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MACH1
10-12-2009, 03:14 PM
Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look
Levy Viewed as Way to Reduce Deficits, Fund Health Reform

By Lori Montgomery
Washington Post Staff Writer
Wednesday, May 27, 2009

With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax.
This Story

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.

At a White House conference earlier this year on the government's budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. A recent flurry of books and papers on the subject is attracting genuine, if furtive, interest in Congress. And last month, after wrestling with the White House over the massive deficits projected under Obama's policies, the chairman of the Senate Budget Committee declared that a VAT should be part of the debate.

"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.

Liberals dispute that notion. "You could pay for it regressively and have people at the bottom come out better off -- maybe. Or you could pay for it progressively and they'd come out a lot better off," said Bob McIntyre, director of the nonprofit Citizens for Tax Justice, which has a health financing plan that targets corporations and the rich.

A White House official said a VAT is "unlikely to be in the mix" as a means to pay for health-care reform. "While we do not want to rule any credible idea in or out as we discuss the way forward with Congress, the VAT tax, in particular, is popular with academics but highly controversial with policymakers," said Kenneth Baer, a spokesman for White House Budget Director Peter Orszag.

Still, Orszag has hired a prominent VAT advocate to advise him on health care: Ezekiel Emanuel, brother of White House chief of staff Rahm Emanuel and author of the 2008 book "Health Care, Guaranteed." Meanwhile, former Federal Reserve chairman Paul A. Volcker, chairman of a task force Obama assigned to study the tax system, has expressed at least tentative support for a VAT.

"Everybody who understands our long-term budget problems understands we're going to need a new source of revenue, and a VAT is an obvious candidate," said Leonard Burman, co-director of the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, who testified on Capitol Hill this month about his own VAT plan. "It's common to the rest of the world, and we don't have it."

Seeking New Revenue

The surge of interest in a VAT is testament to the extraordinary depth of the nation's money troubles. While some conservatives have long argued that a consumption tax would provide a simpler and more efficient alternative to the byzantine U.S. income tax code, this time it's all about the money.

The federal budget deficit is projected to approach $1.3 trillion next year, the highest ever except for this year, when the deficit is forecast to exceed $1.8 trillion. The Treasury is borrowing 46 cents of every dollar it spends, largely from China and other foreign creditors, who are growing increasingly uneasy about the security of their investments. Unless Congress comes up with some serious cash, expanding the nation's health-care system will only add to the problem.

Obama wants to raise income taxes for high earners and impose new levies on business, but those moves would not generate enough cash to cover the cost of health care, much less balance the budget, and they have not been fully embraced by Congress. Obama's plan to tax greenhouse-gas emissions could raise trillions of dollars, but again, Congress is balking.

Key lawmakers are considering other ways to pay for health reform, including new taxes on sugary soda, alcohol and employer-provided health insurance. The last proposal could raise a lot of money -- nearly $1 trillion over the next five years, according to White House budget documents. But options on the table would raise a fraction of that sum. And while it might pay for health care, it would barely dent deficits projected to total nearly $4 trillion over the next five years and to grow rapidly in the future, as baby boomers draw on Social Security and Medicare.

Enter the VAT, one of the world's most popular taxes, in use in more than 130 countries. Among industrialized nations, rates range from 5 percent in Japan to 25 percent in Hungary and in parts of Scandinavia. A 21 percent VAT has permitted Ireland to attract investment by lowering its corporate tax rate.

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.

A VAT's Bottom Line

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.

Sales Tax Gains Momentum

Burman, who helped House Democrats craft an unsuccessful 2007 plan to repeal the alternative minimum tax, said he's received a number of phone calls from lawmakers interested in his idea, though "they can't quite imagine how to make it happen politically." Burman said the 25 percent rate has caused some sticker shock, and he's trying to figure out how to bring it down.

Graetz's proposal drew an endorsement from Volcker, who last year called it "a sensible plan for reform." (Volcker did not respond to a request for comment.) It also has piqued the interest of Conrad, the Senate Budget Committee chairman who argues that it could be modified to accommodate Obama's pledge not to raise taxes on families who make less than $200,000 a year.

"I think interest is quietly picking up," Graetz said. "People are beginning to recognize that the mathematics of the current system are just unsustainable. You have to do something. And a VAT has got to be on the table if you want to do something big and serious."

