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Old 04-09-2010, 11:29 AM   #21
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With respect to the Reuters link, Volker mentions an energy tax as well as the VAT. An energy tax is a much easier sell politically. Especially if it is put in place as a "cap and trade" regime with gradually increasing auctions for carbon. It is far, far sneakier than a VAT and has the much easier sell of being necessary to save the planet.

VAT is DOA. Long live Cap & Trade.

Why even go with a cap and trade... that rewards current polluters... just do a carbon tax with NO exceptions... the market will work it out... and nobody gets rewared.. no funny accounting etc...

As for VAT... one of the things I forgot to mention about the 'other countries'... is that all the ones I have been to with VAT do NOT have 'state' sales taxes. The central government does all the VAT/Sales taxing... here, the VAT would be on TOP of all the states sales taxes... so we would be in a unique position.
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Old 04-09-2010, 12:10 PM   #22
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While entitlement reform is difficult, nearly everyone is in agreement that it is necessary. And there is precedent. In 1983 we raised the retirement age from 65 to 67 (a benefit cut), subjected benefits of higher income individuals to taxation (a form of means testing), and raised the payroll tax. No reason all of those things won't be on the table today.

Meanwhile, no precedent exists for a sweeping new tax regime that impacts 100% of the population. It is hard to envision what political coalition would form to support a VAT. Democrats will complain that it is extremely regressive (which it is), while Republicans will complain that it is a tax increase (which it is). Where is the middle ground consensus? At least with entitlement reform a middle ground bargain can be found. . . higher taxes on the "rich" in exchange for some benefit give backs for the "middle class".

We won't know until we know. But since I've been in the business of making predictions lately, I'll say with near certainty that 10 years from now the US will still be VAT free.
Oh goodie, I guess that means that FIT, SS, and Medicare taxes never happened! Or maybe they aren't considered a precedent? And as far as your statement that the VAT conversation is just a right wing reaction to realization that taxes have to rise? I don't think anyone doubts anymore that taxes have to rise, after 8 years of Bush and 1+ of Obama. They/we are unhappy that our elected leaders representatives put us in the position where taxes have to increase. But what is done is done. Many of us are thinking of ways to decrease the effects of the increase, with the Roth IRA as a main weapon, since it's unlikely the government will undo what they have already done with it. But we also doubt they'll not be trying to find a way to get an additional portion of that pie. Thus, the VAT or something similar.

As for entitlement reform, I suspect there will be some. But nowhere near enough to pay the piper, just as the 65 -> 67 retirement age change didn't "fix" the SS/Medicare issues. So there will still be a need for increased taxes.

So I call your "near certainty that 10 years from now the US will still be VAT free" with my near certainty that there will be one, even if it is phased in, effecting some products at first, then moving toward the majority of them.

I'll check back in 10 years. If I'm wrong, I'll buy the beers with my barely taxed Roth dollars.
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Old 04-09-2010, 12:19 PM   #23
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I think it's inevitable that we have to raise taxes (AND cut spending), but I prefer my taxes to be obvious and transparent, not hidden in the price tag. People should know how much government is costing them.
To me there is nothing more transparent than a little line on the receipt showing the VAT tax, just like we now have for state sales tax.
EVERY time you buy something, you are reminded of how our government is overspending. I love the idea, I think it should have been implemented long ago.
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Old 04-09-2010, 12:26 PM   #24
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To me there is nothing more transparent than a little line on the receipt showing the VAT tax, just like we now have for state sales tax.
EVERY time you buy something, you are reminded of how our government is overspending. I love the idea, I think it should have been implemented long ago.
Actually, in a pure VAT, you don't see it. A little is added at every stage of the process, from the manufacturer to the wholesaler to the retailer. The end consumer will not generally see all those taxes listed. They *might* see the tax added in the final stage of distribution (from the retailer to the consumer), but not the taxes built into the price before then.

In a national sales tax, on the other hand, you would see the tax specifically listed as a line item. Which is one reason I would prefer that to a VAT if we had to have one or the other. A VAT makes it easier to "hide" the taxes, much as with the gas tax where the price at the pump includes the tax which isn't separately listed.
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Old 04-09-2010, 12:57 PM   #25
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Actually, in a pure VAT, you don't see it. A little is added at every stage of the process, from the manufacturer to the wholesaler to the retailer. The end consumer will not generally see all those taxes listed. They *might* see the tax added in the final stage of distribution (from the retailer to the consumer), but not the taxes built into the price before then.

