VAT is on the table

[rjsciurus]

Just returned from a trip there, I've got a pile of receipts from Germany with 19% VAT, 7% on groceries. It was 16% a year or two ago. I was there as it was being raised-- lots of talk, lots of drama advertising, lots of rushing to buy big-ticket stuff (including by me). Afterwards? As far as I know, nothing. I don't think there was even much of a drop because of the sales surge. Just a reduced projected national debt. Of course, this is in a country where most people can figure out not to spend more than they have. Your mileage may vary.

 

[ziggy29]

It's the perfect anti-supply side tax. All the yuppie go-getters will just have to work 25% harder to afford all the nonsense they feel they have to own to justify their inflated self worth. It's perfect!

This is what's wrong with the tax system. We all want the taxes to paid by the *other* guy -- and if only hits people whose lifestyles are loathesome to me, so much the better -- serves 'em right for not living the way I want them to.

Yep, it's always a good time to raise taxes on everyone else...

 

[atlas888]

If people are happy to spend $1,000 for a designer hand bag, or $75,000 to have a certain emblem on the hood of their automobile, or even $2.50 for a fifty cent cup of coffee, do you really think a 25% VAT is going to change consumption behavior?

In some sense the VAT is discretionary, so if some people chose to pay the additional levy for the lifestyle they prefer, that's their prerogative. But I think that group you described represents a small portion of the population. The VAT, like the luxury tax on yachts the congress passed a few years back, and then had to repeal because it nearly destroyed the boat building industry, will make most people think twice before an optional purchase. It will have a negative effect on a number of industrial sectors and may generate less revenue then the government think it will bring in.

 

[dex]

In some sense the VAT is discretionary, so if some people chose to pay the additional levy for the lifestyle they prefer, that's their prerogative. But I think that group you described represents a small portion of the population.

Change the word "discretionary" to "quality of life" and you get a better insight into the issue.

It is not levied only on luxury goods but everything from hobby gear to bedding.

 

[atlas888]

Change the word "discretionary" to "quality of life" and you get a better insight into the issue.

It is not levied only on luxury goods but everything from hobby gear to bedding.

I know what you are saying. But the price differentials between items are often a lot more than the quality differentials, so one can still use discretion as to which item to buy. If one still choose to live below their means, paying 25% more on $25 for something is a lot less dreadful than paying 25% more on $250 for a similar item with a brand name. has more bells and whistles, but performs the essential function more or less the same.

 

[explanade]

I'm not a fan of "hidden" taxes. I wish taxes were broken out as a separate line item for everything we buy. I think it might open some eyes if we saw the $2.39 gallon of gas sold as $1.79 plus 60 cents state and federal tax.

I'd prefer to have it more obvious to everyone how much they are paying in taxes without realizing it.

Well in Europe they include the VAT in the prices of all items, including food at the restaurant. They include the gratuity too.

Then you figure after the exchange rates what you're paying but since all the prices are that way, it doesn't stand out, especially after awhile.

 

[rjsciurus]

In Germany a computer-generated receipt will always clearly list the VAT, including the percentage, if you care to look. Maybe it's required to, I don't know. Regardless of the rate, it works much better to know the final cost as you're shopping, not as you're paying.

I speculate that the obscuring of full costs in the USA by not listing taxes in prices is in the national character, along with unpayable mortgages and other debts, personal and governmental.

 

[WilliamG]

Yeah, I would expect a VAT might be added into the mix to cover health care but don't expect the income tax to disappear.

Keeping the income tax at a progressive level would be one way to help offset the regressiveness of a VAT.

 

[deserat]

I, for one, come down against a VAT tax UNLESS it truly replaces the national income tax. However, I've never seen a tax repealed totally, only reduced, so I'll let past behavior dictate what will probably happen in the future. Have you ever looked at your phone bill and seen all those taxes/fees? None of them have been repealed - and some have been around long past their original intent.

 

[ziggy29]

Keeping the income tax at a progressive level would be one way to help offset the regressiveness of a VAT.

I suspect that keeping the income tax would also increase the opposition to creating a VAT. If a national sales tax doesn't include the repeal of the 16th Amendment, I'm probably not on board.

 

[explanade]

Well previous proposals involving a VAT effectively reduced the overall tax receipts especially for the highest income brackets.

Advocates talked up the simplicity and "fairness" of the scheme but would shut up when asked about whether it was "revenue-neutral."

