V-A-T spells disaster

Do you feel undertaxed? The value-added tax can help with that

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One idea, the Fair Tax, is a grass-roots idea that has been building steam for years. The other, a value-added tax, is a European import being talked up by liberal elites as the answer to all our government's problems.

Which idea do you think will get traction in the national media?

The VAT, of course. It's so continental!

Billionaires Bill Gates and Berkshire Hathaway Chief Executive Warren Buffett, and Buffett partner Charlie Munger, recently said the European-style value-added tax -- a tax on goods at every stage of their manufacture and distribution -- is pretty much inevitable in the United States.

Wow. Grass-roots Americans can work for years on something like the Fair Tax -- a national retail sales tax that would more fairly spread the tax burden and even reduce it -- but the elites have a better idea, and that's what we'll likely get.

And consider this bone-jarring endorsement of the value-added tax from Buffett: "In the end we are not taxing enough, unfortunately, or we're spending too much, probably some of each."

Do you feel undertaxed?

Buffett and friends believe the U.S. government needs more money for the country to be more competitive in the world. Oddly enough, this editorial page believes the American people need more of their own money for the country to be truly competitive.

And consider this telling, yet tepid endorsement of the value-added tax by Munger: "The people that are against it are against it because they think it will work too well, that the politicians will get too much money and do too many dumb things with it, and there is a good deal to be said for that point of view."

Wow. We'll just let that one digest.

Buffett adds: "We've got a gap of 10 percentage points between what we're raising in taxes and what we're spending. One way or another we are going to have to close that gap in a major way, so if some of those taxes fall on me, or some fall on Berkshire, that's probably the way it should be."

Just to clarify: The people pushing the value-added tax believe the federal government desperately needs more of your money. The people supporting the Fair Tax are more concerned with the people who are paying the taxes.

Which side do you fall on?

If you're on the fence, consider: The Fair Tax -- levied just once per product, at the point of purchase -- would replace all income taxes, payroll taxes, gift taxes and the death tax on family estates, and would ultimately abolish the Internal Revenue Service. The value-added tax does none of that -- and would actually be in addition to all those other taxes.

Still on the fence?

The VAT cannot logically be argued to be superior to the Fair Tax -- from a taxpayer's point of view, that is. Therein lies the rub: The value-added tax isn't intended to help people; it's intended to shore up big government, a la Europe.

Yet, because elitists -- many of whom have made their fortunes and now want to pull up the rope -- like the idea of a VAT, the proposal is apparently going to move to the fore.

If only we could have a series of national debates and news reports comparing the two approaches.

We're pretty sure the Fair Tax camp would welcome that. Will the VAT camp?

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dichotomy
37344
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dichotomy 05/07/10 - 11:20 am
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Greece had a VAT tax. It is

Greece had a VAT tax. It is now 21%. Most of Europe has a VAT tax and they are all in worse shape than we......partly because of the VAT tax. As you watch the Euro plunge and Europe's economies collapse just remember......they've had the VAT a long time and it, along with the socialisitc spending that came with the VAT tax dollars, has killed their economy and the peoples will to work. You can find very few economist who think that the VAT tax, espeically on top of an income tax, state taxes, and local taxes, are a good idea. Taxes and the resulting socialism are economy killers and Greece, Spain, Portugal and soon to be England are prime examples. Lazy people getting government dollars for doing nothing have killed Europe and America is wounded and bleeding profusely for the same reason.

sjgraci
2
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sjgraci 05/07/10 - 11:20 am
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I give to the government what

I give to the government what I am recquired to give by the law. I am a proud taxpayer and pay what I owe to this country. More, so be it. Less, great! That means we should be doing something right but we are not. Raise the top two tax brackets back to where they were and add new ones on higher incomes. Decreasase wasteful spending and close corporate tax loopholes. Provide tax insentives to invest in American job creation and green technology.

I have a lot of investments and business expenses and that is why I have an accountant which is deductable. I also give to charity nationaly and locally which are other deductions my accountant accounts for. If you or anyone else in a similar situation are not using an accountant, you are fools.

