VAT in the US?

Ah, a key part of this is doing away with the current tax code (many thousands of pages long). In order to do that we'd have to repeal the 16th Amendment to the Constitution which allows for the income tax. Without repeal many think we'd end up with an income tax and a VAT or "Fair" tax (national sales tax similar to the one proposed by Huckabee)

It's a difficult and lengthy undertaking . The first 10 amendments were passed in 1789. Since then we've only had 17 amendments, and one of those repealed a previous amendment (Prohibition of alcohol).

There have been about a half a dozen other proposed amendments. Some have expired, but a few of them are still active. Passage seems doubtful since two were proposed 200+ years ago.

It seems to me that everything I buy here in the US has tax added to the purchase price. How would this be different in a qualitative way?

A VAT or sales tax without an income tax would be one of the most unfair systems imaginable.

Most (not all) states impose a sales tax on purchases. Some items like food are usually exempt. But these are taxes levied at the state level.
The VAT or Fair tax would be levied at the Federal level.
I'm not sure how the VAT works, but the Fair Tax would be a 30% tax added to the cost of an item.
Where I live, we have a 5.6% state sales tax. Buy a $10,000 car and you pay $10,560 (plus registration, title, license plate, etc). With a Fair Tax you'd pay $3000 more.

The caption that accompanies the picture heading the article explains it all.

A VAT tax may soon come into effect for Americans. While the tax won't be seen on receipts, it will be added to each step of the production and distribution of a product, and will be seen in a rise in prices.

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This way, it's not the benevolent government adding a tax, it's the damned corporations suddenly jacking up their prices by 30 percent.


And if anybody thinks they'll eliminate the Income Tax when they institute this, I've got a bridge for sale with a wonderful river view.

clintl said:

A VAT or sales tax without an income tax would be one of the most unfair systems imaginable.

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Maybe. But the proponents of the national sales tax claim there will be a rebate for low income earners and a repeal of the FICA payroll tax. They also claim that the super rich will pay more because they buy more expensive things.

I prefer a simpler flatter income tax without the thousands of loopholes. Congress seems to create loopholes and tax benefits for their financial backers. I think taxes should be used to raise funds for the legitimate business of government.

So we have what is effectively a sate VAT. Seems like having a federal one isn't that big of a jump. In NZ almost all tax is leveed on goods and services and the overall efect isn't that different from an income tax. After all, rich people spend more money--so they pay more tax.

I don't believe it. I distinctly recall a promise that anyone making less than $250,000 would not have any of their taxes raised one thin dime!

for the legitimate business of government.

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And is this from whence the stickiness begins?

Gary said:

I don't believe it. I distinctly recall a promise that anyone making less than $250,000 would not have any of their taxes raised one thin dime!

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This would, I suppose, be an election promise?

veinglory said:

It seems to me that everything I buy here in the US has tax added to the purchase price. How would this be different in a qualitative way?

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Unlike sales tax, the VAT would not be listed as a tax on the sales receipt. It's paid to the Government by the manufacturer rather than the retailer, and so is embedded in the price of the product.

clintl said:

A VAT or sales tax without an income tax would be one of the most unfair systems imaginable.

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The VAT won't be added "without an income tax" - that would stay, and the VAT would be IN ADDITION to all other taxes. This is what's being talked about recently in and around Washington DC.

Perhaps you're thinking of the "Fair Tax" where the plan is indeed to explicitly eliminate the Federal Income Tax and replace it with a Federal sales tax on new retail items.

I think building into the price would be better than adding it at the till. You have to pay it either way so it is simpler to know the real price when you look at the ticket. Of course VAT can be charged at the register too. For some good like computers this is still the usual method.

benbradley said:

Unlike sales tax, the VAT would not be listed as a tax on the sales receipt. It's paid to the Government by the manufacturer rather than the retailer, and so is embedded in the price of the product.

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Oh that's sneaky. Over here you have to (if you are VAT registered) provide a VAT receipt showing the VAT you've charged the customer, and the retailer ( in fact each business) pays the Government their portion of the VAT ( minus the VAT they've paid out in purchases) It is harder to fiddle than just a flat sales tax. Of course if you're buying something from the retailer for your business, you get to claim the VAT back .

Williebee said:

And is this from whence the stickiness begins?

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refer to the enumerated powers listed in the US Constitution - Articles 8 and 9 would be a good place to start.
Yes, I realize there is debate about what they all mean. But just read them sometime.

http://www.usconstitution.net/const.html#A1Sec8

benbradley said:

The VAT won't be added "without an income tax" - that would stay, and the VAT would be IN ADDITION to all other taxes. This is what's being talked about recently in and around Washington DC.

