A Value-Added Tax In America? What?

The Washington Post writes that a national sales tax, known in other countries as a value-added tax or VAT, is getting some attention in DC, even among Democrats, who traditionally don’t favor regressive taxing schemes. The article notes some pros and cons about a VAT, as well as the small problem that imposing a 25% sales tax on everything would be political suicide.

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  1. bornonbord says:

    Not only would it be political suicide but it would be population suicide, as I’m sure I wouldn’t be the only one abandoning ship if that were to pass through legislation.

    • U-235 says:

      @bornonbord: It wouldn’t be if that was our only national tax. There is no telling how much we really pay out after income tax, social security, medicare, and the corporate taxes that get passed down to us every time we buy something.

      • bornonbord says:

        @U-235: That would be too sweeping of a change to ever happen, IMO

      • Xerloq says:

        @U-235: So which would you prefer, a graduated income tax, flat tax, or national sales tax. I’d vote for the national sales tax only if it meant no more income tax.

        • vastrightwing says:

          @Xerloq: @Steven Edwards: I vote no tax. The government has shown time over that it is not capable of being responsible. But that’s just my observation.

          • RCheli says:

            @vastrightwing: It’s a good thing roads fix themselves and the police and firemen are kind enough to protect us out of the goodness of their hearts.

            • Trai_Dep says:

              @RCheli: Pay for services used? Are you nuts?!
              The Republican credo: why pay when you can charge it to little kiddies instead?

              • Ms Brangwin wants carnal knowledge of Henry Cavill says:

                @Trai_Dep: They can’t tell the difference anyway!

              • jimconsumer says:

                @Trai_Dep: What are you talking about, “Republican credo?” Both parties are spending our great great grandchildren’s money. They’re both fiscally irresponsible blowhards.

                • Trai_Dep says:

                  @jimconsumer: Name the party of the last President who ran our budget with a surplus. I dare you. DOUBLE-DARE you…

                  • Mesothelioma says:

                    @Trai_Dep: Ooo! I can play this game, too. Name the president who is increasing the already insane debt of this nation? I dare you. I bet it is the same. Go read before you take party sides: http://www.cbo.gov

                    All politicians are slick car salesmen which I don’t like to degrade a car salesman to that low of a standard. They will increase your taxes and won’t tell you about it. This isn’t a Democrat/Republican debate, this is a “Get Your Shit Together” debate. If the people need to make cut-backs to their budgets, so should the government. And not this government cutback of less than a percent. Partisan politics is what got us here. Congrats.

                  • zyodei says:

                    @Trai_Dep: Yes, it was a Democrat, John F. Kennedy in 1960.

                    Clinton never had a real surplus, because the numbers were based on Social Security returns being counted as regular tax revenue, not retirement savings. If a normal company calculated their books like that they would all be wearing orange jumpsuits.

                    Not that the Republicans and Bush weren’t a thousand times worse than Clinton. But the current crop of Democrats bear as much resemblance to Kennedy as a mouse does to a monkey.

        • Sathallrin says:

          @Xerloq: I’m good with a national sales tax if it means no more income tax either. Having both would be ridiculous.

          • bohemian says:

            @Sathallrin: As long as certain things were not taxed. Food, utilities, mortgage and medical care. Those are the core expenses that would absolutely kill people on the lower tax brackets.

            Our state (SD) is one of the few that has a sales tax on food. Since we have no state income tax I document all the sales tax we pay in a year to write it off on federal taxes. We average about $5000 we pay in state sales tax in a year. A large portion of that is on groceries.

            I have to wonder of a VAT would suppress spending.

            • the_wiggle says:

              @bohemian: several of my co-workers relocated to America from Europe. none of them miss the VAT. as they each put it, in America i get to keep most of MY money & can buy what I want when I want (assuming I’ve saved up for it)

          • twistermoves says:

            @Sathallrin: Wait what? I’m sorry, I’ve lived in three different countries all with an income tax and all with a sales tax and most other people get along fine. Why do Americans so often feel that they’re better than everybody else except for when somebody expects them to deal with what everybody else already deals with…

        • David Brodbeck says:

          @Xerloq: If that happened I would have a big laugh at the expense of everyone who put money into a Roth IRA.

    • David Brodbeck says:

      @bornonbord: Exactly where would you go? Almost every other country in the world has higher taxes than the U.S.

      • bornonbord says:

        @David Brodbeck: I lived in NZ. It was pretty sweet to have national health coverage that worked.

        One of the unique qualities of America is putting power local governments. My state taxes sales. My city taxes sales. I don’t want the federal government to tax sales on top of all of those.

        Now, if they did away with all local sales tax, I could see something working out.

        Even then I probably wouldn’t like it, as my local sales tax goes to my local areas needs (idealy).

        So, in the end, I don’t think it’s right for a country like America.

        • David Brodbeck says:

          @bornonbord: Yeah, that makes some kind of sense. I think local governments are actually pretty essential in the U.S. because it’s such a big country.

      • the_wiggle says:

        @David Brodbeck: in an ideal world – OFF PLANET – time for a new colony!

        however we are stuck in the real world :

  2. Anonymous says:

    Makes people consider those “essential” purchases. We have friends in Norway that pay probably 50% of their income in taxes. They also get free college education and medical care and most families only have one car because it would cost about $90,000 for a car that costs $20,000 over here.

    • balthisar says:

      @JasmineJalople: See, that’s the problem here. People think that stuff like that is free, when in fact they’re paying for it. The government’s money is our money. Now I’m not suggesting that we stop public funded education, but we’ve all got to get it through our minds that nothing is free.

  3. xerotope says:

    Dead Link

  4. Morberis says:

    VAT or GST as it’s known in Canada doesn’t have to be as high as 25%…. Up here we have a 6% tax.

    • frari489 says:

      @Morberis:

      yep, that 25% number is a little scaremongerish.

      Goods and Services Tax (GST) is also used in New Zealand and is 12.5%.

      • bornonbord says:

        @frari489: Yeah, but in NZ that’s all there is. No state sales tax. No county tax. No local city sales tax.

        When I lived in NZ I actually quite appreciated the flat tax across the country. That’s basically the only reason that the shelf prices in stores in America don’t have the final price, it’s because the final price could potentially fluctuate with in a ten minute walk of where you are.

      • Major-General says:

        @frari489: That 25% rate is Scandinavia.

    • Kogenta says:

      @Morberis: Canada’s Goods and Services Tax is only 5% now. I agree that 25% is unreasonable high. Even when you factor in Provincial Sales Tax in addition to GST I don’t think any particular province exceeds 13% combined tax rate.

      US might be trickier since they have local and city sales tax in addition to state tax? I could see the tax rate in certain areas being regressivly high if yet more consumption taxes were tacked on.

      • Benny Gesserit says:

        @Kogenta: yeah the govt promised to reduce it if elected– and they did. Go figure eh?

      • klc says:

        @Kogenta: That should probably read 13% combined SALES tax rate.

        We are still free to be taxed out the arse via income taxes as well.

        I didn’t know NZ had only the sales tax. I’ll have to prod my old Maori roommate as to why he never mentioned this in his glowing reviews of the land down underish.

      • arymede says:

        @Kogenta: When the GST was first introduced, some provinces (cougcoughAlberta) negotiated the tax to the point where provincial taxes were eliminated entirely and only the GST remained. Just because there are municipal and state taxes already doesn’t mean they can’t be altered, reduced, or eliminated, and have portions of the federal tax reserved for funding the things that those local taxes currently fund.

    • god_forbids says:

      @bornonbord: Right! Japan’s nationwide 5% sales tax is easy to calculate, predictable, and often enough included in the sales price to make nice round figures. It was magnifique!

  5. Overheal says:

    VAT is no friend of Ireland, I can tell you that. Sales tax is annoying when you go to the counter and realize you forgot to add 7% to whatever you were buying, but with VAT they get to slip any number of taxes under the tag. This is especially true for cigarettes and alcohol. Most all consumer items besides food and clothing are taxed at 21% with additional hidden levies on other items. In the case of cigarettes the applicable taxes exceed 200%

    • floraposte says:

      @Overheal: The U.S. does the hidden taxes already, especially, as you say, for cigarettes and alcohol (and gasoline).

      The article link should be .html, not .htm–here’s the actual link: [www.washingtonpost.com]

    • Mikael Vejdemo Johansson says:

      @Overheal: I still cannot understand why people in the US insist on putting the burden of arithmetic on the customer.

      The system in use in all of Europe is that you pay whatever the price tag says, and then your receipt will have precalculated for you what proportion of that was actually sales tax, VAT, et.c.

      And if you are actually exempt from VAT (by virtue of being a business collecting VAT from others in turn for instance), you get the VAT you’ve paid erroneously cleared out come taxation day….

      • David Brodbeck says:

        @Mikael Vejdemo Johansson: It’s a conservative political thing. The feeling is that if taxes are visible people will oppose them more, and agitate for smaller government. If they were built into the price people wouldn’t notice them as much.

        • bohemian says:

          @David Brodbeck: I would be willing to consider a VAT, even a fairly high one if they did away with state and city sales taxes and we received national health insurance and free college tuition in trade.