So it was as much a tax cutting scheme as it was a tax reform scheme.


But VAT now seems to be coming up in the context of closing the budget gap and fixing things like health care.

So it may be a way to increase tax revenues.

 

[HFWR]

I suspect that keeping the income tax would also increase the opposition to creating a VAT. If a national sales tax doesn't include the repeal of the 16th Amendment, I'm probably not on board.

I am often "not on board" for various gumment actions, but it hasn't stopped them yet...

 

[samclem]

I suspect that keeping the income tax would also increase the opposition to creating a VAT. If a national sales tax doesn't include the repeal of the 16th Amendment, I'm probably not on board.

Here's what happened in Europe when they instituted the VAT in addition to their existing income tax. Hint: Taxes didn't go down.

In 1965, before the VAT swept across Europe, the average tax burden for advanced European economies (the EU-15) was 27.7% of economic output, roughly comparable to the U.S., where taxes were 24.7% of GDP, according to data from the Organization for Economic Cooperation and Development OECD). European nations began to impose VATs in the late 1960s, and now the European Union requires all members to have a VAT of at least 15%. Results? By 2006, the OECD reports that the average tax burden for EU-15 nations had climbed to 39.8% of GDP. The tax burden also has increased in the U.S., but at a much slower rate, rising to 28% for that year.

 

[rjsciurus]

Lies, damned lies, and statistics. I don't know how reasonable the Cato Institute numbers are, but a tax comparison between the USA and Europe is easily manipulated. In the USA your tax payments might include local property, income and sales, state income and sales, and federal income including social programs. European countries, as far as I know, do not have such a labyrinth of taxes, and probably use the VAT as a more primary source of funding. My biggest single USA tax bill is my local property tax. Our german house, worth more than our american one, is a few hundred Euros. If nothing else, it's a much nicer arrangement for retired and elderly people. You've got to judge an American VAT based on what the American politicians do with it, not on what the Europeans do with theirs.

edited to add- and I don't think they mentioned that the national debt likely moved inversely to the tax burdens in the two areas, did they?

 

[FUEGO]

edited to add- and I don't think they mentioned that the national debt likely moved inversely to the tax burdens in the two areas, did they?

I'm not sure of the historical change in national debt over time, but the US's external national debt is roughly equal to our annual GDP (or it will be by the end of the year). Not sure what the eurozone's total debt is, but the external debt of the top four euro debtor nations (UK, France, Germany, Spain) sums to $23 trillion give or take. That by itself, ignoring the debt of the rest of the eurozone countries, is more than 150% of the entire eurozone's GDP (PPP). The Eurozone isn't exactly a debt-free, responsible borrowing group of countries. High taxing and high spending is more like it.

 

[Meadbh]

I'm not sure of the historical change in national debt over time, but the US's external national debt is roughly equal to our annual GDP (or it will be by the end of the year). Not sure what the eurozone's total debt is, but the external debt of the top four euro debtor nations (UK, France, Germany, Spain) sums to $23 trillion give or take. That by itself, ignoring the debt of the rest of the eurozone countries, is more than 150% of the entire eurozone's GDP (PPP). The Eurozone isn't exactly a debt-free, responsible borrowing group of countries. High taxing and high spending is more like it.

U.S. National Debt Clock

I.O.U.S.A.: The Movie

 

[FUEGO]

U.S. National Debt Clock

I.O.U.S.A.: The Movie

And? Our annual GDP roughly equals our external debt. Many other industrialized countries fare much worse in their debt-to-GDP ratio. From an macro-economic standpoint, we have more room to increase taxes to pay down debt than other industrialized countries where the tax burden is much higher.

 

[Meadbh]

True.

Here is a quote from the Public Accounts of Canada, 2007-2008:

The accumulated deficit (the difference between total liabilities and total assets) stood at $457.6 billion as of March 31, 2008, a decline of $105.2 billion from its peak of $562.9 billion as of March 31, 1997. The accumulated deficit-to-GDP (gross domestic

product) ratio was 29.8 percent, down sharply from its peak of 68.4 percent as of March 31, 1996, and was at its lowest level since March 31, 1981.​

Unfortunately this happy situation is now reversing as the government attempts to spend its way out of the recession, including purchasing (on behalf of taxpayers) a 10% chunk of GM and Chrysler. ​