Adopting a VAT is a Necessity for the US

[Rajiv]

Adopting a VAT is a Necessity

There is not the political will in Washington to cut spending and raise taxes enough to rein in the massive federal budget deficit, so it is therefore inevitable that America will adopt a value-added tax out of necessity, according to CNNMoney.com’s Shawn Tully.

“The battle over whether America should adopt a VAT will be a bloodbath. The debate over how it will work will be wrenching,” he writes. “Most Americans may well hate the entire concept. Our leaders should have thought of that sooner. The smart money says the VAT is America's destiny, a destiny that comes closer with each passing budget.”

While the political support for a VAT is few and far between in the political community, it is a very popular idea in academia among economists. Not only would a VAT be a very efficient deficit reduction tool, it would also have the added benefits of encouraging savings while discouraging needless consumption and level the playing field for American manufacturers that have been left behind in the era of free trade.

Currently over 150 nations utilize the VAT. It works like an export subsidy for foreign exporters and an import tariff at the same time, which places the U.S. in a comparatively most uncompetitive situation due to the fact that we do not utilize the VAT or any other countervailing measures.

In 2006, VAT nations collected rebates totaling $218.2 billion while the U.S. was forced to pay $122.4 billion in taxes due to the VAT. Each year the VAT imposes a $290 billion burden on exported U.S. goods and another $85 billion on services. This encourages outsourcing as American companies move offshore in order to circumvent the VAT and reap the same benefits as the companies producing in those nations.

In 2005, the tax was applied to 94 percent of U.S. imports and exports. In EU countries alone in 2001, the average VAT rate applied was 19.4 percent, coupled with an average tariff of 4.4 percent, this levies a total tax of 23.8 percent on American goods and services.

.
.
.
.

The VAT should be adopted, and to ease the burden of the VAT on low income families, it could be pumped back into the economy in the form of a low income tax credit. But it would be a boost to American exporters.

[blazespinnaker]

Re: Adopting a VAT is a Necessity for the US

Yes, the VAT is inevitable and should be done.

Hopefully one day we can get rid of income taxes and replace it with a consumption tax.

[Rajiv]

Re: Adopting a VAT is a Necessity for the US

Couple that with Sen. Feingold's "Buy American Clause" and we may have an impact on main street.

An influential U.S. Senator is urging his colleagues to include a version of the “buy American” clause in the upper chamber’s yet-to-be-unveiled jobs bill, claiming the provision would go a long way toward putting unemployed Americans back to work.

Sen. Russ Feingold, a long time critic of job-killing free trade policies, in a letter to Sens. Dick Durbin (D-IL) and Byron Dorgan (D-ND) asks that any jobs bill that passes the Senate includes a domestic procurement clause.

[Made in the USA - Buy ... ] “Robust domestic sourcing requirements will help to ensure that federal resources are being used for their intended purposes - to create jobs here in the United States,” he writes.

According to Feingold, a “buy American” provision in a jobs package would allow the nation’s beleaguered manufacturing sector to regain its footing after a very rough two-plus year period. In the past two years alone, the nation’s manufacturing sector has shed 2.1 million jobs.

"Unemployed workers in the United States are facing a double digit unemployment rate, the highest rate since 1983, and we need to do all we can to promote fiscally responsible federal policies that support the creation of American jobs to help get the unemployed and underemployed back to work," Feingold wrote

Unlike the “buy American” clause contained in the $787 billion stimulus package, Feingold would make this provision much more difficult to circumvent. According to that version, there were numerous ways to get around the domestic procurement requirement. For one, the bill excluded America’s current trading partners, and made, for instance, Canadian products eligible. The previous version only required U.S.-made steel products to be purchased, other foreign-made goods were excluded. In addition, there were a whole host of other loopholes used to get around the “buy American” provisions.

"While there should be a reasonable waiver process included in domestic sourcing provisions to address situations where American-made goods may not be available or are prohibitively expensive, it is currently too easy to waive existing domestic sourcing requirements," he said.

Feingold is also the author of a bill that would strengthen the Buy American Act of 1933 by making it more difficult to avoid purchasing domestically made products. According to that legislation, the only way that the policy can be waived is if the foreign-made products are significantly cheaper, there is a shortage of the product in the U.S. or if doing so is not in the public’s best interest. The last provision is so broad and vague that many have exploited it over the year, something Feingold would like to put an end to.

“The federal government needs to be held accountable on whether it is supporting hardworking Americans,” Feingold said. “My legislation will help close loopholes in current law that have allowed federal agencies to evade the Buy American Act. By purchasing American-made goods whenever possible, our federal government will send a simple message to American workers: We support you.”

[sandwind]

Re: Adopting a VAT is a Necessity for the US

Hopefully one day we can get rid of income taxes and replace it with a consumption tax.

