Posted on 04/12/2017 11:08:51 PM PDT by Freedom56v2
The Trump administration, at work on a new plan for tax reform, is reportedly considering a plan to cross into one of the most dangerous territories in American politics: fiddling with the Social Security system. According to multiple reports, the administration is entertaining the possibility of eliminating the 12.4 percent payroll tax, which would require it to find a new dedicated funding source for the retirement checks that millions of Americans count on in their old age.
The plan, first reported by the Associated Press, would be part of a major overhaul of the tax code that would make the US system look much more like that of many European nations, which long ago adopted a Value Added Tax model. A VAT is a form of consumption tax that falls on consumers rather than producers.
The VAT model under consideration would generate significantly more revenue than the current corporate tax, allowing the elimination of the payroll taxes that fund Social Security and, all other things equal, giving workers a considerable boost in their take-home pay. (The 12.4 percent payroll tax is split evenly, with 6.2 percent paid by the employer and 6.2 percent paid out of the worker’s gross wages.)
But as former president George W. Bush learned, people start getting nervous when politicians in Washington mess with Social Security.
For better or worse, the system was set up by design to be funded by a dedicated tax that appeared on every worker’s pay stub throughout their working lives. One thing that did was create a sense of ownership of the benefit -- a sense of “entitlement,” though not in the pejorative sense of the word as it is commonly used today.
(Excerpt) Read more at finance.yahoo.com ...
Social Security is an entitlement not because people feel they are due to something that they didn’t earn, but because they believe, rightly, that they have paid for it directly from their wages throughout their working lives.>>>>>>>>>>>>>>>
Exactly. DO NOT MESS WITH IT.
As with any major change of this sort, there would be a cutoff point and those in the gray area around it’s edges would be given a choice to stay with SS or go another avenue. Those who suffer most would be those who never work enough to pay into a system but get paid anyway.
The fact is that most Americans who live long enough to collect Social Security will actually get far more back from the system than they paid into it. So, while they may not be getting something they don’t deserve, they’re definitely getting more than they deserve.)
I don’t think that takes into account a REALISTIC adjustment for inflation. My monthly social security is in nominal terms about four times what I EARNED per month in the first year I paid it as a civilian and actually more than my first YEAR’S EARNINGS as an eighteen year old sailor but one new car now costs what a large farm with a fine house, outbuildings, equipment and livestock cost back then. The average house in this area which is not anywhere near the top in real estate values now costs more than my projected lifetime earnings were when I joined the Navy. The sales tax in this state on a fast food lunch now is considerably more than the lunch plus tax used to be. My social security check which once would have supported an entire family in luxury is a pittance now. Working people used to aspire to make two dollars an hour because that would support a family with no strain, two dollars doesn’t buy one gallon of regular gas now, even though gasoline is down to about half of the 2008 price and only costs about a third or less of what it was expected to cost at this point.
To move to a VAT is like instant inflation.
“Could”. Hypotheticals masquerading as news.
> “In reality, there is little difference between a VAT and a sales tax as you are able to effectively pass the VAT all the way into the consumer/end user with tax credits for other payments.”
Uh no.
Every business cost including taxes is passed along from business to business (B2B) to the consumer retail endpoint purchase.
A sales tax is borne by the consumer and is not passed further as it is applied to the endpoint of the chain.
B2B VATs are passed along in HIDDEN fashion out of the view of the consumer.
A VAT applied directly to the consumer only is a sales tax but the consumer does not see the HIDDEN B2B VATs. This is why legislatures like VATS because they can pick and choose which node in the B2B network to apply a VAT and the consumer will never know why the price is higher. Higher prices due to VATs will be blamed on the retailer.
VATs are hidden, Sales Taxes are revealed in plain sight.
Yes, the National Retail Sales Tax is included in HR 25 and its level is voted on each year by Congress so the voters will have a say and will be able to keep tabs on their legislators as to how well spending is controlled.
I am afraid that HR 25 needs a huge ad campaign and promotional boost by the President. Short of that, it will take a revolution to enact.
The grass roots can continue organizing at the state level to pass constitutional amendments to rein in taxes and spending. That would be a soft revolution and completely legal under Article V of the Constitution.
The problem with that statement is that it's simply not true. Social Security is sold as a retirement program. The reality is that it requires you to save a "Millionaire's Savings Account", while giving you a "Pauper's Pension". I have been paying FICA (Social Security) taxes for 55 years. I still am. Had I put that same money into an ultra conservative savings plan, it would be worth well over a million dollars, and could be paying way more than double what I'm getting now.
The problem, of course, is that it's not a savings plan. It's simply another tax. It's immediately spent (and then some, long before its even paid). Government will ALWAYS do this. The absolute LAST thing we need is another tax that is hidden from the payer.
I am bookmarking this.
Example. Let's say Country Widgetland has a VAT tax of 15% modeled after the European VAT tax. Manufacturer WidgetMaker's Product Y is its most popular product and is made up of 2 components that cost WidgetMaker $4 and $6 each + 15% VAT tax for a total cost of $10 plus $1.50 VAT tax. They then sell this product at retail for $20 plus a 15% VAT tax for a total of $23.00 ($20 + $3 VAT) which is the price on the shelf [$23]. However, they get a tax credit for the $1.50 in VAT tax they've already paid, hence the government of WidgetLand only receives $3 in VAT taxes, effectively making it a 15% sale tax to the end consumer. In essence, the consumer/end user paid the entire $3 VAT tax that was ultimately sent to the government.
