Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
Cas Balicki ·
July 6, 2011 at 1:33am
Below is a list of reasons to seriously consider instituting a Value Added Tax (VAT) in the United States.
- Current monetary/fiscal instability is a significant economic and security threat to the nation
- National reluctance to cut spending programs
- Only a financial emergency will force spending cuts
- Absent such a national emergency nothing will force spending and entitlement cuts
- Apply the VAT revenue only to deficit reduction
- A VAT would allow a lowering of corporate taxes that currently hamper business expansion and the repatriation of international profits
- Everybody pays the VAT, which ends the favouritism implicit in income taxation
- A VAT would end the hash legislators have made of allowable deductions and special interest group privileges, the stock and trade of Washington
- A VAT would end the uncertainty that stems from anticipated/future tax policy that currently hampers investment
- The current tax system is beyond complicated and actually hampers industry by being too expensive to comply with
- The current tax system no longer provides sufficient income for the government to function and even after program and entitlement cuts will likely not furnish sufficient revenue to support the national government
- An easily understood VAT is not a job killer as are income and other taxes, especially hidden taxes
- A VAT is an obvious tax, which makes governments reluctant to raise it, thus forcing government to live within its means
- Over the last few decades government deficits have grown even in good economic times, which belies the notion that the current deficit is temporary
- Constant government expansion and ever growing deficits put increasing pressure on interest rates and impede capital formation thus penalizing investment leading to the malaise of perpetually weak economic performance
- A VAT by taxing all aspects of production at the same rate does not favour labour intensive production at the expense of capital intensive production thus rendering taxation fairer over the whole spectrum of industries
- Because corporations are taxed uniformly over the entire spectrum of production they can focus on the most efficient systems of production as opposed to concentrating on taxation skewed efficiencies, which in the long run turn into inefficiencies
- Corporate taxes tend to render capital more expensive and labour less expensive, which skews production to labour
- The inefficient use of inputs penalizes society as a whole in that it reduces overall output rendering that output dearer than it should be
- Currently the US faces a balance of payments disadvantage from nations that have a VAT tax as the price of goods made for export by such nations is reduced by the amount of the VAT whereas all the taxes included in the price of US goods made for export is carried in the price as a factor of production
- Weak economies produce lower revenues for government and higher spending commitments which prolongs recessionary periods and delays recovery—a VAT would stabilize the government sector thereby shortening recessionary periods
If I have time today I will try to summarize the arguments against a VAT, which I have started, but have not taken very far as of this writing.
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Comments:
Mar '11
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
Some quick comments. First, the Canadian Goods & Services Tax was intended to replace the "Manufacturers' Sales Tax," an invisible (to the consumer) tax that was applied to manufactured goods before they hit the retail level.
Second, although it is generally a good thing to replace invisible taxes with visible taxes, the [Conservative] government of the day did it just at the start of a recession. Everyone knew a recession was happening and that it was a dumb idea, but they did it anyway. Implementing a new tax in an economic downturn just doesn't work out well.
Trying to reconcile a theoretical VAT to everyday life is a nightmare. Famous examples include: if I buy one donut ("doughnut" in Canadian), it's taxed; if I buy six donuts, it's tax-free, since it's obviously a grocery purchase. Oops.
Jul '10
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
The answer to the title question is NO.
Nov '10
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
Re. the hidden VAT - that really depends on the gov't; when the GST (the Goods and Services Tax, very similar to a VAT) was first introduced here there was an attempt to keep it hidden, but stores wouldn't go along, so it is explicitly expressed.What the final buyer pays is the total tax on the product, and because of the way it's organized, intermediate sellers don't have to worry too much about whether the buyer is a retail customer or just another step. There are some headaches (i.e. the donuts mentioned above) but in general the bookkeeping is much easier than for the old sales taxes. There are some really useful breaks for very small businesses, good for those just starting out.
As for the lack of Canadian superpowers, just remember that one of the PM's (Mackenzie King) could actually talk to the spirits of the dead, including his dogs, his mum, and Leonardo ( the artist, not the turtle). Hot stuff....
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
If the Federal income tax is repealed, which includes, I assume, the depreciation schedules for corporate flying pigs, then a consumption tax will be accompanied by rebates for lower-income citizens. (You know this would be a condition extracted by the Left.) Thus we would be sending people checks for government assistance, and sending them checks to rebate the taxes they paid with money that wasn't theirs in the first place.
This would be a constituency inclined to go along with future tax hikes, no? It would mean a rise in the rebate, after all. Free money! Everyone loves free money.
Flat rate. No deductions. Doesn't need 21 arguments. Three will do: Fair, Clear, Difficult to manipulate. Okay, #4: elimination of the entire profession of remoras attached to the carcass of the current tax code.
Dec '10
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
And the only reason we need to oppose it:
1) Because it won't be in lieu of an income tax, it will be on top of the income tax.
So, instead of goods costing 20% more but you having 20-30% more income to deal with that, goods will cost 20% more and your income will stay exactly the same.
I will not entertain the proposition of any new or expanded taxation without there first being real (as in, already happened) large scale budget cuts, and even then, it's gonna be a tough sale.
Politicians like the VAT because they can foist the cost of tax collection and remittance off onto the private sector, and the subsequent increase in the cost of goods can be blamed on fat cat businessmen. That's a win-win for the .gov boys.
Sales taxes are also highly regressive, so you know that the .gov will want to implement some sort of a "refund" mechanism to give the money back to the "poor", and we're right back where we are now, only stuff costs 20% (or 30%) more than it did before.