          They already take a portion of federal taxes paid and send it back to the states. That could potentially be part of a VAT also.

      • Eyebrows McGee (now with double the baby!) says:

        @Mikael Vejdemo Johansson: Because I can pay four different sales taxes on the same purchase within 15 minutes of my home. One tax rate in my city, a different tax rate outside city limits in my county, and two more tax rates in the next county (and city) over.

        The stores prefer to say “Light bulb $4.99″ in their region-wide ad going to something like 20 counties (in my newspaper) instead of “Light bulb $5.02 in County A, $5.06 in County B, unless in City B, in which case $5.12 …”)

        • Mikael Vejdemo Johansson says:

          @Eyebrows McGee (now with more baby!): Thanks, that clarifies a little bit. I still think it’s a bloody stupid system, but once you’ve ended up with such a finegrained variation in sales taxes, I could see at least chains not wanting to care.

          And once the chains don’t care, you’ll confuse customers by randomly have some store caring and some stores not… Makes a twisted kind of sense.

          • Eyebrows McGee (now with double the baby!) says:

            @Mikael Vejdemo Johansson: Basically our national tax is the income tax; states may also have income taxes, but sales tax is a state and local tax, that the state, the county, and the city (and possibly other bodies) may all levy at various rates for their own individual revenue streams.

            It’s not so bad if you’re used to it, but I can see how as a visitor it’d be a) annoying and b) surprising every time.

        • bohemian says:

          @Eyebrows McGee (now with more baby!): Every podunk little town and the counties in SD have their own tax rates.
          So people who are doing any sort of on site services have to figure out what county or city sales taxes are applicable down to what most places would see as a neighborhood level. A town of 200 people can have one tax rate that they set. The next town over of 2000 people yet another. It is insane.

  6. Banned in DC says:

    Why did you pick 25% as the number to scare readers with? Does it make your point better?

    As the article states, 25% would be the highest in the world. (Summary link is dead; here’s the story: [www.washingtonpost.com] )

    Why not a more reasonable number, like 5%?

    • Papercutninja says:

      @jyindc: or why not a more reasonable number, like 0%.

    • winshape says:

      @jyindc: Emanuel actually argued for a 10% tax, which I agree would be a better number than the 25% tax in the blurb above.

      However, the article does mention that a 25% tax would be needed in order to pay for everything we want – so the 25% wasn’t pulled out of thin air by Consumerist.

      I think that if Congress put half the energy into looking for ways to cut spending than they do looking for new and ingenious ways to increase taxes, we’d all be better off.

    • TopcatF14B says:

      @jyindc: I am going to assume you have never had any heavy dealings in a negotiation. When you are looking to get to a certain number, lets say 10%, you submit an offer for 25% and then allow the other side to bring you down to your original goal. This way you get what you want and the other side “thinks” they have saved themselves 15%.

    • Unsolicited Advice says:

      @jyindc:

      25%-27% is often cited by “Fair Tax” advocates as a revenue-neutral figure were it to utterly replace the progressive income tax system. I’m not certain that a VAT would necessarily be this high. Given our economic sensitivity to consumption I doubt we could reasonably expect the same income given the overall depression on consumer spending that sales taxes introduce.

      • Major-General says:

        @Unsolicited Advice: 23% with the prebate, 17% without. But also, no federal income, social security, medicare, corporate income, capital gains, estate, or AMT taxes. Also, the Fair Tax is not a VAT, as it is assessed only at final purchase for end consumer use. And is not assessed on used products. And finally the government, as an end user, would be paying tax also.

        Next time be sure to read up on the subject.

        • Unsolicited Advice says:

          @Major-General:

          I specifically stated that a “VAT would not need to be this high.” I understand that you’re potentially a rabid advocate of the Fair Tax, but next time be sure the read the comment. I don’t share your interest in marketing the idea of the Fair Tax and have no obligation contextualize the top-line percentage with the benefits.

          • dragonfire81 says:

            @Unsolicited Advice: I come from Canada, we’ve had a national sales tax (GST) since the early 90s (I want to say 1994). It currently stands at 5% and doesn’t seem to a lot of harm up there.

            I don’t think a national tax in the U.S. is an “If” I think it’s a “When”

    • Alex Chasick says:

      @jyindc: The article talks about a 25% proposal, as well as the political difficulties in enacting it:

      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.

  7. kateblack says:

    It would still place an undue burden on the poor.

    • pecan 3.14159265 says:

      @kateblack: I don’t know if I ever buy the “burden on the poor” arguments…a tax on all would be burdening the poor. But I’m going to get burdened too, and just because I’m not at the poverty line doesn’t mean I don’t struggle. I don’t like that anyone who isn’t at poverty line can’t possibly struggle to make ends meet, and should therefore be taxed. Oh but the poor people! Guess what? I bring home a paycheck and most of it goes right out the door so I can have a place to live, so I can feed myself, and so I can pay for transportation and health care. I struggle too. Not as much as poor people, obviously. But I’m not wealthy either, and I resent paying more taxes.

      • Unsolicited Advice says:

        @pecan 3.14159265:

        Then be prepared to resent most of the economic initiatives enacted during this recession. The combination of decreased employment and the yawning funding gaps in our national budget create immediate risks to our well-being as a nation. They must be addressed, and taxes are more politically possible than spending cuts. There is a national burden to bear here.

        Besides, it’s easy to pass taxes in this environment. Simply state that they affect “fat cats” and the rich disproportionately. That’s far easier than making legitimate efforts to control spending.

        • pecan 3.14159265 says:

          @Unsolicited Advice: So far, I’ve resented many of the economic initiatives. Not so much for the effort, which gets an A, but the tactics being used.

          • Unsolicited Advice says:

            @pecan 3.14159265:

            I’m not sure you’re holding them in context with the benefits you’ve reaped from the stimulus package and the various bailout packages. They were costly, but they arguably prevented an economic disaster of extreme severity. It’s like any other purchase where you carry a balance – it isn’t rational to enjoy the plasma television and complain about the interest.

      • snowburnt says:

        @pecan 3.14159265: It’s more of a disproportionate burden on the poor. The basis being that the poor and middle class spend a higher proportion of their income than the rich. Therefore after taxes they will have less left over to survive.

      • Shadowman615 says:

        @pecan 3.14159265: You’re missing the point. The idea is that the poor spend a larger portion of their income and therefore (with a national sales tax) are taxed at a higher rate than the wealthy who spend a smaller percentage of their income.

        So instead of paying taxes at a higher rate than those poorer than you, you would be effectively paying taxes at a higher rate than those richer than you. I think you’d resent that at least just as much.

        • Tux the Penguin says:

          @Shadowman615: It depends… stay with me for a second.

          Man One and Man Two both go and buy a loaf of bread. Both pay $10 for the bread and spend $1 on taxes. Both were taxed at a 10% rate. And, for completeness sake, both men earned $100.

          In that situation, we have equal tax rates, correct? Both men were taxed at the same rate and paid the same. Which one made more money? Under this system, no one cares.

          Now lets add that Man One earned $1,000 dollars and Man Two earned only $100. Both go and buy that bread, both pay that taxes. Both men were still taxed at 10%… correct? They still paid the same rate.

          But you are focusing on OVERALL rate. Which for Man One is 1%, Man Two 10%. The rich man “paid” less in taxes. But is that REALLY true? He paid the same for the services and goods consumed. But you want to look at the total income in this calculation.

          It comes down to that any type of sales/consumption tax is inherently regressive. To fix this, the government could simply send, say $100 to every taxpayer (Social Security Number, or some other identifier) to “repay” what the “poor” pay in taxes. Now the poor pay nothing…

          Now see why taxes are so complicated?

      • Eyebrows McGee (now with double the baby!) says:

        @pecan 3.14159265: Consumption taxes are almost always regressive, since they tax you a larger portion of your income the less money you make. A VAT would disproportionately burden YOU compared to someone wealthier than you; and disproportionately burden someone poorer than you compared to you.

        Nobody’s saying you’re not burdened. Or even not disproportionately burdened. Just that it’s a regressive tax that falls more heavily on you the farther down the income scale you are, which (political rhetoric aside) is a Bad Thing in that it makes the poor poorer and more reliant on state aid (or less able to support themselves, which is going to amount to the same thing in the end, whether “state aid” is welfare or debtor’s prison).

      • ilovemom says:

        @pecan 3.14159265: Sounds like you might be poor like the rest of us.

      • the_wiggle says:
    • wgrune says:

      @kateblack:
      Or everybody…

    • johnva says:

      @kateblack: Not necessarily, if it were combined with some sort of negative income tax or rebate scheme. (In other words, everyone would pay the VAT, and then everyone (or just poorer people) would get a check from the government to give some of it back. The people who pay less total VAT because their income is lower might get more back than they’re paying, while richer people would get a lot less).

      • Murph1908 says:

        @johnva:
        Oh. You mean Socialism.

        • Sean Masters says:

          @Murph1908: The US is already socialized in loads of ways. I hope you are just stating a fact and not being a douche.

        • secret_curse says:

          @Murph1908: Where does johnva’s idea state anything about the government owning and running the largest industries in the country?

          Oh, you don’t know what socialism is. That’s right.