KSL
143268
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KSL 05/07/10 - 11:29 am
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I still say it is

I still say it is hypocritical to say you should be having to pay more taxes while at the same time taking every tax advantage available. Why worry about it?

Tigger_The_Tiger
0
Points
Tigger_The_Tiger 05/07/10 - 11:33 am
0
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Very hypocritical. And we are

Very hypocritical. And we are still waiting on an answer.

baronvonreich
1
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baronvonreich 05/07/10 - 11:36 am
0
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Kitten must be a card

Kitten must be a card carrying socialist to not think everybody in America has the same opportunities. All schools may not be exactly equal but they mostly standardized through all the state and federal bureaucracy. It isn't the schools' responsibility to enforce attendance. Even if a child has poor and lazy parents, the child knows they should go to school everyday. There is nothing wrong with putting personal responsibility on children. And having sex and babies and abusing drugs and alcohol is a personal choice. It is not the right of government nor the responsibility of taxpayers to support them. Allow social Darwinism to clean up the ills of America that have been fostered by the government for decades.

Tigger_The_Tiger
0
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Tigger_The_Tiger 05/07/10 - 11:49 am
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I went to a public school in

I went to a public school in a state which consistently is ranked low in public education, yet applied myself enough to be a nuclear engineer. I wonder how i could have managed that when I didn't have the advantage of a top education.

sjgraci
2
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sjgraci 05/07/10 - 12:13 pm
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I'll be glad to answer your

I'll be glad to answer your question TTT. The answer based on a couple filing jointly on 2010 tax brackets and the hypothetical tax bracket of 50% on taxable income over $999,999 with a taxable income of $1,000,0000 and no other exemptions and deductions would pay a tax of $313,763.50.

You can see this would be a percentage of 31% on their taxable net income. The percentage of tax based on their gross income would very likely be in the mid to high 20% range. This is far less than the 50% or $500,000 the clueless believe and the exploiters would like you to believe.

The progressive tax is the fairest tax. The rich pay the same percentage as you do on whatever income you make. You make $50,000 they pay the same tax as you do on their first $50,000.

The richer you get and as you move up the marginal bracket ladder you pay more of a percentage on the money made in those higher brackets. The 36% - or even 50% - is not taxed on entire gross income. The rich have benefited the most from the American society and all that it offers. They also have the most to lose should it all come crashing down. Therefore, they should pay a higher tax percentage on their highest incomes. They can afford it.

Afterall, I live very comfortably in my tax bracket. If I were to be so fortunate to be taxed in the highest bracket, I certainly would not be hurting more. I'd love to annually have an after tax disposable income of $686,236.50. We all should be so fortunate to make more than 20 times of the American median income. In other words, for half of all Americans, it would take more than 20 years to make what this one couple made in one year. Or, if you are like me in the top 90% (those with incomes above $77,500), it would take you at least 9 years to make that much.

The rich get richer and everyone else gets further behind in our current system. In a "fair tax" everyone else will get even further behind.

sjgraci
2
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sjgraci 05/07/10 - 12:22 pm
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TTT if you really are a

TTT if you really are a nuclear engineer, there is no excuse for you not to know how the progressive tax system in this country works. There is a very big problem with the palinites and tea partiers in this country and their willful ignorance. Learn something about the way you are taxed! Hell, I even read Boortz's "fair tax" book.

Chillen
17
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Chillen 05/07/10 - 12:35 pm
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sjgraci. Your math on the

sjgraci. Your math on the progressive tax is correct. But please keep in mind, this is only a small portion of the taxes paid by the hypothetical rich couple.

They also would pay around 6% to their state. They pay 7-9% sales tax, property taxes, ad valorem tax, transfer taxes, corporate taxes (yes, you pay for those with every single product you purchase), etc.

The "true" American tax rate for that couple is probably between 50-60%. This rivals any European system out there.

Our taxes are way too high when you factor everything in. You can't just look at the federal rate and compare it to Europe the way everyone always likes to do.

Fair Tax. It's the only way. The folks who make more, spend more, and consequently pay more. No IRS. No accountants. No loopholes. No taxes to file. Everyone gets a tax credit "check" sent to them for household necessities like food & clothing so that the truly "poor" actually pay nothing assuming they don't overspend their income & buy big screens & cell phones.

