It is not that complicated. You don't need to keep track of every item. Just add up the sales in aggregate, subtract the aggregate purchases used in production, and apply the tax rate to the difference. (OK, so I know the politicians will make it more complicated than that.)
At least it doesn't offer all the opportunties for manipulation that the income tax does, e.g. deciding what is capital versus expense, depreciation rates, considering various depreciation schedules, etc.
A VAT will lead to a hopelessly complicated tax system. It will get more and more complicated as the years go. The VAT was born in France in 1954. Or look at the EC. See how complicated it has grown in 50 years. Soon it will be as complicated as our own code.
Can you name for me a scenario in which a 10% markup will drastically increase costs? I am interested in the idea that to compute VAT you would add sales and subtract purchases and tax the difference. What happens if you buy more than you sell? Would you pay no tax? How do you distinguish between consumption for sale and internal consumption?
I would be happy to support a VAT if they would eliminate the income tax. The only new tax suggestion I don't like is the flat income tax. Ugh.
I am interested in the idea that to compute VAT you would add sales and subtract purchases and tax the difference.
What you describe is a subtraction method VAT.
This differs from a corporate income + payroll tax how?
(sales - purchases) = (earnings + payroll) = corporate income + SS/Medicare wage base.
All you seek to do is take our current business tax structure & exchange depreciated capital expenditures for expensed capital expenditures.
The current corporate income/payroll tax structure now in place is a VAT, a levy imposed on businesses at all levels of production, passed on to the consumer hidden in the price of goods and services. It lacks only one small modification to make it conform to the European, WTO tax system.
Exchange depreciation for expensing, and be welcomed to the global government.
http://www.taxfoundation.org/foundationmessage03-00.html
" Under the WTO definition of the term, a sales tax is an indirect tax, as is an European-style VAT. The economic equivalence of an European-style VAT and a subtraction-method VAT is well-established. A subtraction-method VAT is essentially identical to a business income tax except that all purchases of plant and equipment may be expensed, rather than depreciated as under current U.S. law.
As Glenn Hubbard of Columbia University and others have argued elsewhere, the signal difference between expensing and economic depreciation is the time value of money, estimated in percentage terms at roughly 3 percent of the value of the principal annually. This means that for a relatively small amount of tax revenue, the U.S. could make its corporate income tax a WTO-sanctioned indirect tax. "
Definition [ http://www.encyclopedia.com/articles/13330.html ]:
value-added tax
levy imposed on businesses at all levels of production of a good or service, and based on the increase in price, or value, added to the good or service by each level. Because all stages of a value-added tax are ultimately passed on to the consumer in the form of higher prices, it has been described as a hidden sales tax. Originally introduced in France (1954), it is now used by most W European countries.
As if we needed to hide our taxes from the view of the electorate any more than they already are.
Walter Williams, World Net Daily, 10-25-2000
According to the most recent U.S. Treasury Department figures, ... the top 50 percent ($36,000 and over) paid 96 percent of income taxes. Guess what the bottom 50 percent of income earners paid?
If you're among those who pay little or no federal income taxes, what do you care about tax cuts? Moreover, if you think tax cuts pose a threat to government handout programs, you might be openly hostile and support Al Gore's silly "risky scheme" talk. So many Americans paying little or no federal taxes makes for a natural spending constituency. It's like me in the restaurant: What do I care about extravagance if you're footing the bill?
The Honorable James DeMint (R-SC)
United States House of RepresentativesTHURSDAY, APRIL 5, 2001
12:00 noon"In 1996, Congress passed a historic welfare reform law that has dramatically reduced the number of Americans who depend on welfare. In spite of this positive development, Representative DeMint is concerned about the steady growth of a welfare/entitlement state that extends well beyond the poor and is forcing millions of middle income Americans into dependency.
There has been a shift in the relationship between individuals and government, he argues, such that fewer and fewer are paying taxes at the same time that more and more are receiving increasingly generous benefits. If it becomes the case that most voters do not bear a financial burden for this largess, then there will be little to restrain--and significant political incentives to encourage--the continued growth of government. And at that point, DeMint warns, we have reached a major crisis in our democracy.
70% of the public clamors for more from government, believing someone else is footing the bill.
And you wish to perpetuate the tradition:
Sir Alex Fraser Tytler (1742-1813). Scottish jurist and historian:
"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largess from the public treasury. From that time on the majority always votes for the candidates promising the most benefits from the public treasury, with the results that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.