Still, the Senate Finance Committee declined to include a VAT among the options it is considering to pay for health reform. And even VAT supporters doubt the tax will find a place among the tax-reform proposals the Volcker panel has been asked to produce by Dec. 4.

Though the nation's fiscal outlook is grim, Burman said "the situation will have to get more desperate" before lawmakers are likely to consider a new levy aimed directly at the pocketbooks of every one of their constituents.

Most lawmakers are still looking for "a painless source of revenue" to overhaul the health-care system and dig the nation out of debt, Burman said. "Who knows?" he added. "Maybe the tooth fairy will bring that to them."
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/26/AR2009052602909.html

Whats the sales tax in your state? Now add on an extra 10-25% on top of that.

All hail the Messiah.

Vincent
10-12-2009, 03:28 PM
Whats the sales tax in your state? Now add on an extra 10-25% on top of that.

Yeah, and add that to state and fed income tax, property tax, and various other taxes and fees and you "get to" keep 10-15% OF YOUR INCOME. That'll jack up the economy.

What a bunch of @#$%ing morons.

Here's an idea. Stop spending money like you don't have to wait for the ink to dry on the money you just spent. If bho thinks he can slash defense by a third, do the same to the whole damned gubmint. Somehow they might squeak by on $2T. Just maybe.

RunWillieRun
10-12-2009, 04:24 PM
I think a 'National Sales Tax" is a great idea.

No, seriously, I do.





I support it as a REPLACEMENT of the federal income tax. It would basically eliminate the IRS.

MACH1
10-12-2009, 04:27 PM
I think a 'National Sales Tax" is a great idea.

No, seriously, I do.





I support it as a REPLACEMENT of the federal income tax. It would basically eliminate the IRS.

Ain't gonna happen. Nice thought though.

Preacher
10-12-2009, 04:46 PM
I think a 'National Sales Tax" is a great idea.

No, seriously, I do.





I support it as a REPLACEMENT of the federal income tax. It would basically eliminate the IRS.

Bingo.

Too bad Washington DC thinks the money we make is theirs to spend.

X-Terminator
10-12-2009, 05:22 PM
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/26/AR2009052602909.html

Whats the sales tax in your state? Now add on an extra 10-25% on top of that.

All hail the Messiah.

And also consider that some counties like Allegheny County has an extra 1% sales tax on top of the state sales tax, and it's even more.

Anyway, I also support the national sales tax as a replacement to the income tax, but it has to be for everyone, including the rich. And no matter which plan you support, you're still going to have to pay all of the other taxes on top of the NST, which will affect the poor most of all. So you really can't bash Demos too much for this, other than once again, they would be shifting the income tax burden onto the rich. If they would do this while lowering other taxes such as property taxes, it would be ideal, IMO. I would love to be able to get my entire paycheck every month rather than send 25% of it to Uncle Sam.

AllD
10-12-2009, 05:45 PM
Read my lips, no more balls to $weed.

Vincent
10-12-2009, 06:08 PM
I think a 'National Sales Tax" is a great idea.

No, seriously, I do.

I support it as a REPLACEMENT of the federal income tax. It would basically eliminate the IRS.

Don't apologize for thinking that's a good idea. Its the only tax idea that makes any sense in light of the profligate waste that gubmint is. The "flat tax" is ultimately the only "fair" approach as well - everybody pays the same percentage. No IRS. No @#$%ing tax returns.. No tax dodges. No tax attorneys. No CPAs. Never happen.

Read my lips, no more balls to $weed.

We should try him in the wildcat. :couch:

MACH1
10-12-2009, 06:22 PM
Don't apologize for thinking that's a good idea. Its the only tax idea that makes any sense in light of the profligate waste that gubmint is. The "flat tax" is ultimately the only "fair" approach as well - everybody pays the same percentage. No IRS. No @#$%ing tax returns.. No tax dodges. No tax attorneys. No CPAs. Never happen.


It'll never happen, the gubment will never give up that extra 30-40% of your paycheck.

Also anything with sugar in it will have that extra tax on it.

Preacher
10-12-2009, 06:39 PM
Don't apologize for thinking that's a good idea. Its the only tax idea that makes any sense in light of the profligate waste that gubmint is. The "flat tax" is ultimately the only "fair" approach as well - everybody pays the same percentage. No IRS. No @#$%ing tax returns.. No tax dodges. No tax attorneys. No CPAs. Never happen.