Now let's take this same scenario but North Carolina who let's pretend has just raised their sales tax to 15% from 7-8%. WidgetMaker buys the two raw products for $4 and $6 for a total of $10 bucks and pays no sales taxes. It then sells the product at retail for $20 and collects a 15% sales tax for a total consumer price of $23, including $3 in total taxes remitted to the state of NC, which is identical to the total amount remitted to WidgetLand.
In both cases it's a sale tax. The fact that US states don't require the price on the shelf to include the tax while the European government does is irrelevant to whether its called a VAT, a sales tax or other.
Another promise broken. He said he would leave SS alone. A Vat tax is a high, but hidden sales tax. It’s practiced in the communist EU.
Bump!
Your examples show you are not knowledgeable about taxes nor about VATs.
You have a simplistic view. Let’s leave it at that.
The equivalent in the US is tax exempt status for corporations for resale. For example, if I go into Costco today and buy Pepsi products, I'm going to pay a 7.75% sale tax where I live. However, if I was a business and plan to resell that Pepsi product at the Tennis and Swim Club that I own, I could not have to pay that Sales Tax at Costco. However, when I sold the product at retail at my Club, I collect a sales tax from my club members for 7.75%. In Europe, I'd pay the 7.75% (if the VAT was 7.75%) at Costco, and then when I collect 7.75% from my club members, I'd be able to reduce the amount I remit to the government by the 7.75% I already paid. The amount of total taxes paid is the same if the rates are the same. In the US, only the final consumer pays a sales tax while in Europe everyone pays a tax but gets a credit for the sale/VAT tax already paid (except the final buyer, of course).
How does a VAT work anyway
"The example I always use is a loaf of bread you buy in a store for a buck -- so you have a farmer, a baker, and a supermarket along the production chain. Let's put the VAT at 10 percent.
1) The farmer grows the wheat and sells it to the baker for 20 cents. The VAT is 2 cents. The baker pays the farmer 22 cents, and the farmer sends 2 cents in VAT to the government.
2) The baker makes a loaf and sells it to the supermarket for 60 cents. The VAT is 6 cents. Now the supermarket pays the baker 66 cents, of which 6 is VAT. The baker sends the government 4 cents -- he pays 6 cents in VAT but receives a two cent credit from the government.
3) The store sells the loaf to me for a dollar. I pay $1.10. The store sends the government 4 cents total - the 10 cents it collected in VAT on its sales, minus the 6 cents it paid to the baker in VAT, which it gets back in a credit. In total, the government gets 2 cents from the farmer, 4 cents from baker, 4 cents from the store. That's 10 cents on a final sale of a dollar -- for a 10 percent VAT."
My note: again, this works out to be exactly the same amount of money remitted to the government as just a 10% sale tax collected at the very end.
Don’t believe you were what you say you were. Your exposition does not support anything other than a beginner’s grasp of how taxes work.
Now move along and find someone else to try out your spiel on.
LOL Even if you don’t believe me, which I’ll be happy to PM you my LinkedIn profile if you like (I’m now a finance exec in the hospitality industry), you could read the article I linked you or search for any other number of sites on how the VAT tax in Europe works. Of course taxes are always more complicated than that (do you know how hard it is to keep track of the taxes you need to collect for 20,000 items in ~30 states and in 150 counties? Some states/counties have different taxes for baked in house vs down the road, some have different tax rates if you are over a certain age, you can’t charge sale tax on WIC and EBT purchases, etc) but the basic system is exactly how I - and that article I linked you - described it for both the US and Europe.
“Could”. Hypotheticals masquerading as news.
What is hypothetical is exactly what will be affected and how it will affect the citizenry.
I think it is important to look at issues before they become done deals.
Now is the time to watch this issue and let our elected representatives hear from us if we don’t like changes before they go from hypothetical to actual..
Bad things happen to people who don’t question their leaders.
VAT is a consumption tax, but not all consumption taxes are VAT taxes.
Consumption taxes like a sales tax at the federal level that replaces all income and payroll taxes claws back a portion of every federal payment made to anyone. It’s is very easy to avoid income taxes if you are a non worker, no income, no taxes. It is very hard to avoid a sales tax because everyone buys something.
Even if they give a check to the didntdunuffins to cover the sales taxes they paid, they are still going to pay sales taxes again when they spend it, so a percentage gets clawed back again.
That’s why sales taxes are regressive and income taxes are progressive.
I live in the very broke no sales tax state of Oregon, where income avoidance is the main hobby of the citizenry. The underground economy is officially about 11% of state GDP but I think it’s closer to 25-30% in some counties.
It was originally touted as an earned entitlement, which is how the law was passed.
...The payroll tax is a tax. It is not an insurance premium...
They used to call your account your PIA -- Primary Insurance Account. They have stopped doing this, but the misconceptions were deliberately introduced and perpetuated by the government for a long time.
They are liars, but then we knew that.
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