Does The US Need A New Kind Of Tax?

It's called a value-added tax, or VAT, and it's been used for decades to pay the bills and sustain the immense growth of governments around the world, from France to Mexico to Australia. Created in 1954 by a French economist, the VAT is the most potent, efficient machine for revenue generation yet invented.

And if there's one thing the U.S. government needs as the federal budget balloons, it's a ton of new revenue. "The bottom line is that the income tax cannot support the level of spending that's projected, something other countries faced years ago," said Roberton Williams of the Tax Policy Center, a non-partisan research institute. Today the VAT raises almost half of the total government revenue in France, and a similar share in most of the developed world.

The VAT is essentially a sales tax, except that it's charged at each stage in the development of a product instead of at the moment when the product is sold.

Read the whole story here.

Comments

[gcallaghan]

A VAT could work. Although it's a regressive tax, low and middle income earners may be able to see a zero increase in taxes compared to their current level by raising the threshold on income taxes. Exempt earnings up to a certain level from income taxes, using regional cost of living indexes to make sure that those who can least afford it aren't penalized regardless of where they live.
A family of 4 can live comfortably on 60K per year in many areas of the country but really struggle in the bigger cities. A new tax blind to that reality could break them.

Not meaning to sound facetious but how about a monopoly-style luxury tax on things like art collections, vacation homes, private jets and the other trappings of the wealthy?

[Rule Of Law]

a new tax? Oh, you mean like one on all the Corporations that they actually have to Pay? Not the current system that allows 2/3 of them to pay no taxes at all? That kind of new tax? I'm for it!

[WorkingClass]

Its just a more highly evolved method for extracting money from workers. If we had a democracy we would tax the rich.

[Bobleblah1]

How about

NO MORE TAXES

What those who favor endless taxes seem to not understand is that taxes rob you of your liberty.
Every 500, 1000, 2000, 3000 dollars that the government takes from you, is 500, 1000, 2000, 3000 dollars that you no longer have to invest in your business, home, or ideas. The rich dont care how high taxes get. The rich write the laws, so they will always evade the new tax, or simply shift the responsibility to consumers. It seems only people who want to be an employee their whole life, or have no business they are trying to create, or plans for self determination could want higher taxes. Its understandable that young people would think taxes are a good idea. but for all you folks out there in the real world, who are trying to create a better life for YOURSELF and FAMILY, understand the criminal nature of all this taxation without representation. It is as dangerous a form of terroristic communism as there is.

(Its not even about thinking one day you will be rich, so why not support low taxes.) NO!
Its about understanding that small business owners need as much as humanly possible of their money in order to stay in business.

Taxation KILLS the middle class Not the rich.

They rich don't care how high you raise taxes, THEY WILL ALWAYS EVADE THEM.

[freerovingbovine]

How well would your business do if there were no roads, schools, police, courts. How about those mobs of people who can't afford to buy your stuff but might think you would be a tasty meal after they take everything you own.

Now, given that there is a cost to all these things who should pay them: the collective, who runs all the businesses and makes all the income like the Communists, or by slave labor and theft like the Nazi's who worked the Jews to death after they stole everything they had?

IMHO the consumer should pay. After subsistence consumption the consumer is the only ones in society that has FREE choice as to how they spend their money. Business owner's such as yourself have very little choice. If you don't invest in your business you can't stay competitive and you eventually have nothing to sell.

So, a consumption or user tax is the only tax that respects the FREE choice of individuals. The government that collects this tax has an obligation to fund all the goods and services that our representatives think should not collected by the producer.

The government should be out of the business of handing out tax breaks to help one business at the expense of another. This is what is called "Central Planning", and is "The Road to Serfdom" (FA Hayek)

[Bobleblah1]

Laws should apply to everyone otherwise they will eventually serve no one.
A reasonable person can justify local taxes because those funds theoretically SHOULD
be spent in the local area to serve the infrastructure needs of those who live within that area. Federal taxes on the other hand can not be rationalized. The percentage of those taxes that is going to serve interest on debt is beyond criminal. The money isnt even being used in the United States. Most of this money is just stolen by foreign interests.
alternate sets of books are kept that hide billions in investment revenue earned through use of the tax base. This money is never reported and basically just stolen.
How can anyone look at just a small portion of this criminality and rationalize monetizing such activity further?

The revolution was fought in part to stop foreign usery-lending and tyrannical taxation.
The founders saw that taxation will rob the individual of any ability at upward mobility and freedom.

My advise to those who love advocating more taxes and payment of higher taxes.......
Nothing is stopping you from writing a check right now and sending it to the IRS.
I promise they will accept the money. For the rest of us who feel current taxation is out of control, we will gladly accept your extra payment on everyones behalf.

[freerovingbovine]

Thanks for the article! As said, the VAT tax problems are that it is regressive. Exceptions muddies the water and in effect taxes inventories that cannot be recovered until the item sells.

Another alternative is to have a Universal Transaction tax with Pre-Bates for subsistence consumption and Rebates for investment, production, education and charity. The rebate would quickly recover the tax on raw materials and labor. The IT infrastructure of banks could collect these taxes quite efficiently and anonymously unless a rebate or pre-bate is requested. Then the banks can compete on helping the payer prove the rebate.

The concept is that if you have the money to consume an item, you should have the money to pay for the non-direct costs of that product or service. The role of government in this model is the funding method to support the infrastructure, environmental protection, retirement, healthcare, security and welfare of the society that makes it possible to deliver the product.

Replacing income, wage and corporate taxes with the UTT/PSC would invigorate productivity and investment as all the income you earn you keep, and unless you apply of a rebate or pre-bate you don't need to disclose anything. This is very progressive as subsistence consumption is tax free.


