Posted on 04/03/2016 7:38:50 AM PDT by Arthur Wildfire! March
As I understand it, a VAT tax is very different than a national sales tax because it taxes every level of production and distribution.
That gives imported products a grossly unfair advantage.
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For example -- the price of a screw.
First the ore value is taxed.
Then the smelted steel value is taxed.
Then the steel distributer is taxed.
Then after the screw is made, the value of the screw is screwed again.
Then the screw wholesale value is screwed.
Then the retail value is screwed again -- the only visible aspect of the tax. The rest of the screwing is hidden in the price.
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But if you simply import foreign made screws, then you bypass almost all of the layers of 'value added' taxing.
It would make manufacturing at home harder than ever. The only screws being made here would be corporate welfare.
Not sure if this is correct. If I'm mistaken, I hope someone corrects me.
If my vague understanding is correct, then this would be free trade on steroids.
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This plan was criticized in February. Did 'anti-establishment' Senator Ted Cruz change his tax plan recently?
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.
Isn’t the vat just another progressive tax? What happened to the fair tax?
What Cruz has done is set a 10% individual tax rate which is too low so he has to make it up someplace else. That would be on business. No payroll taxes. Doesn’t that sound great? Yeh breast for the worker because now the employer will be paying the full payroll tax out of his/her revenues. How do you think Teddy arrived at his 16% figure?
The way Cruz tax plan would work is that instead of paying tax on revenues minus expenses and payroll the business owner would now pay a 16% tax on revenues minus expenses only. So the businessman would be paying 16% on wages including his own salary and then another 10% on his individual tax returns.
As a former small business owner I would not want to suck that up. Trump’s plan for a straight 15% Capitol gains tax is far more business friendly. But that’s because he knows business and Cruz hasn’t got a clue.
You are confusing the European VAT with what Cruz’s Business Tax. The Cruz plan is not a direct consumer tax. It is only paid by any business.
In your example of a software company, their basic deduction would be any purchases from other businesses and capital investments. The 16% would apply to wages and profits, but there would be no payroll tax which is now approx. 15% for SS & Medicare, and no 35% Corporate tax. Individual would only pay 10%.
Bill Clinton wanted a value added tax too. And so did members of Obama’s think tank.
For some reason we all opposed it when they suggested it.
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They also weren’t ELIMINATING the business income tax and payroll taxes. This will also not tax exports.
It will encourage businesses to make things here. That is how you encourage job growth, not starting trade wars.
Look, until we can get the Federal Govt out of things it shouldn’t be involved in, there will be taxes to pay for those things and all the waste and inefficiency they cause.
Of course the 16% has to cover the payroll tax revenue in the short term, but it is still a much better system than the current one that is a disincentive for work and investment.
Do you know & understand what an “excise” tax is?
As defined by the Supreme Court as well as the IRS’s Legislative tax Attorney, the income “excise” tax is a tax on certain privileged activities and the amount of tax owed is determined by the dollars produced by participating in those privileged activities. The vast majority of Americans, business owners as well as their employees, are not engaged in privileged activities or very little if they are.
Milton Freidman, when testifying before Congress on the reinstating of the withholding at the source, that taxes will be withheld from a great number of people who are not subject to the tax and that those people, who had taxes withheld when there were no taxes due, will have to file a form with the IRS to receive a refund of all federal taxes withheld, including all FICA taxes, that were erroneously withheld.
So it does not matter what form of tax the candidates are proposing, because ALL the plans propose to further usurp Congresses Constitutional limits in regards to taxation.
Millions of Americans are waking up to the truth and are receiving 100% full refunds from the IRS annually and this scares the hell out of the beast in DC and those in Congress who pass the tax laws because they know a return to the Constitutional truth will end their gravy train.
Ted Cruz & all the other establishment insiders are no constitutional scholars, they are constitutional usurping political hacks seeking to gain fame & fortune off the backs of tax illiterate citizens. And Trump being the outsider, well, many of us have contacted Trump about the truth & rather benign nature of the 100% Constitutional 16th Amendment income “excise” tax and how a direct flat tax, that usurps Article 1, Section 9 of the Constitution, will further erode our freedom of our ‘pursuit of happiness’, the God given right to go out and perform unprivileged services or sell our unprivileged goods without the fear of the government directly taxing every penny that comes in from these unprivileged activities.
And NO ONE can call anything a “flat tax” when deductions can be applied. Any time deductions come into play, this makes it the same type of graduated tax system we already have. NO! We need t return to the truth about the income “excise” tax that was applied before 1942 when less than 8% of the working population paid income “excise” taxes. NOT because they did not earn enough money, but because they understood that the activities they were engaged in were NOT, as the IRS code puts it, “privileged” activities subject to taxation.
Cruz’s plan has been scored as a 700b tax reduction over 10 years, however, Cruz is also proposing elimination a good number of gov agencies to reduce spending.
Those taxes proposed by Clinton and Obama were Additional taxes. The proposed 16% flat tax on business replaces and abolishes the much higher corporate and payroll taxes we currently have.
I didn’t say Cruz’s tax was a VAT tax, the question was on a VAT Tax.
If you want to establish the Cruz tax isn’t a VAT, then people have to be educated to what a VAT really is.
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.
From your example:
Taxes = screw-ed
Cruz doesn’t know shit from shinola when it comes to the 100% constitutional nature of the income ‘excise’ tax
Friedman also regretted that he invented the withholding tax.
Do you own a small business? If so you cannot be serious. If not you don’t understand how a normal small Chapt S pays taxes.
Nope!
As opposed to Trump who has never read the constitution?
Does Cruz plan on stealth tariffs too through a VAT?
‘A VAT usually taxes imports and usually subtracts the tax on exported goods.’
That would be smarter than what we do now.
Does the Cruz VAT incentivize exports and level the ‘stealth vats’ playing field of other countries?
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