          • ARP says:

            @secret_curse: I think he’s been watching Hannity. When Obama suggested raising the income tax in the highest bracket from 33 to 39%, Hannity kept spouting off Marx and Lenin quotes and talking about income redistribution and socialsim. Funny at 33% it’s the bestest (Bush and Republicans signed it into law). But at 39% it’s abject socialism. What’s 34%?

            Of course, that’s not the government owning industry and not socialism.

            • Tux the Penguin says:

              @ARP: Personally, Hannity is a moron. But moving beyond that.

              The question I always ask whenever someone mentions a “good” tax rate: How much of my money should I get to keep?

              Think of taxes like that. Instead of paying 35% (which it is right now) think of getting to KEEP 65%. Oh, wait, its actually less than that. Forgot Medicare, Medicaid, Social Security, Federal Unemployment, State Unemployment, State Income, Local Income… It is possible right now to pay more than 50% of your income in taxes… self-employed earning in the 35% tax bracket living in NYC, just for starters. And then consider that after you get your income, you still have property taxes, sales taxes…

              So, the question remains: how much of my money do I get to keep? 50%? 25%?

              • Snowblind says:

                @Tux the Penguin:

                Even better, think of it as time. If you work a 8 hr day, and they take 50%, that means 4 hours of your time is not your own, it is the governments.

                Raising taxes is a direct loss of liberty in the form of time that is no longer your own while you earn the Government’s “cut”.

                So the question is: how much of your right to liberty will you give up to get the benefits (not rights!) granted by the state?

              • the_wiggle says:

                @Tux the Penguin: ow! what an eye popping rephrase for rethinking.

                75% – gov’ts can have the 25% to share amoung’st themselves IF, I say IF! they use it for infrastructure, common defense, etc.

          • ilves says:

            @secret_curse:

            I think you’re referring to fascism :). That does also apply to socialism, but only the one extreme end of socialism.

            • secret_curse says:

              @ilves: At the very, very least, look up a term on wikipedia before you start trying to argue about things you don’t know about. Socialism requires the state to own a large portion of major industry. The more industry the state owns, the more socialist your government. On the extreme end of the scale is Communism where the state owns everything, and on the other end is true, lassiz-faire capitolism where the state owns (and regulates) nothing. Facism rose as a “third way” between capitolism and Communism. Facists see their movement as a reaction to the failures of both capitolism and Communism. Socialism is a compromise between capitolism and Communism.

              Words matter. If we use them properly, it is much easier to debate. If you know what capitolism, facism, Communism, and socialism are, we can argue the merits (and problems) of each system. If you use the terms improperly, we have to waste time arguing the semantics of the words.

              • snowburnt says:

                @secret_curse: Doesn’t facism also connote a government control over general freedoms outside of the economic sector? It was my impression that “socialism” in it’s purist was economic only.

                • secret_curse says:

                  @snowburnt: Yes, socialism is all about economics. You can have a democratic socialist state. In fact, George Orwell identified himself politically as a democratic socialist. Facists support an authoritarian, one-party system based on the belief that only the nations with the strongest militaries survive. Facism is about philosophy and government, the same way Communism is about philosophy and government. Socialism is like capitolism in that you don’t have to adhere to a strict belief system.

          • edebaby says:

            @secret_curse: nit-picking; you know what they mean, you’re just being an idealogue nazi. These days, the term “socialism” is being used to describe more than the specific definition you are referring to. The term’s use has been expanded to encompass many aspects of social engineering; even those outside of government control of industry.
            So, although you are technically correct, you are using the definition in an effort to censor the ideas being presented. And that is somewhat inappropriate.

            • johnva says:

              @edebaby: So we should just accept the right-wing slur definition of “socialism” just because they’ve started using it for anything they disagree with? Insisting on a correct definition over a definition that is designed purely to be propaganda is not an “effort to censor”. It’s just insisting that words have meaning.

            • secret_curse says:

              @edebaby: How am I trying to censor any ideas? I’m not saying the guy can’t make his argument. I’m just saying he obviously doesn’t know what socialism is. It gets spouted off as a political buzzword to attack Democrats (and no, I’m not identified with any one party, I think they’re both full of crap; I’m most closely associated with the libertarians). Words matter. If we continue to use them incorrectly it just confuses ideas and you can’t have an open debate using accurate terms. Socialism absolutely requires that the government own a significant portion of the largest industries in a nation. It fits somewhere between Communism and true lassiz-faire capitolism. Raising taxes has very little to do with socialism.

              On the other hand, if one wanted to argue that our government buying large portions of our largest banks is a move toward socialism, I’d be on board.

        • snowburnt says:

          @Murph1908: How is this more socialistic than tax refunds?

          How is socialism by default the root of all evil?

          A government that is entirely socialist will not work on a large scale, sure. I can say the same thing about Libertarianism and pure democracy.

        • johnva says:

          @Murph1908: By that false definition of “socialism”, progressive income taxes are also “socialist”. Is George W. Bush a socialist for working with that tax system?

          If progressive income taxes and/or VAT rebates are socialist, then I support that type of socialism.

      • tweaked says:

        @johnva:

        Yeah, that’s how it works in Canada. I’m a student and so technically I’m pretty poor, thus once a quarter I get a check for 90 bucks from the guv’mint. Folks with kids and such get more.

      • craptastico says:

        @johnva: just when i thought our current tax system couldn’t get any more complicated.

        • RandomZero says:

          @craptastico: As has been mentioned, that’s more or less the way it works up here in Canada. It’s worth noting that taxes here are a very simple matter that can be done in well under half an hour by a complete layperson, without missing a thing. IIRC from the last time I actually did them on paper, it’s a whopping total of four pages (one double-sided form each for federal and provincial), most of which will never be used by most people.

          Taxes don’t have to be complicated to be progressive.

        • bohemian says:

          @craptastico: To not have to wade through 1040 forms every year and not have to waste a ton of time getting the IRS to fix their mistakes would be potentially worth it.

    • Brad Brown says:

      @kateblack:

      The sun beams down on a brand new day
      No more welfare tax to pay
      Unsightly slums gone up in flashing light
      Jobless millions whisked away
      At last we have more room to play
      All systems go to kill the poor tonight.

      • the_wiggle says:

        @Brad Brown: assuming someone actually pulled that unethical work off, do they serious;y expect the surviving “not poor” to believe that “poor” won’t be redefined again?

    • RayDelMundo says:

      @kateblack:

      The poor pay NO income taxes as it is now.
      They’re the ones getting the free ride.
      They should pay more.

      The burden falls, as it always does, on the middle class.

      • David Brodbeck says:

        @RayDelMundo: Yeah, poor people have it so good. That’s why everyone is clamoring to become poor.

      • snowburnt says:

        @RayDelMundo: There’s a reason they pay no income taxes now. It has something to do with the fact that they can’t afford to live with the income they make even without paying taxes.

        • RayDelMundo says:

          @snowburnt:
          The reason is that the government has jiggered the tax code to enable those who use the most services to not pay any of the taxes.

          • DollaValueLIFO says:

            @RayDelMundo:

            Right, because you’ve thoroughly read the most recent Federal budget page for page and come to that conclusion.

            How in the hell do poor people pay their “fair share” when, by definition, they have nothing to pay it with?

      • the_wiggle says:

        @RayDelMundo: yes, middle class gets the burden. this is not new in history & yes it sucks.

        however, the poor are not getting a ‘free ride’. they’re getting a shorter, sicker, futureless ride.

  8. winshape says:

    I love how it is called a “Value Added” tax. Who would be against a tax that adds value to a product?

    Next up, the Fluffy Kitten Tax (FKT), because really, who doesn’t love kittens?

    • Ryan Graf says:

      @winshape:

      The name actually comes because the tax is designed to tax the value any single business adds to a product. It’s actually one of the best taxes out there as far as minimizing economic distortions.

      As far as shifting the tax burden to consumers, all taxes shift tax burdens to consumers. In many countries VATs still need to be printed on receipts so consumers can see what they’re paying.

      VATs are better than most other taxes. Take a look into it and see.

  9. RStui says:

    I would be ok with this, but only if the other sales taxes were removed, and only if it didn’t apply to things like food, drugs, and other health necessities. But a flat extra 5% on top of all the other sales taxes (gas, luxury, cigarettes, etc), and in addition to my income taxes (federal, medicare, medicaid, and state) and your talking about me running around paying 60% of my income in taxes!

    REALLY!? And what am I getting? No free health care, no social services (I make too much), no assisted living? Bah, that’s some BS right there.

    I’m all for changing the tax structure, but really (really!) the gov’t needs to spend less, not look for ways to make more. All the people living here, all these corporations, all these import and export taxes and other crap, and they don’t have enough money!? Obviously there’s something wrong with the way they’re spending.

    Make a budget based on your income like the rest of us, US Gov’t!!

    • TheUncleBob says:

      @RStui: “I would be ok with this, but only if the other sales taxes were removed, and only if it didn’t apply to things like food, drugs, and other health necessities.”