It's just so logical I can't see why we don't do it - other than the power & greed coming from BOTH sides of the aisle.

Harrisburg Homeowner
0
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Harrisburg Homeowner 05/07/10 - 12:43 pm
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Gracious! The number of

Gracious! The number of people who do not understand the VAT tax! Okay. Here is VAT tax 101:

The Value-Added tax is an ADDITIONAL tax that will be levied on U.S. taxpayers. It will NOT replace the current income tax system. It will be ADDED to it. The Value-Added tax means that everything will be taxed and passed down to the person who buys the end product.

For example: The corn farmer will pay a tax on the corn he sells to the corn cannery who will process the corn, can it, and sell it to a grocery store, who in turn will be taxed and will pass that price on to the consumer. If that isn't enough taxation, then think about this:

While the above is going on, the person who mines the ores to make steel will be taxed and will pass that cost along to the person who makes the steel, who will be taxed on that added value, who in turn will pass that price on to those who make the cans, who in turn will pass that price along to the corn cannery...

Are you starting to get the picture yet? If not, here is one more thing:

All the people who make the equipment that all of the above use to harvest, process, can, transport, and house the corn will EACH be taxed in the same fashion...

Where does the buck stop? You guessed it! Right with US! YES! NO ONE but the consumer will be shafted because the cost of the tax will be passed on and on and on....

AND DO NOT FORGET what I said at the onset. The VAT tax is NOT a substitute tax. It is a tax that will be used IN ADDITION TO the current income tax system.

Now do you understand why I favor the Fair Tax? The Fair Tax ONLY taxes the end product--what the consumer himself buys.

Do we want hidden taxation or taxation out in the open right where we can keep an eye on it? THAT, my fellow citizens, is the difference.

Now, how many, after reading this, can say that the VAT tax is the same as the Fair Tax? How many are STILL in favor of it? Raise your hands so I can count.... one...two...three ....535....Oh...it's YOU CONGRESSMEN...Now I get it!

KSL
143268
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KSL 05/07/10 - 12:44 pm
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Chillen don't forget all of

Chillen don't forget all of the junk fees that are really taxes.

Tigger_The_Tiger
0
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Tigger_The_Tiger 05/07/10 - 12:49 pm
0
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How is a progressive tax more

How is a progressive tax more fair than everyone paying the same percentage?

Harrisburg Homeowner
0
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Harrisburg Homeowner 05/07/10 - 12:50 pm
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I almost forgot. The FAIR

I almost forgot. The FAIR TAX will REPLACE the current income tax system. It will NOT be ADDED to what we already have.

Chillen
17
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Chillen 05/07/10 - 12:52 pm
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"Gracious! The number of

"Gracious! The number of people who do not understand the VAT tax!"

And finally, we now have the answer to the following question - "Why do the politicians want to levy a VAT tax on us?"

Answer is above - the number of people who do not understand.

The dumb masses and sheeple will never see it coming, nor will they know it's here, even when it happens. They and the media will just blame whoever takes over the presidency in 2012 for inflation.

Kitten35
0
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Kitten35 05/07/10 - 12:54 pm
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TTT, Is that not what people

TTT,
Is that not what people have been trying to explain to you throughout this entire post?!?

Chillen
17
Points
Chillen 05/07/10 - 12:55 pm
0
0
Tigger, the flat tax is good

Tigger, the flat tax is good too and it's certainly fair, but the Fair Tax enourages saving. When you are at the store looking at the shiny new TV and it costs $1000 plus 20% federal and 7% local sales tax. You'll think twice. The price of that TV is now $1270.

Perhaps your $1000 would be better invested in the stock market, gold or your savings account.

This will also result in less money for the government, forcing them to live within their means. Yahoo!

For me, I guess it's not a "fair" issue, its just what's best for the economy & hopefully changing some wild spending habits - by the government and the consumer.

Tigger_The_Tiger
0
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Tigger_The_Tiger 05/07/10 - 12:57 pm
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Chillen, they will also

Chillen, they will also defend the president who promised that he wouldn't raise their taxes, and I quote, "not one dime."

