Exclusive: Treasury May Discuss National Sales Tax

http://www.cnbc.com/id/21900018 ^ | 11-20-07 | Steve Liesman

[Hydroshock]

A U.S. Treasury report on ways to cut corporate taxes will include discussion of a national sales tax, a senior Treasury official told CNBC.

The U.S. currently has no national sales tax, also known as a value added tax, or VAT, though many states do. The tax would be one option to help offset revenue lost from lowering corporate taxes. The report is due in the coming weeks.

The top corporate tax rate is now 35 percent, and the official said that if exemptions are eliminated, a 27 percent rate would be revenue-neutral.

Besides a national sales tax, the Treasury report will also discuss accelerating depreciation and expensing, to as much 35 percent of the value of new investments in the first year.

The Treasury official said the document would make no choice as to the best option, but would note that the "best bang for the buck" for growing the economy will come from accelerated expensing.

The Treasury document is partly an attempt to counter a proposal by Charles Rangel, the Democratic chairman of the House Ways and Means Committee, to cut the corporate rate to 30.5 percent from 35 percent. Rangel’s bill contains proposals to offset his tax cuts with the elimination of special tax breaks for corporations.

[mvpel]

The tax would be one option to help offset revenue lost from lowering corporate taxes.

Because heaven forbid they actually CUT SPENDING and fire some useless bureaucrat overseeing the managers of scientists studying bear DNA. Can't have that, now can we?

[CharlesWayneCT]

If you eliminate the corporate taxes, and replace them with a sales tax, there are some advantages.

First, it means U.S. corporations are taxed less. That lowers their expenses. Either they can lower the price of goods (offsetting the sales tax), return it to shareholders, or use it to grow.

It also makes them more competitive in the global marketplace.

Meanwhile, we would pay the sales tax not just on items purchased from U.S. companies, but on EVERY item from all companies. So in effect it would be taxing foreign corporations for the business they do in this country. Again, helping U.S. companies who currently share the entire burden of taxes while the foreign companies skate.

There are problems with a national sales tax. It is regressive (probably not an issue amongst us here), and it is a new tax. But we are already paying the corporate tax through the price of goods and services.

I’m not saying I support this idea, just that I can see some positive effects. The negatives have been covered here pretty well.

[Squawk 8888]

Well, our taxes dropped quite dramatically in the 1990s. The GST was actually revenue neutral because it replaced a hidden sales tax that was levied on manufacturers and importers. The beauty of it now is that our Conservative PM has cut two points off the rate (from 7% to 5%) and put the opposition in a position where they’ll actually have to go into the next election campaign with their vote against the cut fresh on everyone’s mind.

[RobRoy]

I would LOVE a national sales tax if, and only if, they abolished the income tax.

Getting taxed on both ends is insulting - at the very least.

[RobRoy]

>>I want off the discussion of a sales tax for the rest of my lifetime.
Flat tax fine.

National Sales Tax is a scam through and through. It will never end and just makes it easier for government to increase taxes further.

Want another 100 billion. Just increase one tax. Done.<<

Yes, but if there is only one tax, everyone knows how high it is. When you nickel and dime people here and there it is easier to raise taxes. When people see that their sales tax is 60%, it will be much harder.

It is also very fair becuase it becomes a flat tax. That is, the guy that earns $200k pays the same percentage as the guy that earns $20k.

‘Course, it will never happen, at least as a replacement for the federal income tax.

[NCC-1701]

And would this force the repeal of the 16th amendment and eliminate the IRS? Somehow, I doubt that will happen.

[calex59]

I think politicians miss the point of lowering taxes. You are not supposed to lower them in one area and then raise them somewhere else to make up the difference. Don't you wish we, as individuals, had this power? Simply tax your employer so you get paid more. If he complains about high wages tax him for letting you park in his parking area and cut wages. That should make him happy./SAR

Politicians, the scum of the earth. Why we actually think we need them, I don't know. Citizens who take turns at the helm should be the order of the day and I believe that was roughly the idea when the constitution was penned. We have allowed a whole class of professional power brokers to take over this country and have allowed it almost from the start of this government but we keep making it worse instead of fixing it.

[The Duke]

This article seems to be equating a national sales tax with a VAT. As I understand it a VAT applies at each stage of the manufacturing process, while a national sales tax might apply only at the point of final consumption.

VAT’s are for countries with greedy, lowlife governments that would strangle their citizenry for a few extra bucks - no wonder it’s getting support in Washington.

I think, if enacted, American may be going down for the count. :(

[Resolute Conservative]

I have always said if Americans had to write checks for all of their taxes instead of the “convenient” withholdings scam there would be a revolt PDQ.

[Red Boots]

Perhaps I’m wrong, but I always thought there was quite a difference between a retail sales tax, and a value added, or VAT tax. This article says they’re the same thing.

[Squawk 8888]

My sentiments exactly. To most working people, taxes are just numbers on a pay stub- they never actually see the money so they don’t appreciate the true cost. A reminder at the store checkout counter on a daily basis would make a lot of people think harder about the desirability of “free” government services. A major turn for the worse in the Canadian health care system was when they dropped the monthly premiums and started funding it with a payroll tax; people stopped making the connection between cost and quality of service because they never saw the cost.

[Gorzaloon]

First, it means U.S. corporations are taxed less. That lowers their expenses. Either they can lower the price of goods (offsetting the sales tax), return it to shareholders, or use it to grow.

They could. But I find myself lacking warm fuzzy feelings. They could also use the savings for Special Golden Parachutes, Bonuses, Travel Allowances, Company cars, boats and aircraft, and continue their Quarterly looting.

But they wouldn't do that.

No, they would lower the prices and return the money to Little People.

Sorry, forty years in Fortune 500's has left me a reformed optimist.

[RC2]

But.........have you noticed that nobody running for President is talking about changing our tax system? The “Flat Tax” or “Fair Tax” is never discussed by anyone in the government. It’s not even being talked about in Congress. Taxes are the easiest way to control the people. Take their money away from them and the people have no control over their lives. This is one thing Hillary would love to do. Glad to see people wising up about her and turning on her now.

[retr0]

Here we go once again - doing favors for “corporations” at the expense of the general public. If the proposed corporate tax rate change will result in a shortfall, please explain to me why it becomes incumbent upon the taxpayer to make up the difference?

Corporations and their unaccountability are the among the biggest reasons this nation is crumbling as it is, why should we do them any more favors when ultimately they’ll just export their factories out of this country anyway?

Blatant ignorance is running rampant in DC...

[BMIC]

If it’s to subisidize the lowering of coporate taxes, then it had better ONLY be charged on sales to corporations and not private citizens!

[RightWhale]

national sales tax, also known as a value added tax, or VAT

In what alternate universe?

[Ditto]

Put the tax on the high-end sales market. It’s the only growth sector and the higher price would improve purchaser’s conspicuous consumption.

Sounds like Teddy Kennedy's 'Luxury Tax' back in the 80s.

That didn't end well, especially for people who's livelihoods depended on manufacturing 'luxury goods.'

[ari-freedom]

but it’s just a penny here a penny there. You don’t get one big bill that tells you how much total taxes you paid.

[CharlesWayneCT]

I have a similar disgain for the average company these days. I haven’t thought through though (wow, that’s a pretty cool string of words there) what the conservative way is to fix it.

Supposedly, if a company is wasting it’s profits on useless things, another company that focuses on the customer should be able to undercut the wasteful company and win market share.

But there is a bias toward large companies, through some rather predatory practices regarding sales outlets that are quite legal but seem monopolistic.

[Maceman]

I support a National Sales Tax — right after they repeal the 16th Amendment.