In a national sales tax, on the other hand, you would see the tax specifically listed as a line item. Which is one reason I would prefer that to a VAT if we had to have one or the other. A VAT makes it easier to "hide" the taxes, much as with the gas tax where the price at the pump includes the tax which isn't separately listed.
Looking at some receipts from a shopping spree in France, I can clearly see the VAT amount listed and it looks a lot like the sales tax you would see on a receipt here in the US. The VAT amount listed is not the tax added in the final stage of distribution, but the total VAT paid on the product from inception.
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Old 04-09-2010, 12:58 PM   #26
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Actually, in a pure VAT, you don't see it. A little is added at every stage of the process, from the manufacturer to the wholesaler to the retailer. The end consumer will not generally see all those taxes listed. They *might* see the tax added in the final stage of distribution (from the retailer to the consumer), but not the taxes built into the price before then.

In a national sales tax, on the other hand, you would see the tax specifically listed as a line item. Which is one reason I would prefer that to a VAT if we had to have one or the other. A VAT makes it easier to "hide" the taxes, much as with the gas tax where the price at the pump includes the tax which isn't separately listed.
Hmmm, seems the implementation of how it is 'reported' to the consumer will determine how well the transparency issue works.
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Old 04-09-2010, 01:02 PM   #27
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Looking at some receipts from a shopping spree in France, I can clearly see the VAT amount listed and it looks a lot like the sales tax you would see on a receipt here in the US. The VAT amount listed is not the tax added in the final stage of distribution, but the total VAT paid on the product from inception.
That's good to know. I wonder if that's a fairly new thing, since I'd heard from some Europeans (and folks who visited Europe) that it's not necessarily always clearly listed.

Anyway, score a victory for transparency if that is in fact the case.
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Old 04-09-2010, 01:24 PM   #28
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That's good to know. I wonder if that's a fairly new thing, since I'd heard from some Europeans (and folks who visited Europe) that it's not necessarily always clearly listed.

Anyway, score a victory for transparency if that is in fact the case.
I am not sure if it's a new requirement or if it is retailer-dependent.

If the VAT is 20% and you buy something (say a watch) for $600 at a retailer you, as a consumer, will have paid $120 in VAT. It is just that easy to figure out.

If it were a 20% sales tax, the retailer would collect $120 and send it to the government. But with a VAT, in essence, the retailer only sends part of the $120 to the government and keeps the rest to offset the VAT he already paid on the merchandise he purchased: If the retailer paid the watch $400 from the manufacturer, he already paid $80 in VAT. Now he sells you the watch for $600 (VAT included), and has to collect $120 in VAT from you. He keeps $80 to offset the VAT he already paid on the watch and only sends $40 to the government.

From a consumer perspective however, there is seemingly no difference between a sales tax and a VAT. You still pay $120 in taxes on your purchase.

Note: I edited my post to make it clearer.
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Old 04-09-2010, 01:40 PM   #29
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That's good to know. I wonder if that's a fairly new thing, since I'd heard from some Europeans (and folks who visited Europe) that it's not necessarily always clearly listed.

Anyway, score a victory for transparency if that is in fact the case.
I wonder if different countries might handle the VAT differently because in the UK, the receipt has only one line for: VAT 17%

The products are definitely already burdened with some form of hidden costs because an exact item in England costs about 1.5 times what it would in the US (same brand/model). That fact can easily be seen by doing an online comparison of a camera or computer.

So at least in England, a fair portion of the taxation is masked into the sell price.
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Old 04-09-2010, 01:45 PM   #30
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So at least in England, a fair portion of the taxation is masked into the sell price.
As far as I am concerned, this is a good thing. Many of us will be very aware of the size of this tax and how to minimize the bite- you know who you are.

Others will be less aware; finally they will be paying a little more tax. Dems don't mind taxing the little guy, they just don't want him to be too aware of the tax. The rest of us can count on Facebook, Twitter, and network TV to keep people totally ignorant of anything that might actually affect their lives

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Old 04-09-2010, 01:53 PM   #31
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Unlike sales taxes in the US, the VAT is always included (embedded) in the price of whatever you buy. Here is a typical French receipt:

I bought 3 items for 0.53 euros each (VAT included) for a total of 3*0.53 = 1.59 euros (VAT included)

That's how much I owed for the items including the VAT.

At the bottom of the receipt, you can see that the price of the items ex. VAT was 1.33 euros and I paid a VAT of 0.26 euros (19.6% of 1.33 euros) for a total of 1.59 euros.
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Old 04-09-2010, 01:55 PM   #32
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As far as I am concerned, this is a good thing. Many of us will be very aware of the size of this tax and how to minimize the bite- you know who you are.

