We're broke ... time for a new tax

CNNMoney.com web site ^ | October 2, 2009 | Jeanne Sahadi

[RayChuang88]

NEW YORK (CNNMoney.com) -- President Obama has been steadfast in his pledge that he won't raise taxes on those making less than $250,000.

But that doesn't mean only high-income households will be subject to higher taxes.

An increasing number of influential Democrats and fiscal policy experts have signaled publicly that lawmakers will have to get a handle on the deficit sooner rather than later. And they recommend policymakers seriously consider the creation of adding a value-added tax (VAT) on top of the federal income tax.

That could mean more money out of everyone's pockets when buying virtually anything - sweaters, school books, furniture, pottery classes, dinners out.

[RayChuang88]

This is a TERRIBLE idea in my opinion--it creates even more bureaucratic problems trying to collect on taxes.

A VASTLY better solution is the FairTax proposal (H.R. 25/S. 296). By eliminating the excessively burdensome income tax and replacing it with a 23% national sales tax on new production goods and services, we save Americans at least US$350 billion per year in compliance costs and because we no longer impose taxes on earning money, it means millions of manufacturing and service sector jobs return to the USA under vastly better tax conditions, creating an economic boom so big it would make the growth from 1994 to 2006 seem like a minor event in comparison.

[Made In The USA]

Perhaps a fair or flat tax system; but in my opinion the first problem to address is spending itself. The Dems & GOP need a 12 step program to kick this uncontrollable spending habit.

[RayChuang88]

Actually, under FairTax, we'll know exactly how much money the government generates through the 23% national sales tax receipts. That will immediately tell the government how much money they have on hand for operating government agencies, and that will go a long way in determining how much our governments can actually spend.

[Erik Latranyi]

The VAT is a typical liberal ploy.....tax the value added to products at the manufacturing level so the consumer does not see it directly.

Consumers, educated in our public system, will get angry with manufacturers for raising prices.

If you thought manufacturing was fleeing this country, enact this tax and watch them shut down.

[television is just wrong]

government has an addiction, spending OUR money.

[concerned about politics]

That could mean more money out of everyone's pockets when buying virtually anything

What money? We're about to hit 10% unemployment, and that's with government spin! Imagine how bad it really is. On top of that, everything has already gone up 30% since Oboma took office.
If the price of everything goes up even farther because of this tax, manufacturing is going to get hit worse. They'll have to lay off more employees because the demand for goods will not be there.

sweaters

Shades of Jimmy Carter, only 10 times worse.

In my opinion, Oboma is going to finish the job his Muslim brothers failed to do on 9/11.

[snoringbear]

“The VAT is a typical liberal ploy.....tax the value added to products at the manufacturing level so the consumer does not see it directly.

Yep, this is how it’s done in Europe. And, not only is this tax added in at the manufacturing level, it’s added in at virtually every major process point in the entire supply chain - starting from order entry to point of retail sale. So, this VAT will be added in and compounded several times. All invisible to the consumer of course. Neat little trick, huh?

[concerned about politics]

A VASTLY better solution is the FairTax proposal (H.R. 25/S. 296).

It'll never happen. The politicians would lose their power to control us through our wallets. They'll never agree to lose their power. They see themselves as Gods among men.
A fair tax would be an excellent idea, but this would give too much power to the people in their eyes.

[Caipirabob]

A major dismantling of the US government would result in a massive reduction of expenditures, and would be so much cleaner than a bloody revolution, which is what will happen if enough people’s lifestyles are impacted by continuing government corruption.

[concerned about politics]

VAT will be added in and compounded several times. All invisible to the consumer of course.

Now that the dinosaur media doesn't control 100% of our communications, people will know why the price of goods and services has gone up. I'm sure the new media will make it a point to educate them.
With a tax like this, the cost of social programs will also go sky high, because someone has to pay the democrats bills for them. Their bills go up, the more money the government will have to take from us. That means higher taxes, because the democrat base will still want to feed. Some one will have to pay for their increased expenses, too.

[Sender]

And that gloomy scenario is not considering the next drop of the reaper’s hammer, carbon cap and tax...

[Mouton]

“and would be so much cleaner than a bloody revolution, which is what will happen if enough people’s lifestyles are impacted by continuing government corruption.”

With the government hell bent on raming this health insurance (nothing to do with care) fiasco down our throats, with the Cap and Tax coming, and the specter of a VAT in the wings, I suggested to my wife last night the revolution is less than a year away. She said she used to think I was looney but now she says I agree with you.

Vince

[The Sons of Liberty]

consider the creation of adding a value-added tax (VAT) on top of the federal income tax.

A VAT is an awful idea. One needs only to look at Europe to see how it strangles an economy.

[silverleaf]

VAT is a tax on consumption. So, when your economy teeters on the edge of slipping from recession into depression, when 10% minimum are unemployed and likely to stay so or grow, discouraging people from buying goods and services is almost guaranteed to tip it.

