Tax Advice for Mr. Bush: Consider the VAT ( Bruce Bartlett of National center for policy Analysis)

Fortune ^ | December 13, 2004 issue of Fortune | Bruce Bartlett - Senior Fellow at NCPA

[zzen01]

This guy is a JACKASS! The VAT SUX!

[Moonman62]

Bartlett is just being practical. He knows that a "no veto" president who wants to be a Republican FDR isn't going to cut spending.

[konaice]

And your Degree in Economics is from WHICH university?

[Moonman62]

What's scary is that the President has never spelled out anything resembling a guiding philosophy of taxation.

That's because the tax cuts were done to buy votes, not to help the economy.

[Ernest_at_the_Beach]

They help the economy....which gets my vote and many others....

[Moonman62]

They help the economy....which gets my vote and many others....

Yes they do, but some tax cuts help the economy more than others. My comment was addressing the philosophy of the tax cuts, which is the subject that Bartlett brought up.

[KwasiOwusu]

"That's because the tax cuts were done to buy votes, not to help the economy"

Nonsense!
The Bush tax cuts are precisely what saved us from the double whammy of the Klinton recession and the ravages of the economic effects of 9/11.
President Bush inherited a recession, and is finishing his first term with an economy rocking along with a sizzling 3.9% GDP growth in the last quarter alone.
Try comparing that to Germany and France (who Hanoi John Kerry wants to take orders from) with their pathetic, anemic 0.1% GDP growth in the last quarter!

[konaice]

I think that because FairTax.org has done such a find job of spelling out their program, and the EU has done such a botch job of implementing a VAT, that everyone is down on the Vat and up on the NRST without enough analysis of either.

FACT: No modern industrialized nation has ever been funded solely by a NRST.

FACT: Many many nations use some form of VAT.

Therefore we have ample opportunity to fine tune a VAT by taking the best of the best and eliminating the worst of the worst elements found in the world.

But With a NRST we have to get it right the first time, because when problems crop up, the pressure will be to revert immediately to the Income Tax.

Those people who rail against a VAT always do so by saying "I lived with one in Britain and it was horrible" without a single shred of detail, without any balancing arguments about personal income taxes, and without any well documented plan for an American VAT. All objections are based on one or two miserable VATS with total disregard to where it works well.

Similarly the NRST is put forth with total disregard to entire segments of the economy that will be sent into a tail spin laying off millions (new housing) and with no real plans to deal with the black markets that will grow like wild fire, and no real way to prevent creeping exemptions from ruining it for all.

So pick apart the VAT if you will, but have the guts to do it with fact and figures and the integrity to look for those parts of that really make sense. None of the this "A one dollar item end up costing 10 dollars" nonsense.

And in the gleeful rush to a NRST, at least have the guts to admit there will be massive fraud, and don't look the other way saying "market forces -- yadda yadda".

We all want to get rid of the IRS, but remember all those former IRS agents will (under either a VAT or a NRST) be focused on a much smaller number of businesses. They will, if left unchecked force prices just as high as they are under an Income Tax, by nit picking regulation and paper work. They will make small business impossible.

[JoeFromSidney]

The VAT is a terrible idea for the USA. It makes sense in Europe, where raw material from one country might be made into intermediate products in a second and into consumer goods in a third. Each country gets to tax the "value added" in that country. If they had only a retail sales tax, the country in which the goods are sold would collect the entire tax; the countries in which partial work was done would collect nothing.

In the USA, a VAT might make sense for the states, allowing them to tax the portion of final value "added" in their state. But nationally there is no need for it. A Federal retail sales tax would capture the tax on the entire value of goods no matter in which state they were sold.

Not only is a Federal VAT unnecessary, as compared with a retail sales tax, it's a bad idea because the tax would be hidden. One of the virtues of a retail sales tax is that the taxpayer realizes it's being paid.

I once discussed the VAT with an economist from Vienna. He was complaining that trucks carrying goods from Germany to Italy used Austrian roads, but paid no taxes. I pointed out to him that according to the Austrian School of Economics (unfortunately there are no members of the Austrian School left in Austria), the trucks were adding value to the goods by moving them from where they weren't wanted to where they were, and Austria should apply a VAT. I don't know if he ever made the recommendation to the Austrian government. Nevertheless, that illustrates why the VAT makes sense in Europe.

[Maigrey]

Sure, and tank the economy. Riiiight

[konaice]

The VAT is a terrible idea for the USA. It makes sense in Europe, where raw material from one country might be made into intermediate products in a second and into consumer goods in a third.

You've only provided arguments for one side of your basic premis.

I see no reason why a VAT should not work in the USA, regardless of how much or how little of the value is added within country or in imports.

The fact that the "Tax is Hidden" is the big boogieman that everyone trots out, but nobody substanciates, and nobody seems to come up with much else.

[EternalVigilance]

No need to "substanciate" the fact that the VAT is a hidden tax...because it IS a hidden tax...LOL...

Some things are so basic and self-evident that they don't need substantiation.

The real question is: "Are hidden taxes a bad thing"?

And the only answer reasonable people can arrive at when they examine that question is that they are bad. Very bad.

Transparent government is what is needed. Not more room for politicians and bureaucrats to play their insidious game of playing off one set of citizens and taxpayers against one another.

That is one of a plethora of reasons why I support the 100%
transparent and visible FairTax.

EV

[x1stcav]

Bartlett has his head where the sun don't shine on this one. VAT is Euro-weasel Socialist-crat crp.

Keep it simple. Flat or consumption.

Moron.

[Moonman62]

The Bush tax cuts are precisely what saved us from the double whammy of the Klinton recession and the ravages of the economic effects of 9/11.

What the President inherited was an out of control Federal Reserve Chairman and the beginnings of a business spending depression (not a recession). Two problems he didn't recognize and cared to do nothing about. It was the 9/11 attacks that turned things around (take a look at a chart of the major stock market indices). They brought Greenspan around to his senses, but the President didn't come around until he saw the soft economy would threaten his reelection.

[Reaganghost]

You don't need a degree in economics to recognize the poison label on the VAT.

[EternalVigilance]

They will make small business impossible.

That's ridiculous.

First of all, over 80% of sales taxes are collected by large corporate retail businesses. All that will be required for them to implement the FairTax will be to reprogram their cash registers. That's it.

Secondly, as a former small retail businessman, I assure you that the sales tax is by far the simplest tax to collect and pay. A couple of lines in the form: Gross sales. Percentage collected and owed. Bam. Finished.

The idea that somehow the enforcement mechanism for enforcing this tax would in any way come anywhere close to the invasiveness of the income tax is a total crock.

And under the FairTax, the individual would have exactly 0% obligation at all to do or show anything.

[EternalVigilance]

Bartlett has his head where the sun don't shine on this one. VAT is Euro-weasel Socialist-crat crp.

Amen.

Keep it simple.

Yep.

Flat or consumption.

The consumption tax is the only way to go.

If you flatten a cowpie, it's still a cowpie, and it still stinks.

Income taxes are fundamentally flawed from their conception, flat or otherwise.

[konaice]

Secondly, as a former small retail businessman, I assure you that the sales tax is by far the simplest tax to collect and pay. A couple of lines in the form: Gross sales. Percentage collected and owed. Bam. Finished.

As a CURRENT small retailer I agree. But what have you EVER in your ENTIRE LIFE seen the US government get involved with that remains that simple.

There will be forms, and paperwork, and require proof, and audits, and source-of-Supply documentation, and waste documentation.

Its Naieve to think it won't be so, and be so in VERY short order.