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Old 04-05-2010, 05:06 PM   #61
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One argument I have heard in favor of the VAT is that it is simply another way to tax, such that the income tax does not have to be so high, which would make the "adverse economic behavior" due to the income tax rate be less strong - i.e., doing things to lower taxes legally OR illegally. With a VAT especially, since there would be a tax and various steps along the way, there would be less of an impetus to cheat at each point, rather than at one single point.
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Old 04-05-2010, 05:08 PM   #62
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Originally Posted by Alan View Post
Texas is almost twice the physical size of Germany
I have driven all the way on I-10 - I love the sign that says "El Paso 869"!
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Old 04-05-2010, 11:13 PM   #63
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North South US 83 is the equivalent of I -10 in the east west direction and runs 783 miles, going from Brownsville, all the way to the Ok Panhandle, thru the Texas Panhandle. It is very much a country road with the only large cities being Brownsville, Laredo and Abline
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Old 04-06-2010, 02:04 AM   #64
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North South US 83 is the equivalent of I -10 in the east west direction and runs 783 miles, going from Brownsville, all the way to the Ok Panhandle, thru the Texas Panhandle. It is very much a country road with the only large cities being Brownsville, Laredo and Abline
Wow, VAT to distances in Texas, reminds me of this thread. Anyway it is a forum on ER.

I hazily remember more than one person telling that they have drive from one end to other on this road.
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Old 04-06-2010, 02:35 AM   #65
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OK - I've driven those Texas roads, too. Yes, sometimes mind-numbing and a book on tape or great music in the car is a requirement :-) As for thread wandering, I raise my hand - the point was about using ideas from smaller regions and thinking they would scale easily - I don't believe that is so.

Back to the VAT - cheating - hmmm, well, basically the VAT ends up being paid by the consumer. Like basic economics, the costs get passed along the chain until the end.

As for the OP's question - a VAT making an IRA conversion to a Roth a double-taxed event - perhaps. Depends on what the money in the Roth is used for and if the VAT aspect is resident in that particular transaction (see my previous posting on no VAT on food). I'll second Nords statement that basing your retirement investing decision on future tax policy is probably a folly as it changes.....quite a bit (70-90% income tax during Hoover and WWII).

Sort of off topic - I fear a VAT in the USA. It is very difficult for bureacracies (governments) to 'rollback' or turn off spigots of funds. Most of the people on this board would 'restrict spending' if the financial situation became dire. Yes, the offensive approach of finding more resources is a valid one, however, it seems our government (and most others around the world) isn't very good at the defensive approach. Once a VAT is placed in, it will not go away....and it will go up. Last time I was here in Germany the VAT was 15-16%. They raised it to 19% a few years ago. It has been steadily rising since it was enacted. ~20% of your money is a LOT. And, if they raise the VAT, that's an automatic inflation jump for that year - outside of natural economic forces.
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Old 04-06-2010, 04:44 AM   #66
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With the foreign import tax, you point to a reference where separate treaties reimburse the VAT . . . the same could be done with a NST.
I suppose, but I haven't seen proposals to do that. Simplicity is a very good thing, and if we get into identifying "foreign content" (labor? materials?) so we can appply a NRST differently for imports than domestically produced goods, it will be so messy and complex (i.e. full of compliance costs and opportunities to cheat) that we might as well have a VAT.

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And couldn't we "pre-bate" a certain amount of the VAT and tax everything too?
Only if we are willing to identify the ultimate retail purchasers (which you previously cited as a problem) and set up the "prebate" mechanisms and bureaucracy on top of the byzantine VAT bureaucracy. And, the folks pushing this VAT idea want to keep the FIT, too, so we'd keep that entire government structure and drain on our economy. It would just be a full employment program for government accountants.

HR 25 calls for eliminating the income tax and payroll taxes, and they would be replaced by a NRST. That's a different thing than adding a new tax on top of the cesspool of a tax code we have already.
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Old 04-06-2010, 06:10 AM   #67
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I love OP's VATs - they helped me sell me much loathed boat in 2005. I listed that beast online and got three inquiries, all from Europe. I finally sold the thing to a guy from Belgium. The only hassle for me was that I had to drive it up to Baltimore to load on a container ship (that is an interesting process). The Belgian guy saved enough on VAT to pay for the transportation and still come out way ahead. He even researched accessories (Garmin Chart Plotter, etc) online and sent me a couple of thousand to buy them for him and hide them in the gunwales. Taxes are a motivator everywhere but he wouldn't have traded in his health care
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Old 04-06-2010, 07:42 AM   #68
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The Highest Taxes in the World | Taxes | Money/Investing | Mainstreet

Taxation of Wage Income - 2008.pdf
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Old 04-06-2010, 07:49 AM   #69
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RonBoyd:

Those "AllIn" tax rates only include federal tax plus SS. They exclude state/local taxes plus property/sales/fuel taxes and other "user fees".

I am not convinced that the conclusion of the article (ie- we aren't taxed so much) is valid.

All-in:
The all-in tax rate, calculated as the combined central and sub-central government income tax plus employee

social security contribution, as a percentage of gross wage earnings.
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Old 04-06-2010, 08:01 AM   #70
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RonBoyd:

Those "AllIn" tax rates only include federal tax plus SS. They exclude state/local taxes plus property/sales/fuel taxes and other "user fees".

