Posted on 03/19/2016 9:47:10 AM PDT by Jim W N
At [the Jan 14, 2016] GOP debate, Senator Marco Rubio accused Ted Cruz of sneaking a value-added tax (VAT) into his tax reform plan.
RUBIO: Here is the one thing I’m not going to do. I’m not going to have something that Ted described in his tax plan. It’s called the value-added tax. And it’s a tax you find in many [countries] in Europe.
…
CRUZ: Well, Marco has been floating this attack for a few weeks now, but the problem is, the business flat tax in my proposal is not a VAT. A VAT is imposed as a sales tax when you buy a good.
Rubio is right. Cruz’s business flat tax is a subtraction-method VAT. Businesses play a flat 16-percent tax rate on the difference between sales price and the cost of inputs purchased from other businesses—i.e., value-added.
How does it work? Consider a loaf of bread. Say the farmer sells the wheat to a miller for 25 cents. Assuming the farmer has no deductible expenses, the initial tax would be 4 cents (16 percent of her 25 cents of income). The miller grinds the wheat and sells flour to a baker for a dollar. His value added is 75 cents, which is subject to 12 cents of business flat tax. The baker sells the loaf of bread for $2 and remits another 16 cents of tax on her $1 of value-added. The total tax adds up to 32 cents, or 16 percent of the final sale price.
The VAT is different from state sales taxes because it is included in the [internal] price of the good rather than added at the cash register. That’s one reason why some conservatives object to it—Rubio cited Ronald Reagan. And why Cruz may be so defensive.
(Excerpt) Read more at forbes.com ...
Eliminated as DEDUCTIONS. We still have to pay them but they will not count as deductions against the federal income tax.
All business taxes are paid by customers. All attempts to shift taxes to the rich, shift it to business owners, which shifts it right back to customers. Tax the rich, and you pay it yourself when you buy the milk at the store.
For me, the most important thing we can do is to separate IRS from the average citizen. You will always pay taxes. There is no reason, however, that average citizens should have to deal with the annual April 15 madness.
This is something to work toward regardless of who the next president is.
Businesses already collect the tax from their employees and send it on, based on a table. That should be the end of it. Whatever percentage we agree on, fine. The company who is already withholding it, withholds it and sends it in. They deal with IRS (or whatever replaces IRS). The average employee who is not a company should have no contact with them and no responsibility to them.
“With Cruz’s tax plan you eliminate all taxes, and in its place you establish his flat business tax.”
That changes everything.
Ok... that clarifies it.
“property taxes, local and state income taxes are eliminated.”
Feds can’t do that.
This entire thread and article by Forbes is FALSE. Every accusation by Forbes about this being a hidden tax or onerous European style VAT tax is FALSE.
For a CORRECT analysis of Cruz’s tax plan.. Please read the Tax Foundation’s take.
http://taxfoundation.org/blog/ted-cruz-s-business-flat-tax-primer
The reform plan does this:
- creates more tax payers
- flattens the tax payer curve by repealing the IRS, repealing the Socialist enabling Progressive tax rates
- uses the flat tax concept on all businesses (including nonprofits that are the love of Leftists and Socialists)
- forces imported products to pay the corporate tax rate that steal American jobs
- enables American businesses to EXEMPT foreign exports (which create jobs) from the business tax, thus allowing American busineses to compete on an equal footing with foreign businesses
- repeals all progressive tax rates which takes power away from tax courts, lawyers, government and regulators and gives FREEDOM, LIBERTY and PROSPERITY to AMERICANS.
- duh, it uses simple math not secret, complex, onerous regulations that number in the thousands that trip up almost any taxpayer
I’ll admit that I have not read this carefully, and it is a complex topic. But the following excerpt from the article does not seem to make sense:
“Interestingly, Senator Cruz’s business flat tax differs from what most tax wonks call a flat tax, which is a subtraction-method VAT with the labor portion remitted directly by wage earners. Professors Robert Hall and Alvin Rabushka developed the concept in the 1980s. Their flat tax is more progressive since the wage tax includes a generous exemption. A still more progressive variant, which the late David Bradford called the X-tax, includes progressive rates rather than a single-rate flat rate.
They are all variations on the same theme. But they are all VATs.”
So the Flat tax on income was a VAT? I don’t think so. It seems that every tax is a VAT in the eyes of Len Burman.
Thanks for the info. The following SHOULD have special appeal to some of the folks at FR:
“- forces imported products to pay the corporate tax rate that steal American jobs
- enables American businesses to EXEMPT foreign exports (which create jobs) from the business tax, thus allowing American businesses to compete on an equal footing with foreign businesses”
Regarding Cruz’s flat tax, I have a couple of questions. First, what happened to Cruz’s constitutionally indefensible promise to abolish the IRS? Does he intend for his flat tax to take the place of the IRS?
