Common around the world, including in Europe, such a tax — called a value-added tax, or VAT — has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity.
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“There is a growing awareness of the need for fundamental tax reform,” Sen. Kent Conrad (D-N.D.) said in an interview. “I think a VAT and a high-end income tax have got to be on the table.”A VAT is a tax on the transfer of goods and services that ultimately is borne by the consumer. Highly visible, it would increase the cost of just about everything, from a carton of eggs to a visit with a lawyer. It is also hugely regressive, falling heavily on the poor. But VAT advocates say those negatives could be offset by using the proceeds to pay for health care for every American — a tangible benefit that would be highly valuable to low-income families.
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The VAT has advantages: Because producers, wholesalers and retailers are each required to record their transactions and pay a portion of the VAT, the tax is hard to dodge. It punishes spending rather than savings, which the administration hopes to encourage. And the threat of a VAT could pull the country out of recession, some economists argue, by hurrying consumers to the mall before the tax hits.
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What would it cost? Emanuel argues in his book that a 10 percent VAT would pay for every American not entitled to Medicare or Medicaid to enroll in a health plan with no deductibles and minimal copayments. In his 2008 book, “100 Million Unnecessary Returns,” Yale law professor Michael J. Graetz estimates that a VAT of 10 to 14 percent would raise enough money to exempt families earning less than $100,000 — about 90 percent of households — from the income tax and would lower rates for everyone else.
And in a paper published last month in the Virginia Tax Review, Burman suggests that a 25 percent VAT could do it all: Pay for health-care reform, balance the federal budget and exempt millions of families from the income tax while slashing the top rate to 25 percent. A gallon of milk would jump from $3.69 to $4.61, and a $5,000 bathroom renovation would suddenly cost $6,250, but the nation’s debt would stabilize and everybody could see a doctor.
Sounds like it will cure blindness, get my sheets whiter than white and make me a hit with the ladies! What can’t a VAT do? If it’s this good, why not go all the way and make it 100% so the government can do everything for us?
If we can get a true national/universal healthcare system with and a social welfare system like France, then I wouldn’t mind a VAT. I could cut out my costs for employee provided healthcare… That would allow me to support a VAT..
BUT if the fuckers decide to throw in VAT upon all the other shit I’m paying for, then no way!
Nope, sorry. There is no way they will deliver on this. I’m reminded the lottery that was funded on the promise that the money would go to ‘schools and wetland consesrvation’ in Iowa. Turns out when they went back to look that it was in a general fund and already spent.
So no,no,and NO! And #1 thats exactly how it will be implemented…on top of everything else.
First, we already have a VAT. It is called a sales tax levied by states and localities.
Australia replaced their local sales taxes with a national 10% VAT. The commonwealth promised up and down that that the states would get all the revenue they were getting as before. The only difference was that the commonwealth would be the tax collector instead of the locals.
As expected, that didn’t work out as planned. The states get screwed. But more important, it is a power grab. The states have to grovel to the powers in Canberra to get THEIR money.
If this is done in the US, then it is people in DC, not your county or state capital, that get to decide how the money is spent. Then what that hell is the point of having a state and local gov’t? Might as well nationalize the police, schools, fire services, prisons, roads, DMV’s, everything.
That centralization of power is why I oppose this. I don’t want the idiots in Washington getting their paws on money for state and local services.
Second, a VAT to pay for universal health care is a dumb idea. What Australia did was levy a medicare income tax. It is there on your tax return. You pay a health insurance premium, and you know how much you pay. Couldn’t be clearer. Why can’t we do that in the US?
Interesting concept but probably not workable since we all know at this point that the government will NOT keep their promises, they never do, and they will NOT spend the money on healthcare or anything else that would help the working class, working poor or poor of this country. They will give the money away to their special interest friends and groups. Period. I say let the government go bankrupt. If one good thing comes from this mess it’s that the Federal Reserve (hopefully) drops dead.
I lived near Buffalo when Canada implemented their GST (Goods and Services Tax)in ’91; sales plummeted on *everything.* It seemed like it took years for their economy to recover. It was great for the WNY economy tho – Canadians streamed across the border to buy GST-less goods.
Anyone who thinks the VAT will replace any existing tax program is nuts. The government mantra “Gimme more, gimme more, gimme more”.
We don’t have a revenue problem.
We have a spending problem.
Here is a what the democrat said:
“There is a growing awareness of the need for fundamental tax reform,” Sen. Kent Conrad (D-N.D.) said in an interview.
Here is what he really means:
“There is a growing awareness of the need for an additional tax platform,” Sen. Kent Conrad (D-N.D.) said in an interview.
“But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity.”
And that’s because whoever thinks that is an idiot. See, CA.
When they repeal the income tax, then a VAT tax makes sense. More likely it will be an additional tax. Remember the Laffer curve.
I’d be in favor of expanding the concept of a “sin tax” to other things like luxury items such as yachts, private jets, or even things like totally elective plastic surgery.
