Thread: All things being equal would you vote for a VAT?

Former tax accountant speaking here (in case anyone cares )

People have to realize that this government uses the tax code to encourage/discourage behavior almost as much to raise revenue for the treasury. The reason that you get a child tax credit is because they want us to continue to procreate instead of becoming a country with a decreasing population. The reason that debt is rewarded (tax deductible) uncapped and savings are limited (depending on your method) is because you "leverage" yourself and the economy when taking on debt. What does a lever do? It allows you to do things that you were not able to do (think of lifting a large boulder by handed verses a nicely setup lever mechanism). The reason there are social programs is that they want to prevent those in poverty from becoming so destitute that they will resort to uprisings.

The tax code is not about fair. It never has been and probably never will be. We will all be better off when fair is removed from the tax discussion. It's a wonderful thought, and it would be the ideal, but it will never be the reality. IMO

Originally Posted by sparq

There is one significant difference between a VAT and sales tax if I get it right. VAT is only collected from the final consumer of goods or services, sales tax is paid by every link in the service chain and results in higher overall taxation than VAT if the tax rates are equal.

Example: if I produce "A" and need part "B" from a provider "C"; the VAT is collected only from my customer (which depends on how much I charge for "A" alone). I do not pay VAT for purchasing "B" as I am not its final consumer.

Sales tax would be collected twice; the first time from me (I pay sales tax for purchasing "B" from "C") AND from my customer when he buys "A" from me; so the customer is effectively taxed twice for "B".

That's my guess, someone correct me if I have it wrong.



That's what progressive taxation is here for. Uncle Sam puts you in your federal tax bracket according to your gross adjusted income. The higher your income his, the higher your tax rate is.

I cannot speak for any other state, but as a former owner of a small business in Texas, I only paid sales tax on items that I was the final user. Cash register tape, pens, pencils, paper, etc. Everything for resale, or even as a part of something put together for resale was totally tax-exempt when I purchased it. Then I collected Sales Tax on the sale to the final retail comsumer.

The progressive taxation is what I am speaking against as totally unfair. Why should someone be penalized for earning more money? Why should someone be rewarded ( through deductions and credits ) for having more children?

Originally Posted by richmondesi

Former tax accountant speaking here (in case anyone cares )

People have to realize that this government uses the tax code to encourage/discourage behavior almost as much to raise revenue for the treasury. The reason that you get a child tax credit is because they want us to continue to procreate instead of becoming a country with a decreasing population. The reason that debt is rewarded (tax deductible) uncapped and savings are limited (depending on your method) is because you "leverage" yourself and the economy when taking on debt. What does a lever do? It allows you to do things that you were not able to do (think of lifting a large boulder by handed verses a nicely setup lever mechanism). The reason there are social programs is that they want to prevent those in poverty from becoming so destitute that they will resort to uprisings.

The tax code is not about fair. It never has been and probably never will be. We will all be better off when fair is removed from the tax discussion. It's a wonderful thought, and it would be the ideal, but it will never be the reality. IMO

Rich,

Can't I be allowed to Dream? Why can't I be allowed to hope for a "fair" world? Or country?

Was it "fair" that individuals had to come all the way to the colonies to enjoy the religious freedom denied them previously? Isn't "FAIR" why the USA exists at all?

We have come far and wide form the original VAT question and I accept the largest part of the responsibility! For the HIJACK, I apologize, but I see all taxation as part of the same topic!

Originally Posted by T-Ram

Rich,

Can't I be allowed to Dream? Why can't I be allowed to hope for a "fair" world? Or country?

Was it "fair" that individuals had to come all the way to the colonies to enjoy the religious freedom denied them previously? Isn't "FAIR" why the USA exists at all?

We have come far and wide form the original VAT question and I accept the largest part of the responsibility! For the HIJACK, I apologize, but I see all taxation as part of the same topic!

You can certainly be allowed to dream . I'm just interjecting some reality.

Originally Posted by richmondesi

You can certainly be allowed to dream . I'm just interjecting some reality.

Well, thanks for the dose................I guess!

Originally Posted by richmondesi

Former tax accountant speaking here (in case anyone cares )

People have to realize that this government uses the tax code to encourage/discourage behavior almost as much to raise revenue for the treasury. The reason that you get a child tax credit is because they want us to continue to procreate instead of becoming a country with a decreasing population. The reason that debt is rewarded (tax deductible) uncapped and savings are limited (depending on your method) is because you "leverage" yourself and the economy when taking on debt. What does a lever do? It allows you to do things that you were not able to do (think of lifting a large boulder by handed verses a nicely setup lever mechanism). The reason there are social programs is that they want to prevent those in poverty from becoming so destitute that they will resort to uprisings.

The tax code is not about fair. It never has been and probably never will be. We will all be better off when fair is removed from the tax discussion. It's a wonderful thought, and it would be the ideal, but it will never be the reality. IMO

Well said.

Originally Posted by T-Ram

I cannot speak for any other state, but as a former owner of a small business in Texas, I only paid sales tax on items that I was the final user. Cash register tape, pens, pencils, paper, etc. Everything for resale, or even as a part of something put together for resale was totally tax-exempt when I purchased it. Then I collected Sales Tax on the sale to the final retail comsumer.

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That is how VAT effectively works. Everytime you buy something you pay VAT. If you are not the final user of the product you deduct VAT paid from VAT received and pay the difference to the taxman. So you do not pass the VAT paid on to the next buyer in line.

Originally Posted by hoglahoo

Answer: pay for it with the money you earn

Or are you equating "country" with the big spenders in Washington? In that case, then yes by all means let's raise some more taxes. Just think of how well they do with the money we've already given them; it is a no-brainer that they should be entrusted with as much of our money as we can hand over to them

Do I detect a note of sarcasm?

I think the inherent problem with this kind of tax is that it's not progressive. There are lots of tax loop holes for the wealthy who can afford the tax whereas the less well off, who are expending a much higher percentage of their daily income have no respite. People get used to paying more though.

The worst tax was the British Poll Tax though. Everybody pays the same amount or else they're not allowed to vote!

the problem with wanting 'fair' is that 'fair' is subjective.
the government does a lot of things and they affect different people differently.
for example the defense budget is about 25% but i'm pretty sure that some people could be quite happy if there was no defense altogether and canada could take over, while others would loose a lot in such scenario.
likewise social security programs are worthless to some and lifesaver to others.

i guess one way of 'fair' is if everybody be paying for just the part of the shared resources that are using. That would certainly work but salaries may change quite a bit from what they currently are.

I think the bit that taxes are actually tool for policy is very important. If you decrease its power it's like increasing the power of other ways to affect behavior. That may not be a very good thing.