Podesta said such a tax may be regressive, but can be balanced by exempting some products and using “the money to support low-wage workers.”
Ok I read about this latest article promoting a VAT and am really interested in hearing from some of the tax policy experts in the BMG community.
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p>Assuming it’s “balanced” would it be a fair, stable, and easy to administer tax?
somervilletomsays
The regressive aspects of any consumption tax can be handled by returning a fixed portion of the proceeds to everyone. For those on the bottom, this can moot the impact of the tax altogether.
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p>The main problem with any VAT is that it requires each seller to calculate and report the value added by that seller. This is far more complicated than a simple flat sales tax.
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p>An approach I prefer is to replace the income tax (repealing the 13th amendment) by a national sales tax. I would like to see the states do the same for state and local taxes.
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p>An across the board sales tax is likely to have the following implications:
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p>
Producer networks are likely to get broader and shallower. Each time a product component is sold, a sales tax is paid. Thus, an organization can minimize its tax payments by minimizing the number of steps in the production chain.
The actual (as opposed to legal) tax base will be enlarged. Incentives to break the law will shift from workers and their employers to sellers (companies will be tempted to avoid charging the sales tax). Since there are many more workers than sellers, the effect will be to collect taxes from a far larger segment of the population.
The national savings rate will increase, leading to increased capital formation. Americans will consume less and save more, in order to minimize their taxes. “Unearned income” (interest, dividends, etc.) will become more attractive, because it will have no adverse tax impact — resulting in higher savings and investment rates.
People will feel better about taxes and government. Americans who despise paying taxes can avoid them by buying less. Every income earner will see every penny of every paycheck. For the middle class, it will feel like an immediate 30-50% pay hike.
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p>Frank Zappa first advocated this in his autobiography, published many years ago. I don’t know his politics, but it’s hard to imagine Frank Zappa as a right winger.
christophersays
Nice to know I have company. I would just make a few comments:
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p>In order to ameliorate regressivity I would insist that the national tax follow the MA model of exempting food and clothing, but I would include food purchased in restaurants in the exemption. I would also eliminate ad hoc sales taxes on things like gas and cigarettes and simply tax those items at the regular sales rate. I’d also like to consider an exemption for the first X amount of real estate/housing as shelter is as much a necessity as the other two exempt categories.
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p>States certainly can tax items on an ad hoc basis, but I’m sensitive to over-relying on sales taxes at the state level based on growing up near the NH line. I fear the temptation will be to race to the bottom as states compete to attract business and next thing you know they don’t have a revenue stream.
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p>Finally, I would not go as far as to repeal the 16th amendment as I think this is a policy matter that should not be restricted by the Constitution. I certainly wouldn’t repeal the 13th as you (mistakenly, I am sure) suggest as that would make slavery legal again!:)
frankskeffingtonsays
In addition to a broad based sales tax that provides some level of “give back” that minimizes the regressive nature of a sales tax, why not add a couple of luxury tax levels and make it a truly progressive tax system (albeit probably as complex as the current code). For example, autos sold for less than 30 grand-5% tax, 30 to 50 grand – 7% and so on. Yes, things need to be index.
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p>Conservatives SHOULD love it, because like gambling, people will be making personal decisions, knowing the “state” is making more money from them.
purple-mass-groupsays
Don’t you make a personal decision every time you go to work, thus knowing that the state will receive its’ piece of the action?
judy-meredith says
Ok I read about this latest article promoting a VAT and am really interested in hearing from some of the tax policy experts in the BMG community.
<
p>Assuming it’s “balanced” would it be a fair, stable, and easy to administer tax?
somervilletom says
The regressive aspects of any consumption tax can be handled by returning a fixed portion of the proceeds to everyone. For those on the bottom, this can moot the impact of the tax altogether.
<
p>The main problem with any VAT is that it requires each seller to calculate and report the value added by that seller. This is far more complicated than a simple flat sales tax.
<
p>An approach I prefer is to replace the income tax (repealing the 13th amendment) by a national sales tax. I would like to see the states do the same for state and local taxes.
<
p>An across the board sales tax is likely to have the following implications:
<
p>
<
p>Frank Zappa first advocated this in his autobiography, published many years ago. I don’t know his politics, but it’s hard to imagine Frank Zappa as a right winger.
christopher says
Nice to know I have company. I would just make a few comments:
<
p>In order to ameliorate regressivity I would insist that the national tax follow the MA model of exempting food and clothing, but I would include food purchased in restaurants in the exemption. I would also eliminate ad hoc sales taxes on things like gas and cigarettes and simply tax those items at the regular sales rate. I’d also like to consider an exemption for the first X amount of real estate/housing as shelter is as much a necessity as the other two exempt categories.
<
p>States certainly can tax items on an ad hoc basis, but I’m sensitive to over-relying on sales taxes at the state level based on growing up near the NH line. I fear the temptation will be to race to the bottom as states compete to attract business and next thing you know they don’t have a revenue stream.
<
p>Finally, I would not go as far as to repeal the 16th amendment as I think this is a policy matter that should not be restricted by the Constitution. I certainly wouldn’t repeal the 13th as you (mistakenly, I am sure) suggest as that would make slavery legal again!:)
frankskeffington says
In addition to a broad based sales tax that provides some level of “give back” that minimizes the regressive nature of a sales tax, why not add a couple of luxury tax levels and make it a truly progressive tax system (albeit probably as complex as the current code). For example, autos sold for less than 30 grand-5% tax, 30 to 50 grand – 7% and so on. Yes, things need to be index.
<
p>Conservatives SHOULD love it, because like gambling, people will be making personal decisions, knowing the “state” is making more money from them.
purple-mass-group says
Don’t you make a personal decision every time you go to work, thus knowing that the state will receive its’ piece of the action?