Obama suggests value-added tax may be an option

[Martinus]

What's wrong with an income tax, DGul?

It discourages work and investments, and there is a whole host of double taxation issues that need to be dealt with, which bloats the tax code complexity enormously.

I don't think VAT opponents in the US know what VAT is about. For example, it looks like they do not have any idea about the concept of VAT deduction.

[Zanza]

Is there any difference to the consumer between sales tax and VAT? As far as I can tell, that's not the case...

[DGuller]

I don't think VAT opponents in the US know what VAT is about. For example, it looks like they do not have any idea about the concept of VAT deduction.

Ironically, I bet most people who ate up the Fair Tax idea are absolutely aghast at the prospect of having VAT.

[Razgovory]

I don't think VAT opponents in the US know what VAT is about. For example, it looks like they do not have any idea about the concept of VAT deduction.

Ironically, I bet most people who ate up the Fair Tax idea are absolutely aghast at the prospect of having VAT.

Apparently.  Grover Norquist's organization is up in arms.

[Martinus]

Is there any difference to the consumer between sales tax and VAT? As far as I can tell, that's not the case...

Err, VAT is a type of a sales tax. 

[MadImmortalMan]

Is there any difference to the consumer between sales tax and VAT? As far as I can tell, that's not the case...

Err, VAT is a type of a sales tax. 

Yeah. A compounding one that charges the end consumer all of the tax cost of every transaction that happened before his.

[Martinus]

Is there any difference to the consumer between sales tax and VAT? As far as I can tell, that's not the case...

Err, VAT is a type of a sales tax. 

Yeah. A compounding one that charges the end consumer all of the tax cost of every transaction that happened before his.

As I said, people here do not understand VAT (and the concept of VAT deduction). Your post shows why this is the case.

If you can show me one country where VAT works the way you describe, I will withdraw my objection (hint: it will definitely not be any EU country).

[Martinus]

In fact, VAT is the tax where, from the economical perspective, the total value of a good is taxed only once. Unlike, say, income tax, where the same income is first taxed at the corporate level, then it is taxed again as a capital gains tax.

In a VAT system, there is no difference in the total amount of tax paid irrespective of whether the same good is manufactured only by one manufacturer and then sold to end user (e.g. a farmer bringing his goods to a farmer marker) or sold and bought ten times before it reaches the end user.

[MadImmortalMan]

In a VAT system, there is no difference in the total amount of tax paid irrespective of whether the same good is manufactured only by one manufacturer and then sold to end user (e.g. a farmer bringing his goods to a farmer marker) or sold and bought ten times before it reaches the end user.

Okay then. Please explain it to me.

[Razgovory]

Why do we have to tax our citizens.  Why can't we tax other countries citizens.  Some kind of tribute system.

[Camerus]

What's wrong with an income tax, DGul?

It discourages work and investments, and there is a whole host of double taxation issues that need to be dealt with, which bloats the tax code complexity enormously.

Well I have no hard data in front of me, but my gut feeling is that in order to recoup lost tax revenues from scrapping income tax except for the 'very richest', wouldn't the VAT have to be set at extremely high levels?  And that would, of course, come with its own set of disincentives, e.g. reducing consumption.

[Zanza]

Okay then. Please explain it to me.

Businesses only pay the difference between the VAT they earn and the VAT they pay themselves.

[Zanza]

Well I have no hard data in front of me, but my gut feeling is that in order to recoup lost tax revenues from scrapping income tax except for the 'very richest', wouldn't the VAT have to be set at extremely high levels?  And that would, of course, come with its own set of disincentives, e.g. reducing consumption.

We have 19% VAT on most stuff, 7% on some essentials (mainly food). The revenue from that VAT is still less than the income tax revenue (which has higher rates than the US of course).

[Tamas]

We have to do something to cover the deficit and we know they are not going to cut spending no matter what party is in charge because then the voters will revolt...

That's what I keep saying to welfare-craving Americans: it is a one way street. A politican will never plan to abolish any of it, in due time the only way they can differentiate between one another is how much more spending they promise.

[grumbler]

That's what I keep saying to welfare-craving Americans: it is a one way street. A politican will never plan to abolish any of it, in due time the only way they can differentiate between one another is how much more spending they promise.

You are correct, if there really was no "President Clinton" who passed a welfare reform bill that reduced federal and state welfare payments enormously over time.

If there was such a president, I will just assume you spoke out of ignorance.

I dunno why the desire to make sweepingly inaccurate statements overcomes some posters (while others don't need to be overcome because they are permanently in that mode).