      So, if I spend $10,000 on catering my daughter’s wedding, I shouldn’t have to pay taxes on that food? :)

      • FooSchnickens - Full of SCAR says:

        @TheUncleBob: If you’re spending $10k on catering alone you should probably invite fewer guests or find a cheaper caterer.

        I mean, my sister’s wedding cost about $10k for EVERYTHING. Food, venue, tables/chairs/etc for about 300 people.

        I ain’t against people who like to roll, but dayum.

        • TheUncleBob says:

          @FooSchnickens: I have no daughter and no $10,000 catering bill.

          Just pointing out that exempting items just to exempt them causes some issues.

          I like the FairTax idea of charging tax on *everything* (“new goods and services purchased at the retail level”), then rebating taxes paid on basic necessities up to the poverty level. If you’re poor and buy enough food to get by, then you end up not paying taxes on it. If you’re rich and buy enough food to feed everyone on your houseboat champaign and caviar, then you get to pay taxes.

      • winshape says:

        @TheUncleBob: The $10,000 would go towards the service provided by the caterer, not the food. Since the caterer would be the one buying the initial food, he/she wouldn’t pay the tax.

    • usul356 says:

      @RStui: I agree with you on adding taxes to all but the necessary living expenses. Texas does something similar to this with the state sales tax. We pay no tax on unprepared food. If there was any change, I would place gas and clothing below $100 or something like that to the list of non taxable items. The goal here isn’t to penalize one person for making money and help another out that doesn’t, it’s to pay for necessary government expenses that is all.

  10. Diet-Orange-Soda says:

    I’m game for a flat federal sales tax if we cut out other taxes. Seems simple enough; the more you buy, the more you pay. It’d make tax day a lot easier too.

    • Traveshamockery says:

      @Diet-Orange-Soda: A flat tax has a lot of benefits – among them, it taxes the black market income from drug dealers, prostitutes, and those shameful servers who don’t report their tips ;)

      The rich still pay a lot more dollars in tax because they buy more expensive stuff. It eliminates 90% of the IRS, who would now just need to police a few million businesses who collect the taxes, rather than policing 100 million (or more) taxpaying American households.

      It also has big disadvantages: It would have the effect of a giant tax increase on the poor, so I would be for a phase-out of the tax via a card or something for those in lower income brackets.

      Also, something really creative would have to be done to save charities – non profits rely on private donations, much of which wouldn’t be given if not for the tax incentives that disappear in a flat tax system.

      • TheUncleBob says:

        @Coach Cal Is My Dream Weaver: “Also, something really creative would have to be done to save charities – non profits rely on private donations, much of which wouldn’t be given if not for the tax incentives that disappear in a flat tax system.”

        Because all of those people who give away $500 for a $50 tax credit will stop giving away money?

        • DollaValueLIFO says:

          @TheUncleBob:

          In a word, yes. If you knew the number of income tax returns I see each year (upwards of 250, business and personal) where people haphazardly drop a few thousand here and there on December 28th, just to get the deduction.

      • Shadowman615 says:

        @Coach Cal Is My Dream Weaver: So you mean we’ll start paying taxes on drugs and prostitutes with a national sales tax? How are they going to collect that?

        I kid, I kid…

      • MooseOfReason says:

        @Coach Cal Is My Dream Weaver: You’re confusing the “flat tax” with the “Fair Tax”.

        From what I’ve read elsewhere, there would be two rates with the flat tax, I think 15 and 25, and instead of many forms, you would fill out one postcard-size form.

        With the Fair Tax, you would pay a 25% national sales tax. Think about where you pay your state sales tax – that’s where you’d pay it. The Fair Tax would get rid of several taxes, as listed on its website:
        “The FairTax is replacement, not reform. It replaces federal income taxes including personal, estate, gift, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes.”
        [www.fairtax.org]

        If we get rid of the income tax, I’d gladly support either of them.

        • David Brodbeck says:

          @MooseOfReason: From what I’ve read elsewhere, there would be two rates with the flat tax, I think 15 and 25, and instead of many forms, you would fill out one postcard-size form.

          The flat tax proponents conflate two issues when they make that argument. Tax simplification and a flat tax are not the same thing and don’t have to go together.

          If you want to see why, look at a 1040EZ form. It’s a single sheet of 8.5″x11″ paper. No, it’s not a flat tax, so you have to look up your income in a table to find your rate, but that’s not very difficult and doesn’t result in a lot of forms.

          Where all the forms come in is when you want to claim deductions — which could be eliminated with or without a flat tax. Many of the forms are also worksheets that help you make sure you’re reporting all your income — a burden that wouldn’t go away with a flat tax.

          • DollaValueLIFO says:

            @David Brodbeck:

            Excellent points, all. People often forget that 95% of all Americans file only one of the 1040 versions. Most folks don’t have a K1 or a Sched 3, and even more don’t need to look into all the other feeder forms for those confusing deduction/credit worksheets.

            Hell, even AMT isn’t a difficult calculation, the IRS website does it for you.

  11. mzs says:

    The only way that I could see this working is if it was eased in over a period of say 30 years. Otherwise it would put too much of a brake on spending and do to much damage.

    The other thing is that I hope it would be a true VAT and not a 25% sales tax. A VAT is an effective way for preventing companies of finding tax loopholes and effectively paying very little taxes. In a VAT (value added tax) the tax is applies each step of the way on the value added. So for example a company buys raw materials at a total cost of $X and then they sell to a store at $Y, then they pay $0.25 * (Y – X). When you buy that item in the store for $Z the VAT the store pays is $0.25 * (Z – Y). Of course every company builds the VAT into their prices, so in the end the customer pays the entire 25%, but at least companies are paying taxes that are very hard to find a loophole for.

    • Traveshamockery says:

      @mzs: There’s no such thing as a “tax loophole” – that’s political doublespeak. Following the tenets of the law to minimize your tax liability is actually perfectly legal, and in no way immoral. As a matter of fact, it would be immoral NOT to minimize your tax liability – if you don’t, you’re paying more than you owe.

      • enm4r says:

        @Coach Cal Is My Dream Weaver: There’s a big difference with individuals trying to minimize their liability (which we all should do) and companies and corporations playing games with ownership, leasing/lending, and money transfer to reduce their liability further than (arguably) the spirit of the law represents.

        It’s the tax gamesmanship that is referred to as loopholes, though I agree the term isn’t necessarily the best.

  12. jerros says:

    Lets get this straight, they are going to tax us when we make money, tax us on our property (cars/homes/ect) then tax us when we spend money 2x (state & fed)?

    I can see having a VAT instead of tax’s taken out of your paycheck (it makes more sense honestly). But if it’s in addition to…well I’ve got a few words for those politicians “Your Fired!”

    • winshape says:

      @jerros: Don’t forget your local city/county taxes.

      And if you get a state tax refund, you pay taxes on that.

      If Oprah gives you a brand new car, more taxes.

    • Mecharine says:

      @jerros: @jerros: To be fair, taxes on properties “theoretically” are used to pay for local services, such as police,fire department and public schools. You could , of course pay for that stuff out of pocket. That would negate the need for a property tax. But most people dont know what civics is, so if a scheme like that was set up, expect the very rich to thumb their noses and pay nothing at all to support local services.

      • winshape says:

        @Mecharine: Because the evil rich would like nothing better than to swim in their giant vaults of gold coins all day? Take your jealous class warfare rhetoric elsewhere.

        • dragonfire81 says:

          @winshape: It’s worked in other countries, it can work here.

          • winshape says:

            @dragonfire81: Sure, if by “working” you mean “crippling growth”. Which countries were even close to the US GDP even in the midst of a recession?

            Maybe China, but that was only because we buy everything they can make.

            • dragonfire81 says:

              @winshape: Actually I was thinking of my homeland Canada which actually has stricter banking policies than the U.S. and is consistently rated one of the best places in the world to live ahead of the United States.

    • Snowblind says:

      @jerros: One to many words. Just “Fire!” will do.

  13. SegaCDGamer says:

    I am stationed overseas in Italy, nothing like paying at least 20% tax on everything you buy here. A new XBox release costs at least 70 EURO. You got extra money to burn? We’re gonna tax the shit out of you! The best part is, when I do buy something on the Italian economy, the percentage of tax is NOT on the receipt. How much am I paying!?! The USA doesnt want this shit.

    • ilves says:

      @SegaCDGamer:

      Why does having the % tax on the receipt help? I was born in Finland (in the US now), and there they have a built in tax but it doesn’t get broken out of the price, its just part of the price. It’s not a guarded secret or anything so you can find out what it is if you want, but I like having the price I see on something actually BEING the price I pay.

      • SegaCDGamer says:

        @ilves:

        Yea, it is nice paying what the item is on the tag, so no need for “i hope i have the right change” or trying to factor 7 whatever percent into what you are buying.

        I know here in Italy it is 20% VAT on just about everything and 10 to 4 for basic goods.

        I used to work in a store on a state line and knowing the tax rate was important to some people. People could save a lil money on large purchases if they went to the state next to us. Or don’t pay any at all if you find an online store that doesn’t operate in your state.

        It’s habit, so when I dont see the amount of tax I pay, it just feels a bit odd to me.