Tigger_The_Tiger
0
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Tigger_The_Tiger 05/07/10 - 01:00 pm
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0
Tap danced around, kitten,

Tap danced around, kitten, but failed to answer.

ohhsweetconcord
3
Points
ohhsweetconcord 05/07/10 - 01:29 pm
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0
Tigger - I think its safe to

Tigger - I think its safe to say you have a different definition of fair. You think a fair tax system is one where the percentage paid is the same for everyone. If that is your definition, then I have an ever more fair version. The idea of percentages are unfair. If you make $80k a year and have to pay 20% of that, you're paying %16k, while someone making $30k a year is only paying $6k. Why should you have to pay more just because you're making more money? I guess that sounds unfair too...using your definition.

What we really need is a system where everyone pays the same amount of money. $1000K a year for everybody! That's the only fair way to operate cause everyone is equal under the law so why should I have to pay a great dollar value. When I go to McDonalds and get a hamburger I pay the same amount as the dude next to me. We all get the same government services so we should all pay the same!

IMRIGHTYOUREWRONG
78
Points
IMRIGHTYOUREWRONG 05/07/10 - 01:27 pm
0
0
TTT you ask an interesting

TTT you ask an interesting question, “How is a progressive tax more fair [sic] than everyone paying the same percentage?” The answer: it is not, if everyone pays the same amount. But the Fair Tax is not exactly fair. It is a regressive tax: one that taxes lower income individuals greater due to the cost of the items they purchase. Example: If person A makes $10,000 annually and person B makes $100,000 annually then the X% they pay on a loaf of bread or a gallon of milk will take a greater percentage of money out of the pocket of person A rather than person B. Now comes the rebuttal: I believe it was Harrisburg Homeowner who indicated that Saxby Chambliss wrote him/her to inform him/her that rebate checks would cover any necessary purchases or purchases of necessity (i.e. a loaf of bread or a gallon of milk) but in no means is this a requirement of the fair tax and does not constitute that it would ever be enacted if such a tax were made into law. It is just a suggestion and it is merely the wishes of Chambliss that he would see it fit to accompany the fair tax. And thus we reach the solution: the fairest tax is a delicate balance between regressive and progressive taxes. There can be no truly “fair” tax but this means is the best means possible. Just as it is wrong to assume that a rebate check will be issued with the Fair Tax it is also wrong to assume that a Value Added Tax will mean an increased cost for the consumer. Since the ideology behind the VAT is that the current taxes a consumer pays on a product are merely redistributed amongst the consumer, retailer, wholesaler, producer and any other necessary body of its production.

Chillen
17
Points
Chillen 05/07/10 - 01:34 pm
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Imright, you need to read

Imright, you need to read Harrisburg 1:43 A vat tax will mean increased cost for the consumers. Business will not absorb it.

One of the main premises of the fair tax is the necessity rebate. Without that, it doesn't work (unless you exempt food from the tax).

IMRIGHTYOUREWRONG
78
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IMRIGHTYOUREWRONG 05/07/10 - 01:46 pm
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Chillen, I did read HH’s post

Chillen, I did read HH’s post and it seems that we are getting our information from two different sources. The information I read indicates that the VAT can be and has been implemented with the business absorbing the costs. Now whether they choose not to absorb the cost is up to the businesses themselves. As I indicated, the premise of the necessity rebate is not an absolute but an assumption with the Fair Tax much the same way that the businesses’ not absorbing the costs is an assumption. This seems to be the very root of the problem with this editorial: not considering both sides completely.

Chillen
17
Points
Chillen 05/07/10 - 01:56 pm
0
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If businesses absorb the VAT

If businesses absorb the VAT then why are prices so high in Europe? Because of the VAT, that's why.

Businesses in the US don't absorb the taxes that they pay now, why would they start with the VAT? It will just get added to the price of all good & services. Or, they can always lay off a few employees to pay for the new VAT tax. Either way, it's not good for Americans.

If enacted, a VAT will be the final nail in the coffin for our economy.