What I like about this idea is that
a) I can live and consume very little, most of what I want or need I already have
b) The results of this should finally reveal the utter bankruptcy of democrat economic thinking

[concerned about politics]

What I like about this idea is that
a) I can live and consume very little, most of what I want or need I already have

Same here. Imagine whats going to happen inside the huge liberal cities. All they have to eat there is cement and sewer rats.

[Willie Green]

A fair tax would be an excellent idea, but this would give too much power to the people in their eyes.

The "Fair Tax" is an abomination, intended to sidetrack and derail any true tax reform.

[alrea]

Government activity = cost that replaces jobs.

[randita]

"But Paul Volcker, the former chairman of the Federal Reserve who heads President Obama's tax reform panel, is advocating a little advance planning.

When it comes to getting control of the country's debt burden, "I think if we can't do it on the cost side, we've got to go on the revenue side. And it's too early to do it, but it's not too early to begin wondering," Volcker said Wednesday in an televised interview with PBS' Charlie Rose. "You've got talk about some tax that hits consumption," said Volcker. "Value-added is one."

I'm disappointed to see Volcker advocating this. I was thinking he was one of only a few grown ups in D.C. nowadays.

[devere]

The best idea is cutting government spending drastically.
If that won’t happen, a VAT tax is preferable to hyperinflation.

[Willie Green]

a) I can live and consume very little, most of what I want or need I already have

FedGov has been taxing my income all my life.
Despite that, I diligently lived within my means and managed to scrimp and save a modest little "nest egg".
Now that I can finally afford to consume what I want, these polidiot frauds and swindlers want to change the rules and clobber me with a 30% Sales Tax.

[Kozak]

HAHAAHAAHAAHAHAHAHAHAHAHAHAHAHAHAHAHAHA
snort
HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA
snort

Hope and Change baby!
Why in Gods name will I go to work only to pay 50+% of my income in taxes and THEN get taxed on any “allowance” the feds decide to leave me? Going to be EARLY retirement for this Doc. I’ll be at the beach.

[RayChuang88]

I actually think it will happen for two reason: ending the income tax will bring back the estimated US$14 to US$19 TRILLION sent out of the US financial system for income tax reduction reasons (talk about the world's biggest "private bailout" of our financial system!) and ending the income tax means millions of manufacturing and service sector jobs return to the USA under better tax circumstances.

[Willie Green]

"You've got talk about some tax that hits consumption," said Volcker. "Value-added is one."

Yes, VAT is a consumption tax.
So is the abominable "Fair Tax".
Implementing either one would be like throwing our economy into reverse gear when we're still traveling forward.

[concerned about politics]

I actually think it will happen for two reason:

From your key board to Gods ears! It may be the only way out of this "Oboma will save us" disaster.

[Iron Munro]

President Obama has been steadfast in his pledge that he won't raise taxes on those making less than $250,000.

Unless you count the huge tax increase of $32.8 billion on tobacco products (62 cents on a pack of cigarettes) that he signed into law in February, only two weeks after he was coronated.

"I can make a firm pledge. Under my plan, no family making less than $250,000 per year, will see any form of tax increase.
Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes."

-– Candidate Barack Obama, Sept. 12, 2008, Dover, N.H.

.

[Willie Green]

and ending the income tax means millions of manufacturing and service sector jobs return to the USA under better tax circumstances.

Hogwash...
It does absolutely nothing to alleviate the EPA, OSHA regulations, Zoning regulations, Worker's comp litigation, etc. etc. that burden domestic manufacturing sector.

You might as well be claiming that the Fair Tax will also remove calcium deposits and eliminate mildew stains. The Fair Tax snakeoil claims are that ludicrous.

[PugetSoundSoldier]

That will immediately tell the government how much money they have on hand for operating government agencies, and that will go a long way in determining how much our governments can actually spend.

Why would Congress restrict itself to only spending what its revenues are? Why not deficit spend, like it's doing now?

Changing the taxation model will NOT change the way Congress spends, only the way they collect dollars from us. The only way to reform Congress' spending stupor is to vote them all out OR add a Constitutional balanced budget amendment.

[PugetSoundSoldier]

I'm disappointed to see Volcker advocating this. I was thinking he was one of only a few grown ups in D.C. nowadays.

He is being grown-up, and he's being a realist. If Congress refuses to curb it's deficit-spending ways, then there is no choice but to increase taxation and try to get more revenues. Current deficit spending levels are unsustainable, so it's either cut back on spending or increase taxation.

Volker said "if we can't do it on the cost side" - if we cannot curb spending - "we've got to go on the revenue side" - increase taxation.

It's quite grown-up, it faces and addresses the problem straight on. If Congress does not curb deficit spending there is no other option but to increase taxation. And since our economy is essentially a consumption-based economy, you have to look at taxation of consumption. Sales tax or VAT, you pick.

[RayChuang88]

THE biggest reason why American jobs are leaving the country is the fact our taxation is based on taxing income, not taxing consumption. Switching to FairTax means businesses--even the new "green" economy--will stay here in the USA, not headed out of the country.

I mean think about it: do you want tomorrow's wind turbines, tidal wave generators, solar panels and advanced electric batteries to be built in the USA, or built in Mexico, eastern Asia, etc? Build it here and it means millions of new jobs for the American economy.

