Value added Tax article: answers desired

[DonCoquixote]

http://www.tampabay.com/opinion/columns/a-tax-to-battle-our-debt/1121780

The above article discusses a VAT (Value added Tax) to reduce the debt. I know this had been flirted with. Normally I like Gibbons, and I know some people like this idea. However, there are some questions I have.

One: is this article making the VAT seem to good to be true?
Two: how does it avoid being a very regressive tax that hits the middle class hardest?

[Warpy]

1. It's a sales tax and that in and of itself is highly regressive

meaning that the people who spend the highest percentage of their income on subsistence will pay the largest percentage of it in taxes.

With the consumer economy already on the ropes, this is clearly a stupid strategy, even though a lot of the tax is hidden at the producer level. It still increases the price of goods and services across the board.

While enacting this during highly inflationary, full employment times might make a little sense, enacting it when we're facing the spectre of a deflationary spiral is insane.

It's all to avoid looking at the rhinoceros in the tea room: we need to raise taxes on the rich. A lot.

[Pab Sungenis]

3. But sales taxes don't have to be across the board.

Here in New Jersey, for example, our sales tax is fairly liberal. Staple foods are exempt (as is anything including wheat gluten, even frozen pizzas). Clothing is exempt. Most of the things that would be considered necessities of life are exempt. So are periodicals...newspapers and magazines.

A well-structured sales tax, especially a VAT, doesn't need to be regressive.

[Skink]

4. Last thing non food retailers need is another layer of sales tax.

[Warpy]

8. Exempt food at the state level

and the tax is added at every other point. The guy who buys from the farmer adds value. The distributor he delivers to adds value. The processor who gets it next adds value. All this "added value" is taxed. Get it? The stuff is already heavily taxed before it's ever shipped to the state, and just the shipping process itself adds value that is taxed.

There is no way a VAT can ever be considered progressive and there is no way it won't drive a few more nails into the coffin of the consumer economy right now.

If you want a new tax, asses a ten cent a trade tax on the stock and commodities markets. Now that puppy would raise much more than a VAT would in the short term and it would take out all the profit in HFT, something that threatens the stability of the market, itself.

[Riftaxe]

2. Well...

one: yes
two: by hitting the poorest the hardest.

[pa28]

5. I'm glad you posted because this needs to be talked about.

Discussions of the Simpson catfood commission seems fixated on SS but the final report could contain any number of unexpected and regressive blindsides. The VAT tax being one of them.

A few things about the VAT I find disturbing:

Firstly is the layered approach to taxation. The government would be taxing the value added portion of any transaction along the wholesale chain. The final consumer would not only be paying the VAT but the merchant would presumably pass along all the accumulated costs of the tax along eventually resulting in retail markups. So it's a a double impact in the form of a tax on top of higher prices with no underlying economic prosperity to back it up.

Secondly, Gibbons is stressing the need for equality and no exemptions. The reason cited is that we all shared the benefits of deficits and now we all need to share the pain of a balanced budget equally. He's recommending no allowances for basic items like food or children's clothing that would at least mitigate the regressiveness of the tax.

Thirdly, he's saying it should be implemented on a "temporary" basis. Yeah right.

Also, for small businesses it's another burden in terms of compliance and audit exposure at a time when many are already hanging on by their fingernails. He says this would be "simple" but in reality it would be similar to sales tax accounting which would mean many hours of paperwork and hundreds or even thousands of dollars in additional accounting fees to be current with a requirement of this type.

Finally I just think it's wrong to squeeze people already on the edge. We're in the middle of an economic emergency still and the growing army of newly poor is having trouble meeting their own basic needs. We don't need to make it any more difficult.

[Warren Stupidity]

6. Republicans should push this. nt.

[Massacure]

7. The devil is in the details.

There are so many deductions that can be claimed in the current income tax, that I don't think a VAT would make much difference.

[LiberalAndProud]

9. Paid upon the consumption of goods and services.

Labor will be taxed. So if an entrepreneur sells services, his customers pay sales tax and he pays income tax. The laborer who is just trying to make an honest living gets squeezed between two tax structures.


The man who can keep money in his pocket keeps his money in his pocket. No tax for him. Ain't he the lucky one? The poor schmuck who has to spend every dime every paycheck and put off the rest of the bills till next time ... he gets taxed on every single penny. That's so fucking FAIR I just can't describe it.

It's a fucking STOOOOOOOOPID idea. Republican pablum.