Posted on 01/31/2005 7:12:16 AM PST by bmweezer
"what is your agenda? your real motivation? you get fired up, rabid against the fair tax but give no clear reasons why
you have made it clear that you hate the fair tax but don't say why....what are you not saying?"
That question keeps popping up on all the tax reform threads. YN steadfastly refuses to answer, sometimes giving a flippant "I've looked all around my place and haven't found any agendas" answer. It is very obvious that his motives aren't what he claims.
Even more black market stuff!
So far your only substantive argument for a VAT is it theoretical enforceability, actual experience with real VAT implementations show the fallacy of such arguments, in fact according to those studies the degree of complexity and red tape that induces the entrepreneur and small business to evade and go to cash underground is of at least equal if not greater importance the rate of the VAT.
As far as the US is concerned you entirely over look the fact that there is no infra-structure in place to support a VAT which would necessitate the cost of creating the infra-structure with a new Federal level of enforcement over and above the current state systems, as well as the overhead and administrative costs imposed on intermediate level business that are not present with an NRST.
All in all, the VAT not only does not meet the expectations of enforceability you claim for it (it actually increases black market activity even at low(<10%) rates when replacing single stage sales taxes) in real practice, it imposes unnecessary economic and regulatory burdens on business creating high entry barriers for small businesses and drives established one out of the market.
A VAT, by clear experience in the EU and around the world, demonstrates the proclivity of central governments to lay ever heavier burdens on business in the form of complex regulatory and exclusionary rules via the VAT actually exacerbating and evolving into tax systems worse than the tangled mess of the US corporate income tax.
The clear evidence of the VAT operating in reality demonstrates the best place for it is in academia and think tanks not in the real world affecting real economies and real people.
That question keeps popping up on all the tax reform threads. YN steadfastly refuses to answer, sometimes giving a flippant "I've looked all around my place and haven't found any agendas" answer. It is very obvious that his motives aren't what he claims.I have answered it many time.
So far your only substantive argument for a VAT is it theoretical enforceability, actual experience with real VAT implementations show the fallacy of such arguments,Show me some studies of NRST's at the rate of 30%.
see 1073...
I do not believe that adding a tax at every stage of production is a good idea. A tax every single time "value" is added to an item.....yikes.
A VAT would be the least efficient consumption tax and it would create more opportunities to evade. If you are looking to create more bureaucrats, each specializing in a particular level of production taxation, then it would seem that a VAT is the way to go. More layers for the government...just what we don't need IMO.
"...unless you include the employee's payroll and income taxes."
and why wouldn't you?
I would agree that VAT (the credit invoice variety) compliance is easier to AUDIT, but that does not necessarily equate to easier to enforce. VAT enforcement would have vastly more entities to enforce than the FairTax making a cheater less likely to be audited, would of necessity be handled by a federal IRS type agency, would have to monitor every transaction made at every level of production, rather than just the retail point of sale, would still give the federal government justification to demand to know every entity's income and expenses, and would burden industry with a greater cost of compliance than the FairTax.
Provided the VAT plan had all of the other features of the FairTax (such as the rebate), I can't think of much where it would differ from the FairTax.
Can you suggest any advantages/disadvantages I have not thought of? I'm very interested in this since it seems odd to me that you seem so opposed to the FairTax, yet have expressed favor for a VAT.
I don't see a single advantage for the VAT except for the ability to cross reference one entity's audit, with everyone that that entity has done business with... which brings to my mind images of tax audits moving from company to company like a computer virus spreads from pc to pc. This would surely result in the cost of audits being imposed upon entities simply because they did business with someone else who is being audited.
I am not nationally known (nor do I want to be, can you imagine?) but I do manage a substantial amount of money. I can't see any way the Dow can double in 24 months. It would take at least 4 years.
You're welcome to provide a link. Regardless, by my observation, you've consistently proven yourself to be either unbelievably obtuse or intentionally disruptive, and I presume you are an intelligent person. If I am wrong concerning your intelligence, then please accept my sincere apology for the harshness of this post.
Provided the VAT plan had all of the other features of the FairTax (such as the rebate), I can't think of much where it would differ from the FairTax.
Other than the overhead, administrative, and regulatory costs a VAT imposes on businesses at all levels and the cost of implementing an infra-structure capable of enforcing a credit voucher system that does not exist in the US today.