    • OrlandoDude says:

      @SegaCDGamer: Ha Ha Ha. Do you think Microsoft is telling you how much of the retail price of that XBOX goes to pay THEIR corporate income tax? It’s the COST OF DOING BUSINESS.

      • SegaCDGamer says:

        @OrlandoDude:

        So you are telling me that part of profit is to pay for your taxes!? wow!

        I just picked out something I know right off hand (videogames).

        Chill out.

  14. Saboth says:

    I think Americans are taxed high enough considering we have to pay for our own healthcare. I know people that are paying around $500-$600 a month through employer provided plans (family), with a 2k yearly deductable. If you make 30k a year, thats like a 20% “tax” rate right there…then add in property tax, sales tax, state tax and federal income taxes…I’d say a lot of Americans are already paying 40-50% in “taxes”.

  15. Trencher93 says:

    If they threw out the wealth-redistribution income tax code and switched to a consumption-based VAT, it would reward those who saved money. If they just add this to all the other taxes, forget it. The other problem is the people who get tax credits under the current income tax system would be up in arms. (Think mortgage interest deduction, charitable giving deduction, credit for dependent children, etc.)

    The simplicity of a VAT or flat tax would make each person richer, not having to consult professionals or buy software each year to understand the tax code, which I think may already be non-deterministic. Imagine never having to do your taxes?

    • GuinevereRucker says:

      @Trencher93: That would be awesome, and would save a lot of time and money (IRS, software, tax fees). That extra money would go right to where it’s needed, hopefully, rather than all that overhead.

      Also, it would be harder to wiggle out of – as it is there are so many tax laws for the different types of tax.

  16. CreativeLinks says:

    Political suicide. Will never happen.

  17. Aaron Anderson says:

    Why don’t people understand income tax? Why do people think that their tax refund is “free money”?

    If you have a VAT, you dont have an INCOME TAX. Jeez. I didn’t see them say that in the article, but isn’t that how it’s supposed to work? That way I’m only taxed on the money I spend and not on what I earn?

    • snowburnt says:

      @Aaron Anderson: I think the idea is no income tax only VAT.

      • SalParadise says:

        @snowburnt: I would gladly switch to a VAT if it meant the elimination of Federal and State income taxes.

        By all means, let’s start taxing consumption, and stop taxing savings. Then perhaps people would spend less (often, they spend money they don’t have, which explains the high credit-card debt most Americans carry) and save more (which would give the banks more money for things like loans to businesses).

        Where do I sign up?

    • rwakelan says:

      @Aaron Anderson: Actually, the article says that there would still be an income tax on varying levels of people depending on how much the VAT was. At 10-14%, no income tax on 90% of households. At 25%, no income tax at all.

    • RayDelMundo says:

      @Aaron Anderson:
      “If you have a VAT, you dont have an INCOME TAX. Jeez. I didn’t see them say that in the article, but isn’t that how it’s supposed to work?”

      That’s how it IS supposed to work.

      Only not in Obama’s America.

  18. williamfranklinpearson says:

    Along with other unintended consequences this would add yet another huge layer of bureaucracy. It would also force many people into black markets where there is no court remedy against fraud or product liability. People would also attempt to escape through the barter economy. Taxation is theft!

    • ilves says:

      @williamfranklinpearson:

      How the hell would a VAT add another layer of bureaucracy? it would basically eliminate the IRS… although tax accountants would be out of jobs. No one is ‘forced’ to go into the black market, you would ‘choose’ to go to the black market if you didn’t want to pay taxes (which you are paying right now anyway, so whats the difference?). Barter economy is fine, at least you COULD escape to that in a VAT system, you can’t in an income tax system unless you produce goods yourself.

  19. ospreyguy says:

    If they would follow the Fair Tax fairtax.org instead of a stupid VAT people might actually like it. NO INCOME TAX, NO IRS, NO REDUCTION IN GOVERNMENT INCOME, ILLEGALS WILL PAY TAXES, CRIMINALS WILL PAY TAXES. On top of that every family would receive a debit card as credit on staples (basic necessities if you will). Check out the site. It’s worth it.

    • ossavir says:

      @ospreyguy: FairTax FTW!

      Seriously, though, given that our obtrusive corporate and income tax structure in the US is already causing prices to be inflated because of taxes, the FairTax as a replacement for the Income tax makes sense. However, adding on a VAT (which taxes at all levels, not just the end retail point) in addition to the income tax would be a bad idea.

      • DollaValueLIFO says:

        @ossavir:

        Oh gag me! Praytell what experience do you have with respect to price-setting as a function of tax liabilities? Seriously bruh, don’t go there.

        Just like this canard that S/OX caused prices to go up after Enron & World-Com.

        Look at the most recent IRS releases with respect to the average F500 Corp Tax filings, oftentimes their nil.

    • winshape says:

      @ospreyguy: My hope is that this is the FairTax in disguise…they just can’t call it the FairTax since the “evil neocons” came up with the idea.

    • David Schwartz says:

      @ospreyguy: FairTax can’t possibly work for a variety of reasons. Simply put, a sales tax above about 12% is unworkable, and no government has ever managed to pull it off. The problem is simply that as sales tax goes up, the incentive to evade it goes up as well. Enforcement would have to be Draconian. European countries are very, very good at enforcing taxes, and they haven’t even been able to make a VAT work at rates that high, and VATs were invented to make higher sales tax rates workable.

      • Jon Mason says:

        @David Schwartz: There is heavy incentive to evade income tax at high levels too, so its not a problem that would suddenly appear with a sales tax.

        The advantage of sales tax: Evading sales tax means a buyer has to find a seller who is willing to cheat, and something like 99% of purchases are made through large chains who would have no reason to evade tax. With the current system, cheating only requires one person to lie on your tax form.

        • David Schwartz says:

          @masonreloaded: Sorry, that’s completely incorrect for several reasons.

          First, income tax has numerous cross-checks due to withholding, 1099/W2, and so on. It’s very hard to have comparable cross-checks with a sales tax. This is why studies show that the evasion rates for the highest sales taxes in the nation exceed the evasion rates for Federal income tax.

          Second, it’s not really true that you need to find someone else to help you evade a sales tax. If I’m a retailer, and I can evade 10% of a national sales tax, I can drop my prices compared to someone who doesn’t. I don’t need to find anyone else who wants to cheat, I just have to find people who like low prices.

          And note that since a sales tax is imposed only through retailers, I can not just cheat on my taxes (that is, the tax on my earnings) but I can cheat on the tax on the purchases of everyone who shops at my store. So the dollar incentive for a retailer to cheat is much larger.

          That’s actually two more reasons the fair tax won’t work. First, it’s not fair, since the entire compliance cost is dumped on just retailers. Second, it won’t reduce the awfulness of compliance — just focus it on a smaller group of people. Good luck proving you’re not the retailer who cheats on 10% of the taxes he collects.

      • OrlandoDude says:

        @David Schwartz: ALL products sold in the USA have about a 23% “embedded” (hidden) tax built into the retail price. (You don’t think manufacturers and businesses actually pay taxes, do you? it’s passed on to us).

        Under the Fair tax, that all goes away to be replaced by the 25% “sales” tax. Almost the same price for every new item (Used goods are exempt). For more info- fairtax.org

        The real reason almost all politicians hate it is because it TAKES AWAY THEIR POWER (Manipulating policy via tax breaks).

        Also, it is not regressive, because anyone living below the established “poverty level” (the poor) pay nothing. (Via the monthly “pre-bate” on basic living necessities.) The rich pay more (because they buy more stuff) and guess what- ANYONE who buys ANYTHING (illegal aliens, under-the-table workers, visitors from other countries) pay the tax…. not just the “producers” of society.

        Wouldn’t you rather be taxed on what you spend, rather that on what you earn?

        Way too much to explain here if you don’t get it- check out the website.

        • David Brodbeck says:

          @OrlandoDude: That’s not really true. The corporate income tax is only paid on profits. For it to be the equal of a 23% VAT it would have to be paid on all receipts.

          Also, thanks to creative accounting and/or offshoring, a lot of corporations pay very little corporate income tax.

          • OrlandoDude says:

            @David Brodbeck: Yes, but all embedded costs are not just corporate taxes. For example, payroll departments are set up simply to deal with payroll deductions for employees, that is a hidden cost not related to the direct manufacture of the product.

            The point is, about 23% of the total cost of any new product is “added” when it is sold at retail. (a good reference now is a gallon of gas)

            And, if the corporate tax WERE eliminated under the Fair tax, there would be no need for any offshoring, anyway. Companies would flock to this country, along with the jobs. How cool would it be for the USA to be the “tax haven” of all the world’s leading companies headquarters? It would be worth it just to piss off the other countries thumbing their noses at us. :)

            • David Brodbeck says:

              @OrlandoDude: You really think companies would leave countries where they can pay employees less than a dollar an hour just because the taxes are lower here? I would think the higher labor costs here would still drive offshoring.

              • snowburnt says:

                @David Brodbeck: I’m on both sides of the fence when it comes to taxing companies.

                Companies aren’t going to leave the US solely because of taxes, it’s worth it to do business here because of our comsumerist nature. You’re not going to make money when people don’t have the means to pay for your product.

