If you really understand the difference between the two, you'll realize that that simply isn't true. Only the retailer at the very end of the supply chain is part of the sales tax system. All the other businesses in the supply chain are outside of the system. Manufacturers, wholesales, and suppliers don't have the mechanism for collecting or paying any kind of sales tax. They don't report sales numbers to anybody. That's true under the current retail tax system run by the states, and it would be true under a federal retail tax system.
The truth is, the tax collection system that is closest to a VAT is the current income tax system, because every company along the supply chain is already a part of that system. The collection of a VAT would be piggy-backed on business's current quarterly income tax filing. That's how a VAT would be implemented, not via some new mechanism.
A retail sales tax doesn't do anything to lay down the framework for a VAT. The current income tax system is what would be used as the framework for a VAT if one was ever implemented in the USA.
Some Bimbo infobabe on CNBC doesn’t know, but I do!!!
Does everyone understand the difference? Of course not, and the MSM is encouraging confusion.
Thanks for posting this thread! Vote for Cain, Kill the IRS!
bumo.
Thank you for posting this. I have been fighting the 999 = VAT for some time.
The bunch of FReepers that think a national retail sales tax “lays the groundwork” for a VAT are incredibly ignorant.
Get educated!!
Use some common sense.
That’s not the problem. The problem is THEY WILL NEVER STOP THE INCOME TAX.
So you will just get an additional tax. End of story.
Now why in the hell would you want the truth get in the way of an out and out lie?
No, very few understand the truth as you have posted. And the ones who do not want to believe the truth are the ones who stand to lose by the elimination of the present system. Mostly shyster tax lawyers-like Bachmann, and CPAs, and those getting kickbacks off the backs of the tax payers of this nation.
There is one difference, at least in Canada’s implementation of VAT, to what you describe. Each company DOES pay VAT on what they buy, and charge VAT on what they sell, but what they pay the government is the difference of the two.
In other words, if I pay $100 in taxes on raw materials, and I charge $250 in taxes on finished product, I pay $150 ($250-$100) to the government in taxes. Implementation of VAT therefore becomes the Accountant and Tax Collector full employment Act, because that is a lot of bookkeeping.
The other big question that comes in on a VAT, would be if VAT and state sales tax are both paid on purchase, or is one charged on the total of purchase and the other. In other words, lets say you had a 10% State Sales Tax, and a 10% VAT. If both were charged only on the purchase, you would have $20 ($10 each for state and federal) on a $100 purchase.
However, if one was positioned superior, say the federal, then you pay $21 in tax. The $100 purchase is taxed 10% ($10) at the state level, giving you $110, then THAT is taxed at the next 10% for your federal tax, which would be $11, for a total purchase of $121.
All this being said, I have heard nothing about Cain’s plan that would implement a VAT, but the final issue, about precedence, will certainly need to be clarified, because it would still apply to a sales tax.
I would assume like in California, a highly taxed state that there is no sales tax on milk or most food bought a grocery store.
“If you really understand the difference between the two, you’ll realize that that simply isn’t true.”
So, are you saying the new 9% Federal sales tax will be printed out on your sales receipt at point of sale so you can account for how much Federal Sales Tax you paid all year long?
Except in Texas, there is no Sales Tax on food items. With Cain's plan there would be.
For most of my employees the only taxes they pay are state sales taxes, state property taxes, federal sales taxes on gas, etc. and SS. because they have enough deductions. That's OK with me, because I pay enough for all of them. Now they will take a hit.
So now I have to raise my employees' pay because they don't see the big picture, they see their pay drop and groceries and everything else go up or I lose them to someone who will pay them more.
I'll grant you it is a good idea on paper, a lot of Conservatives like it because most of us pay taxes and it makes everyone else put skin in the game.But the reality is I depend on people who don't want to have skin in the game because they don't make enough.
You want to help me, a tax payer, STOP SPENDING MY MONEY, get the government out of my life and turn the energy back on. Businesses will grow creating more wealth and then I can raise my employees' pay because my business is making more money and then they will have skin in the game.
You can keep your 999, it's a tax plan not a jobs plan.
Answer: Nothing
Aside from that, Congress will NEVER repeal a single tax. Ever. Never have. Never will.
We'll just wind up with a national sales tax on top of the income tax.
Repeal the income tax first, and we can talk.
They know the difference, they are just choosing to lie about it.
A dairy farmer sells their milk to a processor. A tax is levied on the milk, and it is embedded in the price the farmer charges the processor.
