real costs of “socialism” are going to be, once the full program in these United States hits your wallet, take a look at the table above. As you digest these mind-boggling figures, keep in mind that in spite of these astronomical tax rates, these countries are still not financing their social welfare programs exclusively from tax revenues! They are deeply mired in public debt of gargantuan proportions. Greece has reached the point where its debt is so huge it is in imminent danger of defaulting. That is the reason the European economic community has intervened to bail them out. If you’re following the financial news, you know Spain and Portugal are right behind Greece. Next will be Italy and on and on.
The United States is now heading right down the same path. The “VAT” tax (Value Added Tax) in the table is the national sales tax that Europeans pay. Stay tuned because that is exactly what you can expect to see the administration proposing after the fall elections. The initial percentage in the United States isn’t going to be anywhere near the outrageous numbers you now see in Europe. Guess what, the current outrageous numbers in Europe didn’t start out as outrageous either. They started out as miniscule—right around the 1% or 2% where they will start out in the United States. Magically however, they ran up over the years to where they are now. Expect the same thing here all you lucky tax payers..
It’s time to rethink the ‘American Dream’ idea: It is the notion that with hard work and perseverance, anybody can get ahead economically here. Do you think that can ever happen with tax rates between 60% and 80%? Think again. With the government taking that percentage of your money, your life will be exactly like life in Europe. You will never be able to buy a home. You will never buy a car. You will never send your children to college. Let’s not shuffle the battle cry of the socialists under the rug either. It’s always the same cry. “Equalize” income. “Spread the wealth” to the “poor” (whoever they are). “Level” the economic playing field. Accomplish that and everything will be rosy.
It’s time to take a really hard look at reality. Greece is a perfect example. Despite the “socialism” system that has ruled this country for decades, with a 65% tax rate, they are drowning in public debt, would have defaulted without hundreds of billions in bailout money, and still. . .20% of their population lives in “poverty.” What has all that “socialism” money bought, besides ultimate power for the politicians running the show? Do you think these people are “free”? They’re not. They are slaves to their economic “system.”
People, we are at a tipping point in America. We all know it. Turn this around right now or your grandchildren will be massing in the streets of this once-great country, just as the people of Greece now are. Economic slavery is slavery, just the same. Carefully and deeply consider what it takes to throw off the yoke of slavery, once it takes hold and settles over your own neck.