Note that a president cannot abolish the IRS without the consent of Congress. And I think that Congress likes the IRS. After all, corrupt lawmakers can keep their voting records clean by allowing the IRS to make unpopular tax regulations for them.
Next, what was Cruz indoctrinated with in Harvard Law School? His flat tax proposal indicates that it certainly wasn’t the federal government’s constitutionally limited powers as the Founding States had intended for those powers to be understood.
From a related thread …
More specifically, a previous generation of state sovereignty-respecting justices had clarified that Congress is prohibited from appropriating taxes in the name of state power issues, basically any issue which Congress cannot justify under its constitutional Article I, Section 8-limited powers.
“Congress is not empowered to tax for those purposes which are within the exclusive province of the States.” —Justice John Marshall, Gibbons v. Ogden, 1824.
Also note that the example taxes given in the OP deal with INTRAstate commerce. But despite what FDR’s state sovereignty-ignoring activist justices wanted everybody to believe about Congresss’s Commerce Clause powers (1.8.3), a previous generation of state sovereignty-respecting justices had also clarified that the states have never delegated to the feds, expressly via the Constitution the specific power to regulate intrastate commerce.
”State inspection laws, health laws, and laws for regulating the internal commerce of a State, and those which respect turnpike roads, ferries, &c. are not within the power granted to Congress [emphases added].” —Gibbons v. Ogden, 1824.
I don’t think that Cruz understands that one of the very few domestic federal spending programs that the states have actually delegated to the feds, expressly via the Constitution, the specific power to regulate, tax and spend for is the U.S. Mail Service (1.8.7). Most other federal domestic spending programs are based on 10th Amendment-protected state powers and state revenues which the feds have stolen from the states by means of unconstitutional House appropriations bills.
In fact, based on the Court’s statements above, here is a rough approximation of how much taxpayers should be paying Congress annually to perform its Section 8-limited power duties.
Given that the plurality of clauses in Section 8 deal with defense, and given that the Department of Defense budget for 2015 was $500+ billion, I will generously round up the $500+ billion figure to $1 trillion (but probably much less) as the annual price tag of the federal government to the taxpayers.
In other words, the corrupt media, including Obama guard dog Fx News, should not be reporting multi-trillion dollar annual federal budgets without mentioning the Supreme Court’s clarification of Congress’s limited power to appropriate taxes in budget discussions.
Remember in November!
When patriots elect Trump, or whatever conservative they elect, they need to also elect a new, state sovereignty-respecting Congress that will not only work within its Section 8-limited powers to support the new president, but also put a stop to unconstitutional federal taxes.
Also consider that such a Congress would probably be willing to fire state sovereignty-ignoring activist justices.
Well, first of all, regardless of whether subtracting the old tax would neutralize the new tax, it’s a business tax which in itself is problematic because the so-called “business tax” is really another tax, a hidden tax, on individuals at the point of sale in higher prices.
Second of all, the VAT concept would allow much more government interference and intrusion into business operations and would be more costly deal with, more forms and complexity. So this would result in higher net business costs that passes in higher prices to the individual customer. So although on paper it might appear the new tax adds nothing to the old, the added costs required would effectively be a greater tax on the consumer.
So even if Cruz’s individual tax plan shut down the IRS as we know it, this would be IRS II, The Sequel -”WE’RE BAAAACK!”
He never says tax on individual income as far as I can see but, yes, VAT is a tax on business income which is the "value added" to a product.
The fact that VAT is so "complex" as you say and, really convoluted with many holes and misunderstandings, all of that right there should put up a big red flag for you: don't go for it. The feds LOVE complexity and confusion because they can get more of your money that way without you even realizing it. VAT absolutely goes the wrong direction. We need SIMPLER tax not more confusing convoluted tax.
Well, you’re certainly getting to the heart of the BIG issue in our country about which so many here and elsewhere seem to be oblivious: the $4 trillion mostly unconstitutional federal government.
You and I are close to what the actual constitutional size of the feds would be - I estimate roughly about $800 billion.
Either way, what we propose and what somebody actually tries or miraculously succeeds in implementing would send hundreds of thousands of federal government officials, bureaucratic heads, and workers home packing. Short term loss for them, long term recovery for America.
You rightly bring up the Commerce Clause as a source perverted by the Left to grant sweeping government powers not intended by the ratifiers of the Constitution.
Two other perversions the Left has used to give essentially despotic powers to the feds are the so-called “Incorporation Doctrine”, a perversion of the intent of the 14th Amendment, and the Administrative State which violates both the constitutional limitations on the feds power and the separation of powers.
You also rightly acknowledge state sovereignty which contrary to what the Left claims and apparently many so-called conservatives think is still constitutionally and legally intact although sadly not asserted.