[jwparkerjr]

[RC one]

Dems don’t raise taxes on poor and middle class people, they just raise the cost of everything they use one way orthe other.

[jwparkerjr]

re: first problem to address is spending itself

That can’t be said loud enough or too many times. Every plan they come up with to move toward a more balanced budget involves only one side of the equation and that’s the income side.

Millions and millions of families all across the country determine outgo on the basis of income. Government is the only entity I know of that does it the other way around. We want this, we want that, the ‘people’ need this, the ‘children’ need that. OK what’s it going to cost? Great, let the little people know what they will be paying to us this year.

If it were me I would take the projected income, uh oh we’re in trouble already, and divide it among all the agencies, etc. on a percentage basis. Period. If it’s 10% less than last year everyone gets 90% of what they got last budget year. Here’s your allowance, spend it wisely. Save some of it and you can add it into next year’s allowance. Spend it all by Sept. and you can close down for a month.

It works for us, it will to be made to work for them.

[Gritty]

... Democrats and fiscal policy experts have signaled publicly that lawmakers will have to get a handle on the deficit sooner rather than later

B@stards.

How about you @$$h0les cut runaway government spending, rather than sending the rest of us into permanent penury and serfdom? Oh, wait a minute. That's your objective. Never mind.

"Public Servants", my @$$!

Is it time yet, Claire...?

[sionnsar]

"I can make a firm pledge. Under my plan, no family making less than $250,000 per year, will see any form of tax increase.
Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes."
-– Candidate Barack Obama, Sept. 12, 2008, Dover, N.H.

He said he CAN make a pledge. And he can. But he did not say he was making it.

[Willie Green]

I mean think about it: do you want tomorrow's wind turbines, tidal wave generators, solar panels and advanced electric batteries to be built in the USA, or built in Mexico, eastern Asia, etc?

Most of that technology is overhyped as well, so I really don't care where it's made.
If you really want to address our future needs, we should be building electrically powered mass transportation systems (high-speed rail, light-rail and Maglev), nuclear power plants and desalination plants to supply fresh water to our coastal cities.

But hey, it's not my fault that you financial frauds and hucksters are just as technologically incompetent as the bean sprout and tofu crowd.

As far as I'm concerned, the Fair Tax is to economic discussion what
9/11 conspiracy theories are to the War on Terror.

I'm tired of hearing the drivel.

[Skenderbej]

I agree. Check the spending. 23% is ludicrous! $230 in taxes on a $1000 purchase. Why does the government need that much? $4600 on a $20,000 car? NO WAY!

[RayChuang88]

Except for one thing: since there are NO corporate income taxes, payroll taxes, etc. under FairTax, the cost of a US$1,000 item drops to US$770. As such, FairTax brings the price back to the original US$1,000.

I recommending reading this overview paper in PDF format to explain how FairTax works:

http://www.fairtax.org/PDF/FairTaxFAQ.pdf

[Willie Green]

I agree. Check the spending. 23% is ludicrous! $230 in taxes on a $1000 purchase. Why does the government need that much?

Actually, that's $230 on a $770 dollar purchase, ($1000 total purchase + tax.)

That's actually a 29.87% sales tax rate, but the hucksters utilize the more obscure "inclusive" method of calculation so they can deceive the public with the lower figure.

[Skenderbej]

It’s still a tax, and too high. Show that you can control spending before offering me a new tax.

[randita]

You are right - sigh. I just would have liked for Volcker to push the cuts in spending angle more forcefully.

[Oatka]

If you thought manufacturing was fleeing this country, enact this tax and watch them shut down.

Enact this tax on services as well and watch the lawyers flee the country. :-)

[PugetSoundSoldier]

I agree. Check the spending. 23% is ludicrous! $230 in taxes on a $1000 purchase. Why does the government need that much? $4600 on a $20,000 car? NO WAY!

If they ONLY got that much, we should be happy... Right now, the Federal Government is more than 27% of our entire economy. Federal tTaxation for most people - when you factor in FICA, SSI, your share of corporate taxes, capital gains, and of course income taxes - is very close to 30%.

For 2007, total AGI was $8.7 trillion; we can assume around $9 trillion this year. Total Federal Government receipts will be around $2.6 trillion, or around 29%.

[tdscpa]

I actually think it will happen for two reason: ending the income tax will bring back the estimated US$14 to US$19 TRILLION

Sorry about your reading problem. Life must be tough without that ability.

The article (and the plan) say nothing about ending the income tax. In fact, the article mentions adding an additional tax, plus keeping the income tax.

All you "fair tax" proponents just provided the democrats with a very evil idea.

[motor_racer]

A couple of thoughts:

First, reject ALL arguments that changing the tax structure will actually increase revenue to the government (sorry Dr. Laffer). We want to reduce government revenue, size, services, scope and power. The Laffer arguments are red herrings put forth by people who still want to increase government.

Second, get into the habit of asking people if they think the government they are getting is worth, TO THEM, the cost they are PERSONALLY paying. You will quickly find that the only ones that believe this is true are on the receiving end.