                On the other hand, we are taxing companies extremely high (compared to the rest of the world) and seeing little revenue (proportionately to the number of companies compared to the rest of the world) from it. I don’t think it would hurt to lower corporate taxes significantly.

                But at the same time, the cheap labor is the biggest plus in outsourcing…NOT the fact that there are taxes here, the “Fair tax” wouldn’t completely solve outsourcing.

          • secret_curse says:

            @David Brodbeck: I agree that it’s annoying when fair tax proponents say that it will get rid of the IRS. However, the fair tax would take the IRS out of the lives of most ordinary people. The IRS would operate pretty much as it does today for corporations. You just wouldn’t have to file your personal income taxes every year, so you’d probably never notice it.

            • David Schwartz says:

              @secret_curse: The fair tax is, therefore, not the least bit fair to the small retailer. How will he ever convince the government he is not cheating on other people’s taxes?

              I owned a small mom&pop store, and I can tell you that State sales tax was a constant nightmare. Dealing with amounts three or four times that large would have been truly hellish.

              Yeah, it seems fair when you’re not the one the entire compliance burden is dumped on.

              • DollaValueLIFO says:

                @David Schwartz:

                I have several clients that tried to handle their SUT filings for Maryland and had a doozie of a time when the auditor came around. Billable hours baby…

                But seriously, shifting the burden for complaince/collection on businesses (and SBO’s) seems unrealistic.

          • DollaValueLIFO says:

            @David Brodbeck:

            Stop being faster than me!

            Corporations (not evil, just bottom-line centric) are sooo able to avoid paying taxes, simply by losing money, on purpose. Not to mention NOL carryback provisions, sec 529, and NOL carryforwards. Corporations only use the tax line because it “makes sense”.

          • ospreyguy says:

            @David Brodbeck: “Also, thanks to creative accounting and/or offshoring, a lot of corporations pay very little corporate income tax.”

            HAHA! You believe that?! There are currently (as of 2002) 23,343,821 business in the US. All making $$ and paying taxes. There isn’t some giant high rise building in the caymans full of head offices for all these businesses. Your talking gross receipts of $22,062,528,196.00

            So if you want to send all business off shore keep taxing the hell out of them and see what happens.

        • snowburnt says:

          @OrlandoDude: illegal aliens actually pay more (unless they are paid under the table in cash) because they have their taxes taken out of their pay check but they can’t reclaim them.

          The website is geared towards talking points and propaganda rather than actually explaining what the fair tax is.

        • David Schwartz says:

          @OrlandoDude: I do get it. It just won’t work. A 25% sales tax is unworkable. That’s why no country has a sales tax anywhere near that high. There’s simply no way to control the evasion rate. European countries invented the VAT largely because they wanted to have sales tax rates higher than 10% without a severe evasion problem.

          There are so many other problems with Fair Tax, I wouldn’t know where to begin. But I will say this — the Fair Tax movement is an embarrassment to the consumption tax movement (movement to switch the United States from a tax on income to a tax on spending), because it is so obviously unworkable.

    • snowburnt says:

      @ospreyguy: I spent 5 minutes on the site clicking on links that look like they’d lead to a page detailing exactly what they’re proposing. Instead they lead to supposed results of the plan or ways to propagandize the plan.

      Can you drill down the plan for me, give some basic bullet points? I don’t want to hear that we spend $250 trillion and the plan will bring in $112 trillion, I want to know what the f-ing plan is.

      It makes me wonder if the argument is: its a “FAIR tax” how can you argue with FAIRness.

      • OrlandoDude says:

        @snowburnt: Bullet points:

        - all new goods to have a 25% sales tax, REPLACING the 23 current “embedded” tax you now pay. (Almost no change in price). the current embedded taxes are hidden costs that cover the company’s expenses NOT directly related to the manufacture of the product: IE- payroll taxes for their employees, corporate taxes, etc.)
        -all new goods taxed, including necessities
        -you get a “pre-bate” check every month to cover the cost of those aforementioned necessities. For example, if the “poverty level” for a family of four is $24,000 per year, ($2000 per month), a family of 4 would receive a $500 check each month to cover the tax. (25% of $2000). so, for instance, if your income is below $24,000 per year, you pay NO taxes.
        -no INCOME OR PAYROLL tax, you keep your whole check (minus state taxes, if any)
        -ALL people who buy stuff pay. Illegals. foreign visitors, even drug dealers, who I am positive pay no “income tax” now.
        -All the companies who have been leaving America, and companies not currently headquartered in America would FLOCK to set up shop here. (They would pay no corporate tax- a tax “haven” if you will)- and their costs would be tiny (no payroll departments to figure out deductions for employees, etc.)- Imagine the jobs COMING to the USA.
        -Pay tax on what you spend, NOT what you earn. Encourages saving money.

        -All you other fairtax.org nerds add in what I forgot here!

    • vladthepaler says:

      @ospreyguy:

      Interesting idea, I hadn’t heard of that. It’d have to be coupled with a seriously enforced use tax to keep people from simply making purchases in/from foreign countries though. (If my book is 25% cheaper from amazon Canada, I’ll order from there. If my my private jet is tax-free in Hong Kong, I’ll buy it there. etc.)

      I don’t agree with the whole poverty-level rebate thing though. Better to simply not tax certain poverty-level necessities (say, non-name brand and bulk foods and articles of clothing costing less than $10).

    • David Brodbeck says:

      @ospreyguy: I love how they say “NO IRS,” but then propose a rate that assumes no one cheats. You can’t have it both ways. If you expect high compliance you’ll still need a government agency to police the tax, and they’re going to have to comb through the books of every business in the country to make sure they aren’t, say, claiming new goods are used or making sales under the table.

    • jtheletter says:

      @ospreyguy: Please stop listing “no IRS” as an advantage of the ‘Fair Tax’. Do you really think we can implement a nation-wide tax system and not have a central agency to oversee it? Even if it’s just a VAT or flat sales tax you still have to have a national agency to regulate and _enforce_ those taxes. Will it be less complicated than the current IRS? Probably, but not necessarily. And it never goes away completely.
      The point is, argue your proposal on actual merits, it comes off as duplicitous when people tout “no IRS” knowing full well someone still has to do that same job under a different acronym.

      • David Brodbeck says:

        @jtheletter: I agree; it’s duplicitous pandering to the widespread hatred of the IRS.

      • snowburnt says:

        @jtheletter: Agreed, how can you have revenue if you have no method of ensuring it comes in.

      • DollaValueLIFO says:

        @jtheletter:

        Hell, more importantly how do you expect the Federal Government to completely (or near completely) shutter an agency with hundreds of thousands of employees!?

        FAIR ain’t that, and it isn’t happening.

  20. Steven Edwards says:

    A television station should hold Presidential-style debates between the groups pushing various tax proposals. Offering these groups three or four 2 hour blocks would go a long way to educating the public on the pros and cons of the best options out there.

    (FairTax, VAT, and income tax proponents could be invited to debate their respective merits, for example.)

  21. I Love New Jersey says:

    Of course it is unconstitutional, but that really doesn’t stop these bastards now does it?

    • Shivved says:

      @I Love New Jersey: I wish you were right, but I have a feeling that a national sales tax would pass muster in the Supreme Court. The courts have found, wrongly in my opinion, that just about any commerce has an effect on interstate commerce, allowing the Federal government to regulate it.

  22. chocobo says:

    Are sites such as Ebay and Craigslist popular in countries with a high VAT? Seems like people would much rather buy and sell their own used products, if getting a store involved means paying 20% more (on top of the increased prices the store needs to earn a profit).

    • Outrun1986 says:

      @chocobo: This is basically what I do, and bartering is always an option such as buying and selling to friends or trading with neighbors. There are extensive trading communities out there for video games and they don’t cost anything to use other than shipping. Every time I buy a game or other product here in NY state I have to pay 8.75% sales tax so the price has to be low enough to get me to pay the extra nearly 9%. I buy very little products from retail stores here other than the essentials. Clothing only has a 4% sales tax here. I am a big yard sale shopper so I try to buy whatever I can at sales instead of in retail especially if its common stuff you see at almost every yard sale you go to. Added bonus is cheaper prices overall. Merchandise is the same or better than what you can get in retail stores. I don’t buy anything that is disgusting. I stay local so gasoline is not an issue. Instead of spending a Saturday afternoon filling up the cart in Walmart like everyone else does I fill up the trunk with yard sale buys(although I do shop at Walmart as well)!

      All thrifts charge full sales tax here so again, the price has to be very low or the item has to be very good in order for me to buy it.

      • vastrightwing says:

        @Outrun1986: There is no fair tax. By its very definition, a tax is coerced. People never willingly pay taxes. If you were to make taxes optional, imagine what would happen. The government is not fiscally responsible and deserves to be stripped of its ability to tax, but that won’t happen. Giving it yet more options to tax is suicide.

        • David Brodbeck says:

          @vastrightwing: Well, you could always move somewhere where that’s the case. I understand Somalia is a good choice at the moment; taxes are entirely optional there, since there’s no national government.

        • Ubik2501 says:

          @vastrightwing: “If you were to make taxes optional, imagine what would happen.”