In Europe it doesn't work this way and never will . Vat is additional tax. Whole tax on person that works for somebody and spend whole his money is about 70% (I include Vat and other taxes that you pay when you buy sth in my calculation).

So you start to work for yourself on Thursday:rolleyes:

[labasta]

Re: Adopting a VAT is a Necessity for the US

it could be pumped back into the economy in the form of a low income tax credit

In your dreams lol.


It is an unfair tax but one which is apparently very easy to collect and all things being considered I would prefer it than an income tax, but taxes always go up and they will continue to do so until the system either breaks down or stumbles along in a dysfunctional stupor. The less the GDP comes from the private sector and more from the public sector where is the breaking point before total revenue collapse? Has it already been reached a long time ago? Is the massive debt the end result of this? Is the funny money to pay for socialism finally coming home to roost?

I remember years and years ago on one of the political programmes in the UK, the two parties were asked if they would both raise taxes if they won the election. The conservatives merely stated that the rate of the tax increases under them would be less than what the labour government would do. They actually admitted that.

The VAT might not sort out the black hole in finances. As 70% of the US economy is consumption, would it reduce the amount consumed negating the tax gains? People still have to eat, but maybe cheaper foods. That Ipad at $500 was too expensive for someone on this board. Would $620 with a 20% VAT rate be too expensive still? Fewer non-necessities bought, less tax income. Maybe if Americans were all relatively well-off first, they would be able to afford the $620 price tag.

Even VAT might not extract blood from a stone. If you want European socialism in the US, you must pay European prices on goods and fuel. I think America needs to start manufacturing and exporting FIRST, and then think about copying European socialism. Otherwise, how is it going to pay for it?

Maybe building a strong economy to support a strong socialism would be the wise thing to do, rather than the other way round.

But it would be a boost to American exporters.

I don't get that bit. Am I being a bit thick? American producers would still have to put VAT on the end product as foreign manufacturers of the end product wouldn't they, or not? Or would American manufacturers be exempt from putting VAT on the end product in the US market?

[pianodoctor]

Re: Adopting a VAT is a Necessity for the US

I was listening to former Comptroller General of the U.S. David Walker on Book TV the other night. He said we need the VAT but it will be in addition to income taxes. No way will they do away with income taxes he said. According to him the government definitely needs to tax us a lot more just for us to get by and get out of this fiscal mess, and VAT would be the best way to do that.

Of course politicians ignored him for years when he was trying to prevent fiscal disaster because the fiscal discipline he said was necessary was not politically convenient and did nothing to further careers. Who knows where we'll go from here? Now raising taxes (VAT?) can be sold as a matter of "saving Social Security and Medicare" or somesuch. And people will think 'yes, we need to do that.'

[tsetsefly]

Re: Adopting a VAT is a Necessity for the US

There is no way in hell a consumption tax would be changed for a VAT tax, the VAt would only be added and I think it would be very unpopular. I dont think there is anyway you can get states to agree on it...

[cjppjc]

Re: Adopting a VAT is a Necessity for the US

More revenue is not the problem. States have added lotteries, sales taxes, sin taxes, income taxes, license and registration fees, rental car fees, hotel taxes. The list goes on and on. Thier books are not balanced.

[MulaMan]

Re: Adopting a VAT is a Necessity for the US

Make Americans take personal responsibility for thier own family and community. Americans need to stop living off the government.

Close the Pentagon and stop all defence spending, that will do it. Deficit will be taken care off. SS will be paid for.

Republicans should be all over it - personal responsibility, buy some guns and take responsibility for your own safety rather then rely on a bunch of goons in DC.

[shiny!]

Re: Adopting a VAT is a Necessity for the US

We don't need a VAT to help pay for excessive and ever-growing Federal spending. We need the Federal gov't to CUT BACK and only fund it's very limited Constitutionally-mandated duties. Everything else should be done on Local and State levels.

Example: I'm a volunteer in a citizens advisory board on housing and human services for my city. Yesterday I attended a meeting on allocating Federal funds for services for 2010-2011. The monies to be disbursed are "CDBG" (Community Block Development Grants) funds from HUD (Department of Housing and Urban Development). The local administrative documentation for these funds is horrendous, taking 11.5% of the funding. The city is asking to be allowed to use up to 20% of the funding for administrative costs! They have to hire extra staff just to deal with it- it's too complicated for volunteers or temporary interns to do it.

I asked about this and was told that HUD has to have all of this documentation when they go to Congress to ask for funding every year. They have to prove the monies are being used effectively. I can't imagine how much of the taxes collected goes to the HUD bureaucracy in Washington, rather than the people who need to be served.