Here is the rub. The government could really get out of debt and create a national health care system. The rub is that there is bound to be more government spending and we will still end up with huge debt. The other problem with this is that is does not address the States debts or the local debts of cities which are also considering new was to tax. But unless we as consumers want to give up on some of these programs. I think more taxes of some kind are going to happen. Its funny how politicians hate to mention tax increases but they love to spend money.
Why bother with taxes at all? The Chosen One seems to think that doubling the deficit is no problem at all.
Doesn’t it worry anyone that the total $$$ in the “stimulus” package exceeds the total revenue from income tax?
I love how they try to sell a new tax: we’ll use the money to pay for extra programs like health-care, plus you won’t have to pay income tax. It’s win-win! The reality is that as soon as the idea becomes acceptable, spending will increase so that when the tax gets implemented, we can’t cut income tax or pay for extra programs.
(sarcasm on)
Who knows … this may work as well as Social Security.
(sarcasm off)
Taxing consumption is better than taxing income, IMHO. I’d not be averse to replacing our entire income tax system with a system based on taxing consumption, especially of luxury items. Income is good. Consumption is bad. We’re currently taxing and discouraging the good.
#13 – That would work.
Not piling it on top of income taxes.
When we got VAT in Swewden in 1960 it was sopposed to be temporary as it was during WWII and it was set at 5%.
We still have it and it’s now at 25%.
#13, exactly right Scott, taxing productivity is completely backwards thinking, and makes sense that politicians would have come up with it.
As long as we’re talking taxes, let me throw out a way to save Social Security. (1) Eliminate FICA on the first $30,000. This is like an income boost for low wage earners. (2) Eliminate the FICA cap. After the first $30,000, all income is subject to FICA.
Let the howling begin.
I think a VAT is a bad idea, but a national sales tax would be a great idea, especially if they got rid of the IRS.
Check out FairTax.org for more info.
#17, since the amount of your retirement payment received is based on the amount of income you earned that was subject to the tax, what you are saying is the poor should get very little and the people getting taxed on a million dollars a year should get significantly more than they currently will.
Good job braniac.
I still say 15% across the board will solve everything
When you think about it, a 100% VAT is the simplest of all. Just double the sticker price. Simple. Piece of cake. Easy as pie. That will get us out of financial woes in just a few months.
# 18 Mike said, “I think a VAT is a bad idea, but a national sales tax would be a great idea, especially if they got rid of the IRS. ”
True, VAT is fairly destructive compared to a sales tax.
Seems like a fairer tax than income tax and property taxes, at least it makes EVERYONE pay tax even the deadbeats.
When we first started paying VAT here in Spain I hated it. 16% doesn’t sound bad till you want to buy a car or a house. But the money didn’t go to healthcare, here they took an ugly post industrial city and polished it like a gem, suddenly we got a thriving service industry thanks to tourism. OTH the economy was quite healthy when the VAT began (a prerequisite). This is a desperate move in the middle of a crisis which seems more a way of financing social programs than fixing the economic problems. The problem is the money has got to flow. Money flows from the top down. Those at the top are still waiting. Target taxes to those large pools of stagnant money and your problem’s are over.
#17 One thing you’re forgetting is that SS was sold to the people as insurance and that we’re paying a premium. If that’s the case then it doesn’t make sense to have an open ended premium that you’re forced to pay (remember the Amish don’t pay to SSN, they don’t believe in insurance and got a pass from FDR). It also doesn’t make sense for some people to pay no premium but get a benefit.
On the other hand a lot of things about government programs don’t make sense so I’m sure that none of this will get in the way of politicians spending our money. For instance, SS revenue was several billions over what was paid out, cool. So, the government took that extra money and used it to fund other existing programs. But don’t worry, you’re premiums are safe, they replaced that money with government bonds so that it can get paid back later. That’s right kids, the government takes in $100, spends $70 on SS, borrows and spends $30 on other things, creates a bond for $30 so that it can remember to tax you again for that $30 later.
So now they want a VAT. I can’t wait to hear the brilliant ideas they have to manufacture more money they will take from us.
# 24 amodedoma said, “When we first started paying VAT here in Spain I hated it.”
When did Spain get a VAT?
This proposal doesn’t go far enough. What SHOULD happen is the “Fair Tax”: a consumption tax that replaces income tax, death taxes, FICA, corportate tax and a few others. Implemented properly, it’s revenue neutral, but makes sure that everyone pays taxes. See “The Fair Tax Book” by Boortz and Linder.
This will never happen. Democrats talk shit all the time about helping the ‘poor” but the Democrats will never support paying this much in additional taxes.
VAT or GST, are always heralded with promises which are then ignored and forgotten. Wherever it has been implementated in the world it has not improved matters. Siphoning, skimming, shaving – reduces government to pimping for it’s survival.
Why do most tax plans assume the same level of spending as before the tax? Eventually, the tax causes decreased spending on the item taxed. Ultimately, people find a cheaper alternative. With a VAT tax, overall spending would go down, and government services would suffer, but, maybe as a side effect, personal savings might actually go up.