IMRIGHTYOUREWRONG
78
Points
IMRIGHTYOUREWRONG 05/07/10 - 02:01 pm
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For the record, I am not for

For the record, I am not for the VAT nor am I for the Fair Tax. I was merely pointing out how assumptions work both ways and the editorial neglects one side in favor of the other. Thus I felt it was important to show the other side.

Harrisburg Homeowner
0
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Harrisburg Homeowner 05/07/10 - 03:27 pm
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IMRIGHT, I guess that means

IMRIGHT, I guess that means you are sitting on the fence? Let everyone else make a decision and then blame them when it's wrong? That is what I notice most fence-sitters do.

The Fair Tax is fair, because those the cost of necessities will be rebated. (Of course, I prefer that necessities not even be taxed to start with. That, my friend, would be the fairest of the fair.)

While mulling this over and over in my head, I began thinking of the many who hide their income. I wonder how the Federal government will weed out who are hiding their incomes and who are genuinely poverty-ridden? That is problematic because we do not have a handle on it now.

The way I see it, the ONLY way that this would work out is to place a value on all commodities. For example: groceries are not taxed at all (unless the item is some exotic imported food), a basic vehicle is taxed at X bracket, a luxury car is taxed at an X+ bracket, and so on. But then comes the question of who would determine what is necessary and what is not. The rich differs with the poor; different cultures have varying ideas, and so on. Working that list out would be challenging.

Any way you look at it, our current tax system is a mind-boggling mess that desperately needs overhauling.

proud2bamerican
441
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proud2bamerican 05/07/10 - 05:10 pm
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The Fair Tax is a "fraud"???

The Fair Tax is a "fraud"??? Really??? Some people don't know the meaning of "fraud"...http://www.youtube.com/watch_popup?v=tCAffMSWSzY#t=28

KSL
143268
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KSL 05/07/10 - 05:17 pm
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proud, skip a space before

proud, skip a space before the http and it will post as a link that can be opened right from your post. One of those improvements the AC has done with the new site.

Tigger_The_Tiger
0
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Tigger_The_Tiger 05/07/10 - 05:56 pm
0
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Darn you for posting the

Darn you for posting the truth.

gaspringwater
3
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gaspringwater 05/07/10 - 07:49 pm
0
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Americans gripe a lot about

Americans gripe a lot about being over taxed but that claim can't be substantiated. American corporations are heavily taxed compared to other countries but only a few countries in the world have lower income tax burdens than Americans do. Bill Clinton may have left office with a surplus but generally governments can't get enough revenue. There must be a natural law that says expenses will always rise to exceed revenues. But in America the higher income brackets have enjoyed an ever decreasing tax burden since the Reagan years and that needs to change. It's long overdue!

But we're talking about how to raise more revenue aside from revising the personal income tax rates. The leading choice is a VAT. They've worked in Europe for years and they're effective while being easy to implement and administer. And a VAT is not subject to fraud.

But others on the site are pumping the FAIR TAX. The Fair Tax is a Republican scheme and that alone says volumes about how the deck is stacked! So I've only done light reading on the subject. It appears to be nothing but a regressive sales tax after the consumer passes a certain amount.

But some practical problems are evident. As I understand ever consumer will get a " prebate " sum to nullify the sales tax up to the federal poverty level. The federal poverty level is the same for the 48 contiguous states and the District of Columbia. So it's obvious that consumers in higher cost of living areas will have a greater bite on their income than consumers in lower cost of living areas. To illustrate, the cost of living in San Francisco is higher that in Hoboken Georgia but the federal poverty level is the same for both and the Fair Tax prebate checks will be the same. So it appears the Fair Tax would exasperate big city poverty.

People and their vices are another problem. How do you give consumers their prebate. Once a month? What happens when the recipient gets their month's prebate check and blows it all on lottery tickets, gambling, alcohol, drugs or partying? What happens to their kids and their creditors for the rest of the month? Looks like an increase in destitute families. To nullify this problem the government would need to issue everybody an EBT card and money accumulates in their account daily. It can be done but it increases the complexity and the cost of administrating the plan. Also cards would be subject to fraud just like debit cards and credit cards.

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