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To: Ernest_at_the_Beach
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.

10 posted on 12/04/2004 2:44:31 PM PST by JoeFromSidney (My book is out. Read excerpts at http://www.thejusticecooperative.com)
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To: 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.

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.

12 posted on 12/04/2004 2:52:49 PM PST by konaice
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