I like the flat tax. I like the (EDIT.. NOT VAT, but Fair)tax ONLY even better.

http://www.fairtax.org/site/PageServer


Check out this simply PDF that explains it very well

http://www.fairtax.org/PDF/FairTax-Fundamentals_and_facts-070122.pdf

Funniest thing, I stand to LOSE a lot more money by a fair-tax. But is truly makes sense.

hindes204
10-12-2009, 06:41 PM
Ive always been in favor of the "flat tax" plan.....but only as an alternative to federal tax, not in conjunction with it. Flat tax would charge everybody exactly the same tax, even those who earn thier income illegally who never have to pay federal taxes. But unfortunatly, as Mach1 siad, itll never happen

hindes204
10-12-2009, 07:01 PM
that nutcase pelosi seems to love the idea of a VAT + the income tax.......you think those san franciscans will ever wise up and vote her out of office............................................ .....................................pfft, what the hell am i thinking

Vincent
10-12-2009, 07:18 PM
I think we're all pretty much in agreement on this one.

First thing we'd need is a Constitutional amendment to repeal the income tax. Then we could institute a sales tax.

Unfortunately, we'll never get the amendment through Congress, so that means we have to fight the sales tax tooth-and-nail so they don't hit us with both.

Repeal the 16th Amendment.

I have advocated a revolution (by that I mean 1994 style) in other threads. That is possible in 2010 as angry as folks are. If that doesn't materialize, it might be time for the traditional approach.

The congress has lost sight of their elected mission - to uphold the constitution and serve the interests of their constituencies. It is time to reorient those two houses and both parties by whatever means become necessary.

Our government architecture, the designed balance between the federal and the states, and the constitution are brilliant by any measure. But those that now hold the offices serve themselves and those that they're beholden to. They are the problem and they need to go.

Preacher
10-12-2009, 07:27 PM
that nutcase pelosi seems to love the idea of a VAT + the income tax.......you think those san franciscans will ever wise up and vote her out of office............................................ .....................................pfft, what the hell am i thinking

I live in the Bay Area... There's not a chance.

The only time she is railed against...is when she does something THAT IS TOO CONSERVATIVE

:horror:

hindes204
10-12-2009, 07:36 PM
I live in the Bay Area... There's not a chance.

The only time she is railed against...is when she does something THAT IS TOO CONSERVATIVE

:horror:

i hear ya, i live there too...it was said more in jest. Its unbelievable to watch the amount of nutcases that live around there

Preacher
10-12-2009, 08:35 PM
i hear ya, i live there too...it was said more in jest. Its unbelievable to watch the amount of nutcases that live around there

Yep,

COMPLETE HYPOCRITES.

Same people make MILLIONS off of the internet, silicon valley, etc. etc. which most, if not ALL have some type of beginning or application (which is driving a lot of their industry) in the very military which they demand NOT be on the college campuses.

The military industrial complex is still big in this area (NOTHING like the cold war).

Hypocrites.

Godfather
10-12-2009, 08:38 PM
VAT tax is a bad idea for two reasons: first, it's a pain to deal with from an accounting standpoint and second, it hides part of its cost from the consumer. They just see the price tag on the shelf plus the final markup.

Better to only tax at the point of sale. Then people will be reminded of the full cost of government every time they make a purchase.

We also need to exempt necessities like food and medicine. That eliminates any argument that it's unfair to the poor...we're not taxing what you need to live, just extra stuff you want.

Preacher
10-12-2009, 09:03 PM
VAT tax is a bad idea for two reasons: first, it's a pain to deal with from an accounting standpoint and second, it hides part of its cost from the consumer. They just see the price tag on the shelf plus the final markup.

Better to only tax at the point of sale. Then people will be reminded of the full cost of government every time they make a purchase.

We also need to exempt necessities like food and medicine. That eliminates any argument that it's unfair to the poor...we're not taxing what you need to live, just extra stuff you want.


Yep.

That is why I like the Fair Tax proposal.

No double-taxing. No unfair taxing of the rich simply because they have more. No overtaxing of the poor because the govt. wants money.

I love the idea.

revefsreleets
10-13-2009, 07:54 AM
Hmmmm....when I suggested that the Democrats had changed from "tax and spend" to "Spend then tax", I was accused of simply pushing the panic button.

Deficit: 1.4 trillion and growing
More spending on the way...

And here come the taxes.

(sigh)