I am not convinced that the conclusion of the article (ie- we aren't taxed so much) is valid.
Don't forget embedded taxes e.g. Corp. Taxes that are ultimately paid by the end user.
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Old 04-06-2010, 08:05 AM   #71
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Back to the VAT - cheating - hmmm, well, basically the VAT ends up being paid by the consumer. Like basic economics, the costs get passed along the chain until the end.
Some of the cheating I remember are:
- Collecting VAT but not giving it to the Gov't
- Using a higher VAT rate to the consumer and giving the Gov't the proper amount
- Setting up a Company and reclaiming VAT never paid to a supplier
- Reclaiming VAT on items not allowed by VAT laws
- Bribing VAT auditors
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Old 04-06-2010, 08:55 AM   #72
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I suppose, but I haven't seen proposals to do that. Simplicity is a very good thing, and if we get into identifying "foreign content" (labor? materials?) so we can appply a NRST differently for imports than domestically produced goods, it will be so messy and complex (i.e. full of compliance costs and opportunities to cheat) that we might as well have a VAT.
I don't think the NST is any more simple. In a VAT everyone pays the tax but manufacturers get to deduct their "cost of good sold". With a NST, you'd need something similar where businesses would get refunded the tax they paid for items for resale. It seems simple enough to adjust the deductions so that they're discriminatory against whatever group you wanted to target. That's what I understand is happening with the VAT.

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Only if we are willing to identify the ultimate retail purchasers (which you previously cited as a problem) and set up the "prebate" mechanisms and bureaucracy on top of the byzantine VAT bureaucracy.
We have to do that anyways, as explained above.


BTW, I don't really have any vested interest in a NST vs. VAT. I don't think either has a snow ball's shot in heck of becoming law. But just from a theoretical point of view, the two systems seem really very similar to me.
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Old 04-06-2010, 09:02 AM   #73
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Heck, it would take me 11-12 hours to drive from Sacramento, CA to Phoenix, AZ, in the USA and I haven't even gone through two states!
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Texas is almost twice the physical size of Germany

Alan beat me.... but you can drive 11 to 12 hours and not get through the state... As the saying goes 'the sun has risen and the sun has set and you have not left TEXAS yet'....


Now let's see if someone from Alaska chimes in
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Old 04-06-2010, 09:11 AM   #74
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. but you can drive 11 to 12 hours and not get through the state... .
Yep, I had a car like that once . . .
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Old 04-06-2010, 09:19 AM   #75
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BTW, I don't really have any vested interest in a NST vs. VAT. I don't think either has a snow ball's shot in heck of becoming law. But just from a theoretical point of view, the two systems seem really very similar to me.
I agree that elimination of the FIT is very unlikely, but I'm not so sure something else won't be added atop it. I do see significant advantages for a NRST vs a VAT from a compliance cost perspective (at least if we look at real-world examples of VATs and the most "mature" proposal for a NRST, as embodied in present House and Senate products). The NRST, because of the "prebate" feature, is a more appropriate replacement for the FIT. Either would be better than the FIT, but I'd rather stick with the FIT than add either on top of it.
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Old 04-06-2010, 10:15 AM   #76
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I look for no major changes. Our law makers have to find a way to game the system and purchase votes. In order to do this, they will have to maintain high income tax on the 'rich' and lower the tax on the poor. However, to the extent the rich invest and spend outside the US, they will lower their VAT/NRST. The poor on the other hand do not have this option. So the politicians will begin to exempt things from the VAT/NRST, food, clothing, housing, kids cloths, or higher give backs based on income. The end results, the 'rich' will pay. I also expect to se many early retirees classified somehow as 'rich'. It is a small group with little or no political clout, and generally with money. A perfect target for greedy politicians.
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Old 04-06-2010, 10:35 AM   #77
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I think it's only a matter of time before we get a VAT. More than 90 countries have some kind of VAT in place and the list is not getting shorter. In most countries, the VAT was introduced in addition to an income tax. Because of the regressive nature of the VAT, the income tax usually has to be made more progressive in order to keep an overall progressive tax system. A VAT is a very efficient way to collect revenues for governments and that's why it is gaining popularity around the world. And while it is generally politically difficult to increase income taxes, small increases in the VAT rate overtime usually go unchallenged which gives governments (IMO) a lot less incentive to control spending because they can always bump the VAT rate when they need to.
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Old 04-06-2010, 10:41 AM   #78
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Income taxes started out low. They started at 1 percent of millionaires income.

We now all know how that "small" tax ended up.
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Old 04-06-2010, 11:20 AM   #79
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Some are mentioning that the rich can buy stuff 'over there'... but if it is like most of them, if you bring it back 'here' you are supposed to pay your VAT tax.... not that cheating does not go on...


I bought something online when I lived in London... and the post office would not deliver it to me until I went in and paid my VAT tax on the item... learned my lesson on that one....
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Old 04-06-2010, 12:02 PM   #80
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Alan beat me.... but you can drive 11 to 12 hours and not get through the state... As the saying goes 'the sun has risen and the sun has set and you have not left TEXAS yet'....

Thanks for posting this. It reminded me of a postcard in the rack by the cash register of the only restaurant in the town I grew up in. It said, "The sun has riz, the sun has set, and here we is, in Texas yet!".

The internets is wonderful. Google and yea shall receive.
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