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I certainly hope not. I was responding to earlier post that expressed that desire, however.

This thread is confusing, mostly because that damn article has "If the sky were green..." suppositions that aren't in any way or shape representative of the "VAT (Value Added Tax) Tax."

Gregg said:

Ah, a key part of this is doing away with the current tax code (many thousands of pages long).

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NO IT IS NOT. The article quoted one person who opined all the things HE thought should happen, but none of them have any relation to why the VAT is gathering momentum in Washington DC. Politicians like the VAT because, as the OP says, it will raise MORE money IN ADDITION to all the current taxes.

Quoting the article, bolding mine:

James Pethokoukis has been keeping us posted as to the progress of this new tax at his blog. In his latest post on VAT, he describes a scenario (not the one being talked about currently in Washington that places this on top of the current income tax system) in which a VAT might make sense and be supported by the public:

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There you go. The "VAT Tax" is NOT going to replace the Income Tax or any other tax.

And whether it's supported by the public is inconsequential to politicians in Washington DC. Apparently the plan is to do something like what happened with the Health Care/Insurance/Whatever-it-is bill/law, and have Congress pass it before, oh, let's say November 2010 (there happens to be a "mid-term" Congressional election in November 2010).

It doesn't mention the Fair Tax in the article, but it's apparent that what's being discussed that "might make sense and be supported by the public" is indeed the Fair Tax.

Gregg said:

In order to do that we'd have to repeal the 16th Amendment to the Constitution which allows for the income tax. Without repeal many think we'd end up with an income tax and a VAT or "Fair" tax (national sales tax similar to the one proposed by Huckabee)

It's a difficult and lengthy undertaking . The first 10 amendments were passed in 1789. Since then we've only had 17 amendments, and one of those repealed a previous amendment (Prohibition of alcohol).

There have been about a half a dozen other proposed amendments. Some have expired, but a few of them are still active. Passage seems doubtful since two were proposed 200+ years ago.

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And the VAT isn't claiming to do any of that.

It's the Fair Tax bill that has written into it that the current income tax system would be abolished, and all you say above does indeed apply to the Fair Tax bill. The popular book on the Fair Tax, "The Fair Tax Book," was published five years ago, and has been more or less continuously promoted ever since. I've only heard of the VAT being discussed for the USA in the last several weeks or month or so.

It appears the guy in the article was confusing the VAT and the Fair Tax, and/or trying to promote the idea of the Fair Tax without mentioning it.

clintl said:

I certainly hope not. I was responding to earlier post that expressed that desire, however.

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The article was misunderstood (and I can sort-of see why, it tries to suggest the VAT could be something that it will never be). I hope this clears it up, but I can only wonder.

I find this to be a questionable article, even if it's supposed to be some "opinion piece." I see the author is listed as a "guest blogger" which in this case I find a little dissapointing, in that it reflects badly on bloggers, who even if amateurs, get enough of a bad rap. It being on the Christian Science Monitor is additionally disappointing, as I've always heard of it as a highly respected news source.

I'm not even sure if I've effectively gotten across my feeling of scorn at the article.

Noah Body said:

Just to make sure I read you right, you're for a VAT in addition to current state and federal taxes? In other words, you want an additional tax added?

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No, I don't want the VAT at all.

I think this needs a different answer than I or others have given so far:

veinglory said:

So we have what is effectively a sate VAT. Seems like having a federal one isn't that big of a jump. In NZ almost all tax is leveed on goods and services and the overall efect isn't that different from an income tax. After all, rich people spend more money--so they pay more tax.

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Sales taxes now are imposed by local (city, county) and State governments, and are one of the main sources of income for them (a few States, such as IIRC Florida, don't even have income taxes). The Federal government generally doesn't tax sales of things (with some exceptions such as gasoline).

The money raised by this VAT thing would go to the Federal Government, and would be in addition to Federal income taxes and all other taxes. Thus the Federal Government would get people at "both ends" - in both the EARNING and in the SPENDING of money.

There's an acronym for this sort of situation: BOHICA.

I've got another idea. How about if the government would stop spending so fucking much money? Maybe then we wouldn't have to figure out which kind of tax increase we'd prefer.

As I now understand it, the talk in Washington is to add a VAT (a type of sales tax) on top of the income tax. My question is if there is a refund/rebate/exemption for low income folks? If not, this is a regressive tax.


The Fair Tax proponents want their tax to replace the income tax and therefore want to repeal the 16th amendment which authorized the income tax..

Haggis said:

I've got another idea. How about if the government would stop spending so fucking much money? Maybe then we wouldn't have to figure out which kind of tax increase we'd prefer.

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If Over 40% of world GDP is spent on the Military, you got to have big taxes.

http://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures