[Carlhole]

Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look

With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax.

Common around the world, including in Europe, such a tax -- called a value-added tax, or VAT -- has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity.

At a White House conference earlier this year on the government's budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. A recent flurry of books and papers on the subject is attracting genuine, if furtive, interest in Congress. And last month, after wrestling with the White House over the massive deficits projected under Obama's policies, the chairman of the Senate Budget Committee declared that a VAT should be part of the debate.

Hmm... A VAT tax in general, coupled with an income tax for high earners?...

I'm all in favor of abolishing the income tax in favor of a VAT -- in addition to property taxes, capital gains taxes, excise and tarriffs. That seems to spread things around nicely. Just have to adjust the rates so that total taxation levels are optimal.

Prop 13 severely reduced California state tax revenues from real estate and other property holdings. This has meant that the state is more dependent upon income taxes -- plenty of revenue during boom years, but virtual bankruptcy during any sort of recession. You have to couple property and capital gains taxes with a VAT because a VAT stimulates savings which find their way into property and investments.

But it's not a good idea to have both a VAT and an Income Tax.

[Quinny]

Why is it not a good idea to have both?

[vision-master]

Get ready for the costs of all goods and services to skyrocket.

[Carlhole]

Why is it not a good idea to have both?

Instituting a sales tax together with an income tax puts the taxpayer in a vice. That is, an income tax encourages a taxpayer to spend savings so as to accumulate income tax deductions. A sales tax encourages savings because every time a good is purchased, taxes are paid.

A sales tax, in conjunction with property, capital gains, excise taxes and tariffs would be most sensible. If we have read any sort of sustainability literature at all, we know that we need curtail our rampant consumerist society. A sales tax serves that end very well. It creates an incentive for people to live more frugally. Savings accumulate. Savings are capital which can be re-invested.

Personally, I think a drastic reduction of US overseas military bases would have to accompany a re-engineered tax policy. The income tax, consumer society, debt-financing, and the petrodollar system have allowed the US to field a global military much, much larger than it otherwise would have been able to afford.

[Daniel_Plainview]

The surge of interest in a VAT is testament to the extraordinary depth of the nation's money troubles. While some conservatives have long argued that a consumption tax would provide a simpler and more efficient alternative to the byzantine U.S. income tax code, this time it's all about the money.

The federal budget deficit is projected to approach $1.3 trillion next year, the highest ever except for this year, when the deficit is forecast to exceed $1.8 trillion. The Treasury is borrowing 46 cents of every dollar it spends, largely from China and other foreign creditors, who are growing increasingly uneasy about the security of their investments. Unless Congress comes up with some serious cash, expanding the nation's health-care system will only add to the problem.

Obama wants to raise income taxes for high earners and impose new levies on business, but those moves would not generate enough cash to cover the cost of health care, much less balance the budget, and they have not been fully embraced by Congress. Obama's plan to tax greenhouse-gas emissions could raise trillions of dollars, but again, Congress is balking.

Three cheers to Obama.

[Armageddon]

A consumption tax would be the best way, but it won't stop this current economic collapse. This entire global system is going to collapse.

[mcgowanjm]

That has been the basic problem of the global economy for the past three decades. Low wages even in boom times have landed the world in its current sorry state of overcapacity masked by unsustainable demand created by a debt bubble that finally imploded in July 2007. The whole world is now producing goods and services made by low-wage workers who cannot afford to buy what they make except by taking on debt on which they eventually will default because their low income cannot service it.

All the stimulus spending by all governments perpetuates this dysfunctionality. There will be no recovery from this dysfunctional financial system. Only reform toward full employment with rising wages will save this severely impaired economy.

How can that be done? Simple. Make the cost of wage increases deductible from corporate income tax and make the savings from layoffs taxable as corporate income.

I agree with Henry Liu, unless we get wage increases across all OECD nations, I wouldn't count on a sustained global economic recovery, or on the hyperinflation we've seen in the past.

http://www.nakedcapitalism.com/

Default the debt. But then the Power shifts. And the Powers will
hold on with a death grip.

[vision-master]

A consumption tax would be the best way, but it won't stop this current economic collapse. This entire global system is going to collapse.

So the rich could consume more.

[AAA]

I still think a large gasoline tax is needed badly in this country.

[Carlhole]

I still think a large gasoline tax is needed badly in this country.

That would be a sales tax. A Value-Added Sales Tax which treats energy like any other product or service would obtain a great deal of total tax revenue from petroleum.

I see a sales tax as very reliable now because of widespread computer use automating such things. It's more democratic and in-line with what the Founders were thinking when they addressed the issue of taxation. A sales tax also captures a lot of black market money which an income tax would normally forgo

The Constitution would have been a much more ingenius document from the beginning if it had only spelled out fundamental tax law and its assumptions about how the world works. It was nearly silent on the matter considering how important a subject it is.

IMO, a sales tax is much more inline with what the Founders considered to be reasonable, democratic means of taxation. This is because a taxpayer can CHOOSE not to purchase something and thus avoid paying taxes. There's a legal term for this idea but I can't remember it right now.

[odegaard]

One of the advantages or disadvantages (delicate cough) with a VAT tax is it's next to impossible to cheat.
As for income taxes, if you have deep pockets to hire good tax lawyers I'm quite sure they can find some good loopholes for you.......An offshore account in the Cayman Islands perhaps? (another delicate cough)

[AAA]

I still think a large gasoline tax is needed badly in this country.

That would be a sales tax. A Value-Added Sales Tax which treats energy like any other product or service would obtain a great deal of total tax revenue from petroleum.

I agree a VAT tax is a fair but I still think we need to address our nation's usage of oil. It would be suicide to have a VAT tax then try to raise gasoline taxes by a couple dollars per gallon.

[dunewalker]

Hmm... A VAT tax in general, coupled with an income tax for high earners?...

You forget that most US states already have a VAT, or sales tax. Only 5 don't. From the consumers perspective, it matters little if that tax is federal or state.

http://www.taxadmin.org/FTA/rate/sales.html

[MarkJ]

A gallon of milk would jump from $3.69 to $4.61, and a $5,000 bathroom renovation would suddenly cost $6,250, but the nation's debt would stabilize and everybody could see a doctor.

Due to increased costs, many homeowners would choose not to renovate, do the work themselves, pay cash or barter to avoid taxation, plans, permits, inspections, code compliance, licensing etc.

To keep the bathroom renovation @ $5,000 many contractors would use cheaper materials, cut corners, hire cheaper laborers, under the table laborers, work faster etc.

From a psychological perspective, taxing the nation's poor will meet with less resistance when the true cost of increasing taxes, regulations and other costs of doing business are subtracted from wages, benefits & services, added to rents or hidden/embedded in the cost of other goods and services.

[Plantagenet]

Obama will never allow a VAT tax to be enacted......remember, Obama promised over and over again that he wouldn't raise taxes on anyone earning under $250,000.

[Carlhole]

What happened to Obama's promise that he wouldn't raise taxes on anyone earning under $250,000?

The Washington Post article said that the White House was not impressed with the Sales Tax idea, saying its implementation was unlikely.

The article was about a group of economic experts who were advocating the idea.

[mattduke]

Let's simplify this mess. Let's just force citizens to work as slaves to the government for 4 months out of the year and eliminate all taxes.

[Plantagenet]

.....the chairman of the Senate Budget Committee declared that a VAT should be part of the debate.

"There is a growing awareness of the need for fundamental tax reform," Sen. Kent Conrad (D-N.D.) said in an interview. "I think a VAT and a high-end income tax have got to be on the table."

--------------------------

A VAT tax is sneakier then a sales tax. You don't see the VAT being added to the total on the receipt after the purchase. The VAT is already added into the price of the item when it is sold.

Everything on the menu in a restaurant and everything in stores just costs 20% more. It keeps the rubes from realizing how heavily they are being taxed.

[heroineworshipper]

Just closed another $2,300,000 mortgage today without planning on paying it off, so U'd better start paying more taxes, U slaves.

[odegaard]

Let's simplify this mess. Let's just force citizens to work as slaves to the government for 4 months 6 months out of the year and eliminate all taxes.

There fixed that for you.