State sovereignty should be asserted to nullify unconstitutional federal acts which by definition are acts of tyranny. Sooner or later, it is the people of each state who will decide whether they want to stay dependent and slaves to an illegal government or whether they will fight for their freedom and against tyranny through their states.
Consider a loaf of bread. Say the farmer sells the wheat to a miller for 25 cents. Assuming the farmer has no deductible expenses, the initial tax would be 4 cents (16 percent of her 25 cents of income). The miller grinds the wheat and sells flour to a baker for a dollar. His value added is 75 cents, which is subject to 12 cents of business flat tax. The baker sells the loaf of bread for $2 and remits another 16 cents of tax on her $1 of value-added. The total tax adds up to 32 cents, or 16 percent of the final sale price.
What about that is not true about Cruz's plan?
He never says the VAT is a tax on individual income as far as I can see but, yes, VAT is a tax on business income which is the “value added” to a product.
The fact that VAT is so complex and confusing, with many holes and misunderstandings, should put up a big red flag: don’t go for it. The feds LOVE complexity and confusion because they can get more of your money that way without you even realizing it. VAT absolutely goes the wrong direction. We need SIMPLER tax not more confusing convoluted tax.
As a side note to your estimate, probably more accurate than mine, consider that the Constitution requires the feds to record and publish how it spends taxpayer dollars.
Article I, Section 9, Clause 7: No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time."Two other perversions the Left has used to give essentially despotic powers to the feds are the so-called “Incorporation Doctrine”, a perversion of the intent of the 14th Amendment, and the Administrative State which violates both the constitutional limitations on the feds power and the separation of powers."
Not only do basic reading skills lead us to question the Supreme Court's Incorporation Doctrine associated with the 14th Amendment (14A), but also consider this. Note that the congressional record shows that John Bingham, the main author of Section 1 of 14A, had clarified that 14A applies all constitutionally enumerated personal protections to the states, not just those included in the Bill of Rights.
"Mr. Speaker, that the scope and meaning of the limitations imposed by the first section, fourteenth amendment of the Constitution may be more fully understood, permit me to say that the privileges and immunities of citizens of the United States, as contradistinguished from citizens of a State, are chiefly [emphasis added] defined in the first eight amendments to the Constitution of the United States." — John Bingham, Appendix to the Congressional Globe
So I don’t know why the Supremes dreamed up the Incorporation Doctrine.
What am I overlooking?
It is not a VAT. It is a business tax to replace the corporate and FICA taxes.
Well, to begin with, the 14A is as you probably know very badly written. Confusion and badly-written law always favors the feds who are ALWAYS looking for excuses more power.
Next, famously or infamously, the authors of the 14A wanted to incorporate the first eight amendments into the 14A as you pointed out, so as to give the feds power to enforce the first eight amendments against the states, turning the amendments on their head.
The first ten amendments, which also contrary to popular notion are not a bill of rights, only a presumed sampling of individual rights as confirmed by the Ninth Amendment. The Constitution presumes what the Declaration of Independence states explicitly, that all man are born with rights from God, not from man or his government. These amendments are are specifically written against the feds, to be enforced against the feds.
Although the authors desired this incorporation, there is no evidence that the ratifiers agreed, and it is the intent of the ratifiers, not the authors, that carries the weight of legal intent. As Bork points out in his great book, The Tempting of America, there would have to be some evidence that the ratifiers intended to give such sweeping, almost despotic, powers to the feds over the states. There is NO evidence of such revolutionary intent of the ratifiers. There would have been SOME discussion and debate in Congress about such a radical change. But there is no record of any such discussion or debate. None. ZIP. Nada.
So the Slaughterhouse decision in 1873, five years after the 14A was ratified held that the 14A only applied to the protection and citizenship of ex-slaves. The 14A was one of three post-Civil-War reconstruction amendments designed to give ex-slaves full citizenship. The Slaughterhouse decision was rightly based on the constitutional intent of the ratifiers.
The Slaughterhouse decision plus the fact that there was NO evidence of such revolutionary intent of the ratifiers to so radically widen the power of the feds make, as Bork put it, the Incorporation Doctrine counterfeit.
This is how Cruz's VAT will work according to Forbes:
Consider a loaf of bread. Say the farmer sells the wheat to a miller for 25 cents. Assuming the farmer has no deductible expenses, the initial tax would be 4 cents (16 percent of her 25 cents of income). The miller grinds the wheat and sells flour to a baker for a dollar. His value added is 75 cents, which is subject to 12 cents of business flat tax. The baker sells the loaf of bread for $2 and remits another 16 cents of tax on her $1 of value-added. The total tax adds up to 32 cents, or 16 percent of the final sale price.
What about that is not true about Cruz's plan?
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