The "Planned Economy" by government workers does not work because bureaucrats are not accountable and by law have no skin in the game. The UTT will return control to the people who bear the risk.

[freerovingbovine]

Thanks for the article! As said, the VAT problems are that it is regressive. Exceptions muddies the water and in effect taxes inventories that cannot be recovered until the item sells.

An alternative is a Universal Transaction tax with Pre-Bates for subsistence consumption and Rebates for investment, production, education, charity and the like. The rebate would quickly recover the tax on raw materials and labor. Banks and other financial institutions will collect these taxes quite efficiently and anonymously unless a rebate or pre-bate is requested or unless the government comes up with a warrant.

The concept is that if you have the money to consume, you have the money to pay for the non-direct costs of that product or service. The role of taxes is funding method to support the infrastructure, environmental, retirement, healthcare, security and welfare of the society that makes it possible to deliver the product. The pre-bate makes this very progressive as subsistence consumption is not taxed at all.

Replacing income, wage and corporate taxes with the UTT/PSC would invigorate productivity and investment as all the income you earn you keep, and unless you apply of a rebate or pre-bate you don't need to disclose anything and have no compiance costs.

The "Planned Economy" by government workers does not work because bureaucrats are not accountable and by law have no skin in the game. The UTT will return control to the people who ultimately bear the risk.

[Eusebio]

Can we just legalize and tax marijuana already? It is infuriating that despite how logical this idea is it does not receive mainstream attention or support.

[Rep/Dem both suck]

Can't we just better spend the money that is already coming in. Americans pay enough taxes it just goes to things like maintaining an American empire, the War on Drugs, and various other things, that are not benefical, harmful, and/or horribly inefficient.

[olephart]

This is so typical of our rich Republican elite. Not just settling for a tax code replete with loopholes large enough to drive two Mercedes through, special tax rates for THEIR incomes, (dividends, hedge fund earnings and capital gains) lowered tax rates on THEIR earned incomes, (over $250,000) and no Social Security on UNEARNED incomes now they want to make up for all of their special treatments with a national sales tax. Make no mistake; the bottom 95% will pay this tax. The necessity of additional revenue is required because of their tax cuts, Bush's Wars, Bush's crony capitalism and the Wall Street gangsters stealing everything they touched and now the Treasury. Those who would be put on the line for this tax are the only ones who didn't cause these disasters. That is unless you want to hold non wealthy Republican voters responsible which would be fine by me. So if this cluster##ck of a tax is passed then it should come with national identity cards identifying Republicans voters who would be charged this tax exclusively. Pottery Barn logic, they broke they own it.

[vippy]

How about publishing the list of those who have their money in off-shore banks, Liechtenstein, USB,
etc. If our government would close those loopholes and they finally could collect from those who
hide their money in order to avoid paying taxes that should make up the shortfall quick. But why
would our senate or congress shoot themselves in the foot?

[nomoredead]

If you love this country and want to help out you should be willing to contribute more in a slight tax increase in the coming years. I don't mind helping my country.
But...
Tax churches
Cut military spending.
Close loopholes.
Tax stock trades.
Flat tax across the board.
Cut foreign aid.

[PoorManRichMan2009]

Bingo !!!!

[goldrush]

Did the government ever consider cutting spending? Anybody? No? That would be a crazy idea; a fiscally responsible government.

[jsarets]

(page 1/2)

Most informed progressives understand that consumption taxes (e.g. sales tax, gas tax, VAT, etc.) are regressive, meaning the burden falls disproportionately on lower-income households that cannot afford to save as much of their earnings as can wealthier households. But what most of these well-meaning folk don't understand is that production taxes (e.g. corporate income tax, windfall profit tax, we don't like your product tax, etc.) are economically equivalent to consumption taxes on the resulting products and are just as regressive.

The progressive individual income tax is much better, but it still has a moral hazard in that it functions as a disincentive to labor and production. So taxing consumption, production, and income all have fairly serious drawbacks. The government needs to tax something, but what? What kind of fundamental economic transaction is essential to any modern economy but for which we have no interest in maximizing the volume and which in fact carries severe risks when conducted in excess?

Credit.

(continued)

[KillTheMessenger]

Most informed people understand that consumption taxes are meant to be punitive and decrease consumption. And because we are informed, we understand why that is a good thing.

But say, how do you like your share of consumerism paid for with credit cards and real estate speculation?

Fun, ain't it?

[jsarets]

That's why we need the federal credit union system described below. These institutions would be accountable to the electorate with a mandate to encourage savings, issue affordable loans, and return all revenues as savings dividends and social investment.

Control of credit is similar to control of consumption, except that the disincentive only applies to consumers stretched beyond their means and does not reduce the purchasing power of fiscally responsible consumers. This is a strong deterrent against over-consumption.

[jsarets]

(page 2/2)

What we need is a public banking system, implemented as a hierarchy of democratic institutions at the federal, state, and local levels, that provides the operating revenue for the respective governments by collecting interest on its loans. Instead of private banks re-lending the interest as new interest-bearing debt, it will be reinvested in our communities by the same institutions that issued the loans in the first place. In order for government to spend, it has to lend, and in order to lend it has to spend in a way that empowers the growth necessary for its constituents to service their debt.

This tax promotes financial responsibility in both the private and public sectors. The burden is allocated in direct proportion to the amount of debt owed, which makes sense because these people have benefited from the economy in excess of their productive contribution, and their debt load is threatening to a greater extent the stability of the entire economy. It doesn't involve any complicated forms or loopholes, and it does nothing to impede production, consumption, or income to the extent that the economy can afford it outright.

[mzwednesday]

Yeah in Australia it's called the GST (goods and services tax)
and it's doubled the price of EVERYTHING. It's a tax that
decimates the poor and that has closed down a lot of small businesses.
Don't believe the hype.