Others will be less aware; finally they will be paying a little more tax. Dems don't mind taxing the little guy, they just don't want him to be too aware of the tax. The rest of us can count on Facebook, Twitter, and network TV to keep people totally ignorant of anything that might actually affect their lives

Ha
Oh, agree 100%. Let the VAT begin. In England folks are blissfully unaware of the additional cost of taxation and I used to hear constantly about the extra cost of transporting things to their island home. Some actually believe that they have superior goods. It seems to make them feel better.

One thing I will guarantee is that VAT will never be implemented in the US across the board. Select groups will be exempt. A "Get Out of VAT Work" card. Aptly named the GOV at Work.

The hard worker will never be spared. That would be unfair.
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Old 04-09-2010, 02:02 PM   #33
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Unlike sales taxes in the US, the VAT is always included (embedded) in the price of whatever you buy. Here is a typical French receipt:

I bought 3 items for 0.53 euros each (VAT included) for a total of 3*0.53 = 1.59 euros (VAT included)

That's how much I owed for the items including the VAT.

At the bottom of the receipt, you can see that I paid a VAT of 19.6% or 0.26 euros. The price of the items ex. VAT was 1.33 euros and I paid 0.26 euros (19.6% of 1.33 euros) for a total of 1.59 euros.
Does this 19.6% represent the entire VAT burden, or is it only the retail part of a long chain of manufacturing and distribution taxes? And how about if the jouets chats are imported from VietNam, is there a VAT equalization tax so that the outsourced jouets chats are not afforded unfair advantage over the homegrown manufacturers. (Assuming that there were such in France!)

I see that you anwered most of my question in your post above. Only the import equalization remains...

Ha
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Old 04-09-2010, 02:04 PM   #34
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It seems to make them feel better.
Their rulers are clever then...... Keeping the common folks feeling good about their lot is the key to maintaining power and your head!
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Old 04-09-2010, 02:11 PM   #35
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Their rulers are clever then...... Keeping the common folks feeling good about their lot is the key to maintaining power and your head!
In France the VAT is smoothed over by letting them eat cake for free and in England, the crumpet is heavily subsidized. A crumpet with a bit of oleo and Vegamite seems enough to soothe the urge to question one's lot in life.

We'll get there, no worries. I feel like the VAT'd cow already.
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Old 04-09-2010, 02:12 PM   #36
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Their rulers are clever then...... Keeping the common folks feeling good about their lot is the key to maintaining power and your head!
I read an interesting poly sci book that maintained that the essence of wise and effective democratic government is obscurity. Since ordinary voters cannot concentrate well enough to understand the issues, and cannot stand back far enough to form intelligent opinions even if they did understand, the best thing for the nation is that the voters not become particularly bothered by what is going on.

I take no particular stand on this idea.

Ha
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Old 04-09-2010, 02:12 PM   #37
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Why even go with a cap and trade... that rewards current polluters... just do a carbon tax with NO exceptions... the market will work it out... and nobody gets rewared.. no funny accounting etc...

As for VAT... one of the things I forgot to mention about the 'other countries'... is that all the ones I have been to with VAT do NOT have 'state' sales taxes. The central government does all the VAT/Sales taxing... here, the VAT would be on TOP of all the states sales taxes... so we would be in a unique position.
Canada has both Provincial sales tax and VAT in at least some of the provinces. I am certain Manitoba has both and they add about 15% to the cost of goods.
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Old 04-09-2010, 02:13 PM   #38
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HaHa,

The 19.6% represents the entire VAT burden on this item, yes, not just the retail part of it. The entire VAT burden is born by the consumer, even if the VAT is collected in stages. Now, I am not sure how the VAT works when it comes to imports. I could ask my mom. As an accountant, she is very familiar with the subtleties of the VAT mechanisms. I am more familiar with the export process however, and I know that a foreign purchaser can ask for a VAT reimbursement. So I am pretty sure that you have to pay the VAT on whatever you import.
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Old 04-09-2010, 02:26 PM   #39
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HaHa,

The 19.6% represents the entire VAT burden on this item, yes, not just the retail part of it. The entire VAT burden is born by the consumer, even if the VAT is collected in stages. Now, I am not sure how the VAT works when it comes to imports. I could ask my mom. As an accountant, she is very familiar with the subtleties of the VAT mechanisms. I am more familiar with the export process however, and I know that a foreign purchaser can ask for a VAT reimbursement. So I am pretty sure that you have to pay the VAT on whatever you import.
Thanks FireDreamer.

Ha
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Old 04-09-2010, 02:37 PM   #40
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Ouch 19.6% tax on sales. I may have to buy that new car and major appliances fast if they ever announce a VAT here in the US.
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