          It depends. Do you have the financial, material and labor resources to provide your own police and fire services, build the roads to support them, the schools to educate your children, defend your territory from incursions on your sovereignty, and so on?

          • the_wiggle says:

            @Ubik2501: nope. most folks don’t. which is why i don’t object to paying a reasonable share & why i do object to my reasonable share being pissed away.

  23. Unsolicited Advice says:

    Fair Tax advocates and national sales tax advocates tend to miss two important points:

    1.) The top 50% of wage earners pay 96.93% of American taxes. A sales tax or fair tax redistributes an immense tax burden to lower-income citizens.

    [www.ntu.org]

    2.) The economic impact of consumption-based taxes is rarely analyzed in “revenue-neutral” schemes. ~70% of our economic activity is consumer-driven, meaning all that spending creates jobs. Sales taxes have a deleterious effect on spending – rates would need to be higher than estimated. That effect, of course, must be balanced against the “wealth effects” of the end of income taxes.

    • Steven Edwards says:

      @Unsolicited Advice: Your first point doesn’t acknowledge the FairTax’s prebate system:

      How does the prebate work?

      All valid Social Security cardholders who are U.S. residents receive a monthly prebate equivalent to the FairTax paid on essential goods and services, also known as the poverty level expenditures. The prebate is paid in advance, in equal installments each month. The size of the prebate is determined by the Department of Health & Human Services’ poverty level guideline multiplied by the tax rate. This is a well-accepted, long-used poverty-level calculation that includes food, clothing, shelter, transportation, medical care, etc. See chart in Figure 1 below.

      • Unsolicited Advice says:

        @Steven Edwards:

        It’s not that I don’t acknowledge the “prebate” so much as I dismiss it. That’s not an effective way to distribute resources and it does a great deal of harm to the Fair Tax claim that less bureaucracy would be required. Who is administering, processing, and validating the distribution and use of those prebates?

        • Steven Edwards says:

          @Unsolicited Advice: Social security checks are distributed (via check or direct deposit) on a regular basis with little-to-no problem, so I would imagine the same system could be used for delivering prebates.

          The less bureaucracy claim is often tied to the significant reduction of the IRS and the vast simplification of the tax code.

    • winshape says:

      @Unsolicited Advice: I disagree with your first point – there won’t be that much of a redistribution.

      Wealthy people aren’t suddenly going to be buying $100K houses, and poor people aren’t going to be buying Ferrari’s. On top of that, people below a certain income threshold are going to get rebates back for some of the tax they paid on necessities.

      On your second point, I agree partially. The idea behind the Fairtax is that the 25%-ish VATS would replace income tax and corporate taxes, which would be roughly equivalent to the VATS. There wouldn’t be much of a change in the actual price of the product. In addition, people would have more of their money in their paychecks since income tax isn’t taken out.

      • David Brodbeck says:

        @winshape: My guess is wealthy people would evade the tax. They’ll buy their yachts in some other country, and declare that their $2,000,000 mansion is used and thus tax exempt.

        • winshape says:

          @David Brodbeck: And yet

          “In 2002 the latest year of available data, the top 5 percent of taxpayers paid more than
          one-half (53.8 percent) of all individual income taxes, but reported roughly one-third
          (30.6 percent) of income.” (yeah, there is probably more recent data out there but it hasn’t changed THAT much)

          [www.treas.gov]

          Maybe the wealthy people could use your help in finding these magical IRS fairies that help them avoid paying taxes.

          Or maybe they are too busy working instead of goofing off on Facebook.

          • David Brodbeck says:

            @winshape: You’ll note that I wasn’t making an argument that the rich are evading income tax; rather I was arguing that they could easily find ways to avoid paying the FairTax.

            • winshape says:

              @David Brodbeck: OK, point.

              However, why is it that the “rich” are always accused of avoiding taxes? Is there any proof of this other than the movie “Wall Street”? With the exception of Paris Hilton, they are normal human beings like the rest of us. It’s illegal to discriminate based on age, sex, race, religion, and a myriad of other things, but size of your bank statement? Fair game!

              • David Brodbeck says:

                @winshape: They have the means and the incentive. All those creative tax shelters that are talked about in magazines like Forbes weren’t designed for the benefit of the poor.

                As for the rich being “discriminated against,” cry me a river. As long as our top tax bracket is below 100% they’re still seeing increasing benefits from increasing levels of income, which is why you don’t see many people clamoring to become poor for the tax benefits.

                Here’s a kind of discrimination I’d like someone to answer for: Why are capital gains taxed at a special, lower rate? Why should someone who works for a living pay a higher tax rate than someone who makes money by having money to begin with?

  24. Sean Masters says:

    @johnva: using this scheme would, in effect, result in absolutely no change from our current system.

    The problem with govt spending in the USA has nothing to do with our tax system, and everything to do with our govt. Our tax system, iirc, has consistently been shown to be better than the majority of alternatives.

    To be fair, we could write up a 20-page article on changing tax law and still be nowhere near finished. Tax code should be simplified, yes, but the system itself needn’t be changed.

    • johnva says:

      @Sean Masters: Yeah, I agree that there wouldn’t be a huge change. That’s the point of the suggestion. I’m just trying to correct the false impression that a VAT is necessarily completely regressive. By itself, it might be, but not in the context of a broader tax system.

  25. u1itn0w2day says:

    I’d rather have a national sales taxes than all these IRS games and peeks at your private life.

    Just think what just a penny(NOT 1%) would bring in if tacked on to most of your regular everyday transactions . Just a penny .

    I’d rather pay those pennys than pay a tax preparer , tax software co or an IRS fine . And when the FEDS can’t collect the tax burden goes to local government and sometimes they’re a bigger ass about taxes than the feds .

    Some how some where you have to pay for things like roads and/or infrastructure & services . If it requires me to pull a few extra pennys out of my pocket rather than a tax code,pen,adding machine,paper,software,reciepts etc so be it .

  26. Quilt says:

    Wow. I like the part of the article that says the US is borrowing 46 cents of every dollar it spends.

    Why not try spending less? Say…46 cents less per dollar?

  27. chauncy that billups says:

    “even among Democrats”? Who exactly was in favor of this originally? Pure socialists?

  28. Anonymous says:

    I love how no one has even mentioned that PERHAPS, just MAYBE Obama could scale back his massive spending, instead of taxing us into non-existence. STOP SPENDING. Stop investing in the worst companies in the country. Stop punishing future generations for your mistakes. Big government, here we come. There’s no turning back now.

  29. full.tang.halo says:

    so if you make money and pay tax, and use some of that money to say, buy a car, and pay sales, value added tax, and then go to the dmv and pay some friendly registration tax to be able to drive it on the road, and then go to the shell station and buy some gas with gas+sales+vat….I have to think we’re getting screwed somewhere…

  30. vladthepaler says:

    Oh, come on. A tax that democrats don’t favour? You’re totally making that up. But seriously, as long as they promise to give all the money away to large corporations that make bad decisions, I don’t think anybody will complain.

  31. ThunderRoad says:

    So what if they exempted food, clothing, medicines and services from the VAT – then, in theory, these necessities wouldn’t unduly burden the poor.

    The presumption is that anything outside these categories is less of a necessity.

    (please avoid strawman about designer clothes and lobster, and start with the base premise before working on details)

  32. mikesfree says:

    Yay! more tax!

  33. Borax-Johnson says:

    Do the math. In 2004 most recent year available for all stats, US population: 292,287,000. US Budget $2.3 trillion. Federal spending per person: $7,869. Total personal income: $6.875 trillion. Personal income per capita: $23,500.

    US Tax rate necessary to balance budget: 33%.

    So, it would have taken a VAT of about 33% to balance the 2004 budget. The real rub is that the 2010 budget is $3.1 trillion – a 35% increase. If we assume that incomes have increased at, say 3% a year (yeah right), and the population has now become 306 million, the VAT rate needs to be 38%.

    That’s kind of a whopper that probably wouldn’t be well received if it were right out in front. Want to make it worse? I live in California with a 9% sales tax, and about a 9% income tax. So that 38% VAT would be on the order of 56% here.

    Me thinks the natives are going to get restless soon.

  34. lockdog says:

    One thing I never see the tax-reform people fully address is the impact on charitable giving. I know that the tax-writeoff isn’t the main reason most people give, and I know it can also be abused (megachurches), but charities and non-profits provide a lot of services in the USA that governments provide in most other western countries. Anything that even modestly impacts charitable giving is going to have a tripled effect under a VAT or flat tax. 1) there will be a reduced incentive to donate without the tax-writeoff (at least for some) 2) Those who donate the most tend to be the lower and middle class earners who spend disproportionately more of their income on necessities and therefore will bear a higher tax burden under this system than the upperclass, who while paying more taxes will still have more disposable income after tax. 3) the poor and working poor (say below 200% of Federal Poverty Limit) that many of these charities help will be further burdened because not only are they already paying up to 100% of their incomes on immediate needs, but the charities that help them make up any any difference (housing groups, health clinics, food banks) will have fewer resources given even a slight decline in charitable giving.

  35. subsider34 says:

    “…a national sales tax, known in other countries as a value-added tax or VAT…”

    Um, a VAT is distinctly different from Sales Tax.