Refer:
A Value-Added Tax Contrasted
With a National Sales Tax
Cogressional Service Issue Brief #IB92069
Updated September 30, 2004
I don't see a single advantage for the VAT except for the ability to cross reference one entity's audit, with everyone that that entity has done business with... which brings to my mind images of tax audits moving from company to company like a computer virus spreads from pc to pc. This would surely result in the cost of audits being imposed upon entities simply because they did business with someone else who is being audited.
According to the descriptions in the literature, while such systems are envisioned in theory, their existence and effectiveness fall far short of the theory, for the precise reason you cite(indiced often by reporting errors in the system as often as not, as well as inability of actually tracking the multitude of business transactions that actually occur.
Another problem is the red-tape drives the little guy out of the formal economy to the underground cash economy where there is no monitor possible, nor tax collected. The little guy just says stuff it and goes his own way operating out of home manufacture & service type businesses free of the VAT systems.
See the hyperlinked papers on blackmarket & homeproduction in #1073
I do not believe that adding a tax at every stage of production is a good idea. A tax every single time "value" is added to an item.....yikes.Yes, and add up all the "value added's" and what do you get? The retail price. The VAT's base is exactly the same as a NRST.
A VAT would be the least efficient consumption tax and it would create more opportunities to evade.I don't beleive you are correct on this point.
If you are looking to create more bureaucrats, each specializing in a particular level of production taxation, then it would seem that a VAT is the way to go.A VAT could probably be collected with fewer people that the FairTax due to the fact it would have one collection agency instead of 50.
Another problem is the red-tape drives the little guy out of the formal economy to the underground cash economy where there is no monitor possible, nor tax collected. The little guy just says stuff it and goes his own way operating out of home manufacture & service type businesses free of the VAT systems.And he's paying the VAT on all his costs. Another business wouldn't want to deal with him because they wouldn't get the credits on their inputs. With a NRST this guy could be totally lost to the system. This is a good example of why a VAT is more effective than a NRST. Thanks, AG.
Can you suggest any advantages/disadvantages I have not thought of?
More on the secondary effects of VAT related red-tape in many areas of the EU that are not mentioned in the glowing reports selling the advantages of a VAT:
Underdevelopment Trap
Carillo & Pugno
University of Trento
Economics Department
January 2002
And he's paying the VAT on all his costs.Just to expand, he's paying the VAT on all his inputs but not taking the credits. Unless he is collecting the VAT and not remitting, he would actually make more by charging the VAT and using his credits.
I don't see where this paper says it's the result of the VAT.
The goods he is delivering are next. How will the removal of embedded taxes on those items allow prices to fall? Does my above example prove that the removal of individual income taxes does nothing to help prices fall without a corresponding decrease in wages? Help me out here. I am moving toward the conclusion that the removal of imbedded individual income taxes would do nothing to lower the price of goods and services without lowering wages of the producers of those goods and services.
So I am coming to the conclusion that the only effect would be the removal of corporate income taxes which is currently 35% of the net profit of profitable corporations. Is this the only benefit we can assume from the FT upon price levels?
I'm beginning to agree with the economist YN cited. I know it is heresy. I still think the FT would be better than the current fiasco but what would really be the net effect on price levels?
With a NRST this guy could be totally lost to the system.
Hate to tell you but under the VAT red tape there are more of them and they don't deal with businesses. They operate out of home and are generally barter, service and home manufacture/grown produce oriented.
OTOH, under the NRST the small guy can sell his services and home production to businesses without tax ramifications or redtape. That provides legal avenues to avoid the tax system at the production level, which is what is intended, and brings production to retail market nevertheless assuring a higher compliance rate for the NRST.
Under the NRST with less red tape, there are fewer blackmarket folks, and when they purchase that which they cannot manufacture, they pay the same NRST as everyone.
All the VAT does is ensure there are more folks treated like criminals and everyone pays a higher price for the costs induced by the high regulatory environment that all legal businesses must operate under with a VAT.
Please see post #1097
So I am coming to the conclusion that the only effect would be the removal of corporate income taxes which is currently 35% of the net profit of profitable corporations. Is this the only benefit we can assume from the FT upon price levels?
No, because there is more in the mix that the corporate income tax per-se. The overhead costs associated with the tax system remain whether or not a particular business pays one penny of corporate income tax, as well the employer's SS/Medicare excise taxes on payrolls paid are repealed releasing those taxes and costs associated with them. Along with the removal of those costs are the economic effects impeding business sales(reduced demand) as a consequence of having to cover tax related costs in product pricing.
All taken together accounts for a substantial differential in producer pricing of goods and services when income and payroll taxes are repealed.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.