The processor sells the milk to a wholesaler. Again, a tax is levied on the milk, and it is embedded in the price the processor charges the wholesaler.
The wholesaler sells the milk to a grocery. For a third time, a tax is levied on the milk, and it is embedded in the price the wholesaler charges the grocery.
The grocery puts the milk on the store shelves. For the fourth time, a tax is levied on the milk, and it is embedded in the price of the milk displayed on the shelf.
A parent buys the milk to put on their cereal at home. At the cash register, no taxes are levied on the milk.
The four taxes that have already been levied on the milk do not show up as a separate line on the cash register receipt. With a VAT, every time a product or raw material changes hands it is taxed, and the tax is embedded in the price of the item. If it changes hands five times before it reaches the consumer, it is taxed five times. If it changes hands 100 times before it reaches the consumer, it is taxed 100 times. Conservatives are right to abhor a VAT. A VAT is a hidden tax. The consumer never knows for sure how much in taxes they are paying, because the tax is embedded in the price of the product. That, of course, is why governments love the VAT. Voters are less likely to complain about a tax when it is difficult for them to determine exactly how much they are paying in taxes. A VAT creates a paperwork nightmare for businesses as they have to keep track of the taxes that have been paid on items and raw materials all along the production process.
This description of VAT is GROSSLY misleading. Yes, VAT is levied on the Value Added at each transaction; there is a minefield of paperwork; and there are the 'VAT inspectors'.. Someone needs to post a concise, and correct explanation. Include information about the paperwork involved and the ARMY of VAT inspectors with non-Constitutional powers at least equal to the IRS.
Nice write-up of the differences.
I’m in the middle of a new SAP implementation and we are also implementing the Vertex sales/use tax system.
I’m hoping Cain’s 9-9-9 actually could be a bridge to the Fair Tax, or a national retail sales tax with the phase-out of income/production type taxes.
Call it......20-0-0 Tax Plan of Sapwolf.
I still don’t like any tax that is not collected by government directly.
Sales taxes are sneaky. The get you a little bit at a time. No one ever keeps all of their receipts and adds up the amount of sales tax they pay over a years time.
I also do not like the fact that a merchant has to collect these taxes and forward them to the government. This places a burden on the merchant that he should not have to bare. The merchant spends his time with record keeping, filing forms and sending the check to the government quarterly. The merchant is also subject to audits and is in jeopardy for fines and imprisonment for failure to file the forms on time or submit payment on time.
Taxes should openly and acutely painful for the payer so that he is well aware of what government is costing him. If there is pain endured by the citizen when he pays his taxes he will let his representative in government share his pain with him and hopefully tax increases are therefore rare.
VAT is “added” (by the seller) at every sale - and removed by the seller at every resale - IOW it is “neutral” to the middle man. Except of course if he raises the price in between, which is why it us called a value added tax, the idea being that every middle man “adds” some value to the product ...
So, if a dairy farmer sold milk for $1.00/gallon and need to charge a VAT of 10%, the purchaser must pay $1.10. If the purchaser resells the milk for $1.00/gallon, the purchaser (you, the final consumer) must pay $1.10. The reseller offsets the $.10 paid with the $.10 received and pays “nothing”. The dairy farmer can offset other VAT paid for grain, equipment, etc against that which he received.
Don't get me wrong - VAT is an evil tax as it supposes that every link in the chain somehow “adds” value to the product (I have paid VAT on a CD with pdf documents that I could have downloaded from the Internet - simply for the value “added” by the postal workers who transported it) - but the arguments the author makes are incorrect - the price does NOT change due to embedded VAT taxes as they are offset ..
This as good and simple an explanation as I’ve heard. It’s a clear demonstration that the VAT tax is a compounded tax (a tax on a tax), not simply a new tax. IOW, the “miracle of compound interest” in reverse. Plus, the tax is hidden from view so the taxpayers don’t revolt.
Good article, thanks.
I get it!
In one, the federal government inserts itself into every retail transaction I enter into and extorts money from me to redistribute to its favored interest groups. Whereas in the other, the federal government inserts itself into every retail transaction I enter into and extorts money from me to redistribute to its favored interest groups.
You're right. They're completely different. In no way, shape, or form does one look like the other.
“A VAT is a hidden tax.”
Sales taxes are hidden, too, just less so. We all know from experience on the state level that it’s darn near impossible to keep in mind how much is going toward the store and how much toward the government in the checkout line. Our natural inclination is to blame the store, even when we know better. Government plays off that.
You should say “A VAT is a more hidden tax.”