A VAT is not the answer.
May '11
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
I have to express a little sympathy for the poor schlamazel who is about to retire, who paid income taxes on his earnings his entire life while trying to save something for retirement, and would now find himself being taxed again on the same money when he tries to spend it.
Dec '10
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
Agree with #25, politicians will find a way to corrupt any system, re gardless, anything that makes taxes more visible, simpler will most likely be better.
Edited on July 6, 2011 at 3:55amDec '10
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
Cas, your bullet points 1, 2, 3, 4, 11, 13, 15, and to some extent 20 and 21 all assume that it is impossible to cut the fat out of our national government, that it has to continue on they way it is.
I object. I don't want conservatives to cede that point.
Edited on July 6, 2011 at 4:13amOct '10
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
EJHill
My problem with these tax discussions is that the US tax code is not about revenue and has not been for many years. It is about social engineering, rewarding one's friends, punishing one's enemies and buying votes. Until that changes the discussion is fruitless.
Then how about a constitutional amendment limiting tax-related legislation to no more frequently than once every six (or whatever) years? Would give businesses and investors some stability and predictability for planning purposes, and would help minimize the opportunities for "social engineering, rewarding one's friends, punishing one's enemies and buying votes."
Jun '10
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
OK, guys, I just posted a summary of arguments against a VAT or National Sales Tax in the Member Feed. Have at it, or would that be better put as let 'er rip!
Jun '10
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
There should be no VAT or sales tax (sales tax is better) without a constitutional amendment barring an income tax. A VAT is better than in income tax, but more insidious than a sales tax. A sales tax is more visible to the consumer and a VAT discriminates in favor of large vertically integrated firms, thus discouraging small business.
May '10
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
As a small business owner, I'm not all that excited about having "federal tax collector" added to my list of responsibilities -- administering the state sales tax is annoying enough, especially with the record keeping necessary to survive some potential audit. No thanks.
Also, people like me are already tempted with offers of cash by customers (in hopes that I won't charge them state sales tax on landscaping work, for instance) Those offers would be far more frequent with a heavy VAT, so the potential for fraud and avoidance would be high -- and so would arise yet another IRS-type enforcement bureaucracy. Again, no thanks.
Oct '10
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
There are a lot of advantages to a VAT--conservatives have been arguing for a revenue-neutral VAT forever (and sometimes as a revenue raiser). VATs are really useful for encouraging savings and investment (and also healthy trade, a side effect of increased savings). They can also raise a ton of revenue, but doing is a lot like inflation: everybody hates it.
A revenue-neutral VAT swap (ideally with business payroll taxes) would be great for our economy (the Europeans call this "internal devaluation"--contrary to popular belief, that term doesn't refer to deflation--since it increases savings and lowers unit labor costs, without lowing the value of the currency).
Oct '10
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
Ah, decreasing consumption and lowering unit labor costs is why countries devalue (it doesn't really work unless the currency was overvalued to begin with). A devalued currency makes imports more expensive and exports more competitive. The practical effect is a short-term lessening of labor costs (until the inflation from the devaluation kicks in, anyway).
Anyway, a VAT swap can do the same thing, but without ruining the value of the dollar.
Jan '11
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
Since taxation methods are directly related to the government's need for revenue to support government functions, I don't see how any new (or old) strategy could possibly result in a balanced budget without limiting the government's unfettered ability to create the need for revenues. Any tax scheme is reflexive, depending solely on spending.
Does it make any real difference how the revenue is collected? If the need for that revenue isn't rational, what outcome other than inevitable fiscal failure is possible?
Apr '11
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
I say no to a VAT. Unlike a sales tax, which the customer is very aware they are paying, VAT is built into the price of everything. It allows left-wing politicians to tell people "Don't worry, we aren't taxing you, just those wicked corporations." Government gets the money, business gets the blame for higher prices. Just like now, gas prices are high so let's punish the oil producers with more taxes. Somehow that would lower the price of gas? Plus VAT adds more bookkeeping at every stage of production. If you want to constitutionally abolish the income tax and replace it with a national sales tax, I'm with you. But VAT is the tool of the devil.
Mar '11
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
The ONLY way I'd support a national sales tax is if the income tax were abolished at the same time. No transistion. I simply don't trust my government when they say "Trust us, we'll phase out the IT later if you agree to the NST now".
Ultimately, I'd rather have a low flat income tax for all citizens... no exceptions... across the board. No deductions. Same rate for everyone. Everyone has skin in the game.
Mar '11
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
Speak for yourself, because the vast majority of conservatives do NOT want a VAT tax of any kind.
Jun '10
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
I disagree. Our tax system is so fouled up that the Lord God Almighty himself can't make sense of it. Only a body of US politicians could cook up such a system.
Aug '10
Re: Is It Time to Introduce a National Sales/Value-added Tax in the U.S.?
Cas, every advantage that you see for a VAT depends on future Congresses leaving it alone, which, short of a Constitutional Amendment, can not and will not ever happen.
It cannot be imagined that a VAT will be free from social engineering ("green" products free of VAT?) and "crony capitalism" (Senator, if you will support my amendment to reduce the VAT on widgets, ...)
If Congress was to go to the trouble of replacing the present income tax, why not just insist on simplicity? A flat tax on personal income, the rate for the year to be announced on January 1st. Payable quarterly, cash or personal cheque only. Any if you favour Constitutional Amendments, how's about this: The rate of taxation for the year to be determined to result in a balanced budget. War? No problem. Bounce the tax.