    Whereas a Sales Tax is collected at the point of sale (and so is levied only once), a VAT is levied at each stage of manufacture or distribution. Thus a VAT has two benifits for governments, 1) Allows governments to tax the same product multiple times, and 2) Allows governments to hide the effects of said tax from end-users. Sales-tax on the other hand is levied only once at the point of sale, and is indicated on receipts.

    See:
    Sources on VAT
    [encarta.msn.com]
    [www.merriam-webster.com]
    [www.bartleby.com]

    Sources on Sales Tax
    [encarta.msn.com]
    [www.merriam-webster.com]
    [www.bartleby.com]

  36. waltcoleman says:

    I’d love to see a VAT or national sales tax REPLACE the federal income tax. But a VAT on top of federal income tax? Screw that! I pay enough in taxes already. And I’m sick and tired of politicians who preach about taxing the rich, then turn around and tax everyone. Here in Calif, they just raised the sales, income and car tax…taxes which impact everyone, but hurt the middle class and poor the most.

    • David Brodbeck says:

      @waltcoleman: The great thing about states is there are 50 of them. California may be the worst-governed state in the nation right now…if I lived there I’d be making a serious effort to move.

  37. Sanshie says:
  38. JollyJumjuck says:

    The link to the Washington Post site is either incorrect, or the page is down. Perhaps I forgot to pay my Internet tax in order to view it.

  39. Karen DenBleyker says:

    I’m all for it.. if they repeal the federal income tax, fica and medicare taxes as well as repeal the 16th amendment to Constitution. It’s called the Fair Tax.

  40. Possinator says:

    25%? Talk about only buying the bare essentials.

  41. JGKojak says:

    VAT would create a HUGE underground tax-free economy- its not worth cheating the local and state gov. over 6% sales tax (usually) – but make it 25-30%– the fraud would be rampant.

  42. axiomatic says:

    The irony of this is that the only people providing a “value added service” to Americans are outsourced call center in other countries.

    Irony… it’s what’s for breakfast.

  43. cpaforrent says:

    Very simple to reform our tax system. Flat tax of 17% on every dollar of earnings from all sources that has not been taxed previously above an exemption amount of $15,000 per exemption.

    Family of 2 making $60,000 (60k-(15k*2)=30 taxable) pays $5,100.
    Family of 2 making $100,000 (70 taxable) pays $11,900.
    Family of 4 making $60,000 pays zero.
    Family of 4 making $100,000 ($40k taxable) pays $6,800.

    No credits. No itemizing deductions. No AMT. All income is reported to the IRS. They continue to withhold based on your payroll earnings. They prepare your tax return for you and you send a check for the difference (or they send a refund to you) by 4/15.

    • johnva says:

      @cpaforrent: You know why nothing like that will ever happen? Because all the credits and deductions are a great way for Congresspeople to carve out political favors for various groups they want to support them.

  44. DjDynasty says:

    I totally 110% suppoer a GST/VAT in the U.S. I have avoided income taxes every year since I turned 18 for two reasons. I don’t have health care, and I can’t get married to another man. At least now it’ll be worth paying federal taxes in exchange for true universal healthcare like Canada’s or the UK. I’m tired of the watered down versions. Blue cross and united health care should just DIE!

    • morlo says:

      @DjDynasty: I support not paying taxes, but those are horrible reasons. Unless you are sickly, health insurance isn’t going to be good use of your tax money, and if you want to marry a man move to CT, IA, ME, MA, or VT–I doubt more than a few pennies benefit hetero couples.

  45. shepd says:

    VAT (or, in Canada, GST) is absolute political suicide.

    “I am opposed to the GST, I have always been opposed to it and I will be opposed to it always.” is the lie that got the GST making government voted out and the new one in.

    Funny thing is, the government that made the GST is the only one that has actually reduced the GST rate. The other government did nothing about it, apart from trying to “harmonize” it with other provinces (ie: Increase taxes on services, since most provinces don’t tax services, just goods).

  46. Brazell says:

    I would support a sales tax if income taxes were reduced. However, no form of income taxes would ever be cut in the next eight years.

    Massachusetts just raised their sales tax 30% last week. And the gas tax, liquor tax, cigarette tax; propose internet tax; proposed income tax hike. And tolls. YES!

  47. Anonymous says:

    Aaron, yes if VAT is implemented than theoretically they would have to scrap the income tax, and all other taxation. But, we now how our wonderful government works, and that will not happen. It didn’t happen in Europe. They pay VAT along with a slew of other taxes. Government controls about 40-50% of their economy, that’s why there is slow if no growth, people don’t have large families anymore, they don’t own as much personal property, etc, etc . They can’t afford to! I don’t understand why any normal thinking person would be for this. NOBAMA! He needs to be voted out in 2012!

  48. RogerDucky says:

    Sorry — the article is inaccurate — a VAT is NOT sales tax.

    Sales tax taxes an item every time it changes hands — VAT, on the other hand, does not do that. See [en.wikipedia.org] for details.

  49. William Brinkman says:

    @Murph1908: True/False: America is built on the idea of redistribution of wealth.

  50. BreadBoy says:

    I would preferr a tax on consumption(VAT) rather than on income.

  51. Anonymous says:

    Just so we are all clear: “Value added tax (VAT), or goods and services tax (GST) is a consumption tax levied on value added. In contrast to sales tax, VAT is neutral with respect to the number of passages that there are between the producer and the final consumer; where sales tax is levied on total value at each stage, the result is a cascade (downstream taxes levied on upstream taxes). A VAT is an indirect tax, in that the tax is collected from someone who does not bear the entire cost of the tax.” Source Wikipedia!

  52. arcticJKL says:

    Of course we would have to amend the constitution first

  53. Alex Chasick says:

    Although I appreciate the vigorous debate that this story generated, I am disappointed that it has not touched on the introduction of Tax Dog and his superiority/inferiority to Tax Cat.

  54. physics2010 says:

    Ok. Just to spell it out…25% is only acceptable if you remove:
    1. Gasoline tax
    2. All sin taxes
    3. Property tax (County tax school,city, college, hospital)
    4. Income tax (federal, state, and city)
    5. Sales tax (state and city)

  55. SiddhimaAmythaon says:

    probelm as i see it is the switch over a VAT in place of the current system is fine but it kicks savers in the balls. Lets says this switch over happens i have 20k in the bank that was my savings after the current taxes. i spend the money after the switch over and guss what i just lost 30 % of the buying power of that money. A credit system whould have to be put in place for middle class people not to louse there nest eggs and revolt but any system would be abused to hell by others.

  56. krista says:

    Transferring some or all of our tax burden to a sales tax system rather than an income tax system would be great for most middle income tax-paying people who seem to shoulder an unfair burden of the costs of running this country.

    Rich people find all sorts of loopholes for their income tax, but would pay more fairly if they were taxed on what they spend instead of what they earned.

    Plus, there are tons of regular people who don’t pay their fair share. Most servers, bartenders, hairdressers, etc. do not claim anywhere near all of their tip income. Some larger chains require the waitstaff to claim a certain percentage of sales, but in every restaurant I’ve ever worked, less than half the actual tip money is reported.

    Then there are the tons of people who work for cash “under the table”. I know one person who tried to justify it by saying that he could charge homeowners less because he doesn’t pay taxes. Well, that’s good for him, good for the homeowner, but what about the rest of us who are paying his taxes?

    With a sales tax system, even the drug dealers would pay their fair share. As long as it would eliminate income tax, I would happily vote for a 25% federal sales tax.

  57. Anonymous says:

    a flat tax such as this actually makes a lot of sense, but you have to did deeper into our current tax system. In order to successfully implement a tax reform such as this, all other taxes must be taken off of the books. the figure of 25% comes from adding each persons’ income tax to the average sales tax, as well as all of the corporate taxes that are added into the price of products. Remeber, when a company has to pay a tax there is no individual to fork up that money. The tax is either pushed one of two places, decreasing returns to the investor( bad for the investor) or increasing prices to the consumer (bad for everyone). So while the receipt doesn’t show an actual tax, taxes are embedded into the price.

    There are also two more major points. First is to look in the last ten years at how many companies have moved their headquarters out of the U.S. to escape the tax code. A flat tax can bring them back in and increase money into our economy. Secondly look at underground criminals such as drug dealer. They don’t report and pay their income taxes but under a flat tax every time they buy food or gas, they are contributing just as much as everyone.No matter how they make their money.

  58. esc27 says:

    To even begin to make such a tax “fair” you would have to add tons of exemptions for food, medicine, bandages, soap, shampoo, school supplies, clothing, etc.
    Why not just start at the other end of things and add/increase a luxury sales tax on things like mp3 players, cars (over $20,000,) etc.

    • krista says:

      @esc27: I don’t see any reason to add any exemptions. Poor people spend less, pay less. Rich people spend more, pay more. Seems pretty fair to me.

      Perhaps unprocessed foods (like fruits and vegetables) and medicine should be exempt, but nothing else.

      By herding in all of the people that are currently not currently paying any taxes at all, either through loopholes or by working under the table, the tax burden is reduced for all of us – even the poor.

  59. jesterthejedi says:

    As seen in this video…