Geitnern wants VAT tax in US

[Guest guest]

They are proposing yet another stealth tax to "make up for budget shortfalls and fund health care reforms." These government people just never learn that taxes only weaken the economy and mean less revenue.

VAT taxes are applied at each level of sale, not just the final sale. Look at it this way: A farmer raises corn and sells it to a rancher as feed. VAT tax is applied to sale increasing the cost of the feed. The Rancher feeds his cattle then sells them to a meat company at a higher price to make up for his VAT tax. VAT tax is again applied to the sale to the meat company. The meat company processes the cattle and sells the product to groceries. The Meat producer increases their price to make up for the VAT tax they paid on cattle. The Grocery puts the meat out for sale and the consumer pay a VAT tax on purchase, plus the increase in price the grocer applies to cover the VAT. The Consumer then gets angry at the grocer for the sky high price of meat, not realizing the real enemy is the government itself since it imposed the VAT.

This will apply to everything that is made and sold at each step of production. At each step, prices will increase by the VAT, so a trend up to maybe 20% to 50% higher in short order would not be a great surprise. The result will be not increase revenues for the government, but less because people can't buy as much. That will mean many higher end items will remain on shelves, fewer vacations and travel, etc.

What the government needs to do is not more taxes, but cut the corporate and capital gains taxes and regulations to get industry coming back to the US and putting people back to work. More people paying taxes will net far more revenues than squeezing the few remaining workers and businesses to death.

Notice the highlighted part in red. Don't these fools see that those increased prices would mean less of those goods and services purchased? They are proposing a minimum 10% VAT but all the way up to 25%. Fancy paying 25% more for everything?

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.

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 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 Baer, a spokesman for White House Budget Director 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 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 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." Dinner Made Easy Newsletter - Simple Meal Ideas for Your Family. Sign Up Now!

[Guest guest]

" They are proposing yet another stealth tax to " make up for budget shortfalls

and fund health care reforms. " These government people just never learn that

taxes only weaken the economy and mean less revenue. "

The Democrats never knew how good they had it under the Republican regime.

This proposed value added tax scheme will result in a reduction of consumer

spending, and consequent higher taxes. Also, standards of living will fall off.

As for the healthcare system, anything that is put into place will cost more

than the current system. Even if anyone who uses it pays nothing, and even if

all services are contracted for by the government at negotiated rates, the

overhead cost of administrating the thing will cost the taxpayers in the end.

People who rarely use the system will lose more than they should, through taxes.

People who use the system too much will benefit.

Administrator

[Guest guest]

You are right on all counts.

A VAT tax would confiscate upwards of 25% of people's income on top of any other taxes they might be paying. Cap and Trade will add thousands of dollars to energy bills. The climate bill that Cap and Trade is part of also includes a provision to provide up to 5 years of unemployment payments for anyone who loses their job because of Cap and Trade or other provisions. Seems like they know how much that program is going to hurt the people, not counting the tax increases needed to pay all that welfare.

But you are right: they don't have anyone to blame now but themselves. They've tried blaming this all on Bush but it isn't working. Most people are putting the blame on Obama and the Democrats already. The more time passes, the more true that will become. Once the inflation starts to kick in and the sting from a VAT and cap and trade start to be felt, people will get very angry.

The thing is the people haven't woken up yet. Right now they are still just "feeling" like the schools have trained them to and they aren't thinking. Everyone is so busy feeling everyone else's pain and wanting to make it all better, that we are getting ourselves in a very deep hole. By the time they start thinking, it might be too late.

In a message dated 5/28/2009 12:16:56 A.M. Eastern Daylight Time, no_reply writes:

The Democrats never knew how good they had it under the Republican regime. This proposed value added tax scheme will result in a reduction of consumer spending, and consequent higher taxes. Also, standards of living will fall off. Cooking Dinner For Two? Sign Up Get Immediate Member-Only Savings.