Another example is the Department of Education. It provides less than 10% of funds that go to school districts, yet 80-85% of the paperwork and testing required of administrators and teachers is to satisfy Dept. of Education requirements. This means less money for teachers and classrooms that actually serve student needs, and more money going to administrative bureaucrats. This means more and more time wasted testing and teaching for tests, and less and less time spent actually teaching. And the results are terrible. The Dept of Education has failed utterly and should be shut down.

"Welfare": Years ago I read that 80% of tax dollars collected for "Aid to Families with Dependent Children" (welfare) is wasted in bureaucracy. Only 20% of the money goes where it's needed. These are citizens' tax dollars being wasted on several levels of bureaucratic administration. Multiply by every Federal agency and the waste is staggering.

So much more money would be available for services if we as individuals payed the bulk of our taxes to Local and State governments for equivalent local-and-state-run programs. The more locally the taxes are collected and spent, the less of it is wasted in administrative costs, the closer the oversite, and the more transparent the processes are to citizens.

Federal government waste, bloat and inefficencies should not be supported by more taxation, which is what the VAT tax would do.

Local, rather than Federal, funding and administration of services translates into much less taxation with higher efficiency and more people served.

[sunskyfan]

Re: Adopting a VAT is a Necessity for the US

The only Tax that makes sense in a global market world is a Transaction tax. VAT will not address the raw resource consumption. The tax should somewhere about the nominal central bank rate of each market. It should not exclude any transaction including housing or stocks.

[Master Shake]

Re: Adopting a VAT is a Necessity for the US

We don't need a VAT to help pay for excessive and ever-growing Federal spending. We need the Federal gov't to CUT BACK and only fund it's very limited Constitutionally-mandated duties. Everything else should be done on Local and State levels.

Example: I'm a volunteer in a citizens advisory board on housing and human services for my city. Yesterday I attended a meeting on allocating Federal funds for services for 2010-2011. The monies to be disbursed are "CDBG" (Community Block Development Grants) funds from HUD (Department of Housing and Urban Development). The local administrative documentation for these funds is horrendous, taking 11.5% of the funding. The city is asking to be allowed to use up to 20% of the funding for administrative costs! They have to hire extra staff just to deal with it- it's too complicated for volunteers or temporary interns to do it.

I asked about this and was told that HUD has to have all of this documentation when they go to Congress to ask for funding every year. They have to prove the monies are being used effectively. I can't imagine how much of the taxes collected goes to the HUD bureaucracy in Washington, rather than the people who need to be served.

Another example is the Department of Education. It provides less than 10% of funds that go to school districts, yet 80-85% of the paperwork and testing required of administrators and teachers is to satisfy Dept. of Education requirements. This means less money for teachers and classrooms that actually serve student needs, and more money going to administrative bureaucrats. This means more and more time wasted testing and teaching for tests, and less and less time spent actually teaching. And the results are terrible. The Dept of Education has failed utterly and should be shut down.

"Welfare": Years ago I read that 80% of tax dollars collected for "Aid to Families with Dependent Children" (welfare) is wasted in bureaucracy. Only 20% of the money goes where it's needed. These are citizens' tax dollars being wasted on several levels of bureaucratic administration. Multiply by every Federal agency and the waste is staggering.

So much more money would be available for services if we as individuals payed the bulk of our taxes to Local and State governments for equivalent local-and-state-run programs. The more locally the taxes are collected and spent, the less of it is wasted in administrative costs, the closer the oversite, and the more transparent the processes are to citizens.

Federal government waste, bloat and inefficencies should not be supported by more taxation, which is what the VAT tax would do.

Local, rather than Federal, funding and administration of services translates into much less taxation with higher efficiency and more people served.

+1

BTW, because of previous discussion you had with another member about your handle, I checked out Firefly and am now a big fan. My wife, too.

[shiny!]

Re: Adopting a VAT is a Necessity for the US

+1

BTW, because of previous discussion you had with another member about your handle, I checked out Firefly and am now a big fan. My wife, too.

Yay for you both, that's so shiny! I think Firefly and Serenity (the follow-up movie) are extremely relevant to what's happening now, with the power grabs being made by central governments/banks/multinational corporations (all in the name of doing "good works"), and the increasing impoverishment and loss of freedoms for the poor and middle class.

"The Alliance gathers all the worlds under one rule so they can be interfered with and ignored equally." -Mal Reynolds, Firefly

"I just want to go my way." -Mal Reynolds, Serenity

[tombat1913]

Re: Adopting a VAT is a Necessity for the US

The VAT should be adopted, and to ease the burden of the VAT on low income families, it could be pumped back into the economy in the form of a low income tax credit. But it would be a boost to American exporters.

Do you mean in addition to present taxes or in place of them?

[flintlock]

Re: Adopting a VAT is a Necessity for the US

Stop all defense spending? Are you kidding?