Now they are starting to come out of the woodwork with this latest election, those who favor a value added tax or national sales tax as a way to cut the deficit and transfer more wealth to the wealthy. They've been lurking in the shadows for decades.Any idea what cute slogans will be used by the Bush Administration to sell this plunder to the unsuspecting hordes in Middle America doomed to suffer from it? "Trickle-down" worked well for the Reagan ACRS giveaway to the wealthiest and "a tax cut for everyone" worked well for the latest asset transfer to the top tier of the lobster class.How about something like "sharing the burden equally" or something intentionally misleading like that?Surely there is no person here who believes this idea has any merit....Matthew

Are there any countries that have tried this, a VAT and little or no income tax? VAT and income taxes both appear to be pretty high in Europe, so we can't really say from that experience, I would guess. I actually have little against Bush personally (Mr. Rove is another story), but this particular Republican President and this particular Republican Congress can and very well may bankrupt the US.

Actually, while I have never been able to get a straight answer on a question on the underlying situation, I think there may be merit to the US moving to some sort of consumption tax for certain things.My reason for this is based on trade deficits. Without knowing exactly what sort of exclusions/deductions are available in different countries with regard to their taxes and the destination of their products/services, it would seem that items produced in the US and consumed elsewhere in the world are generally subject to heavy production taxes in the US and then heavy consumption taxes in the places where they are consumed; and in the reverse situation, there is relatively little taxation on products made elsewhere in the world (there ARE, I am pretty sure, big exclusions for exports among most countries' tax systems where there are consumption taxes) and consumed in the US. The net effect of this is the same as if there were a giant tariff on exports from the US and no corresponding tariff on imports to the US, which would predictably lead to the big trade deficits that we in fact have.If there were some way to shift to such a system without pulling the rug out from underneath anyone, it might be a good idea. I certainly wouldn't trust the Bitch Administration to do it in an honest and benevolent way, though.

Such a system could be phased in, and I'm not sure if it would be worse to have Bush & Co. do it sloppily or not having it done at all.The biggest reason I would support sales taxes replacing income taxes is to remove the selective discriminatory taxes on types of income, which in the US tends to discourage work. I never understood why taxes on earned income are amongst the highest there are, while income from real estate speculation and illegal drug dealing has such favorable tax treatment. With a sales tax, even real estate speculators and drug dealers have to pay whenever they buy anything. Income taxes are also easy to manage by not paying the income in the US, while sales taxes must be paid any time someone buys US goods.Another advantage is to level the playing field between urban and rural dwellers. Federal income tax brackets are the same for me in Upper Manhattan as they are for someone in Mississippi, even though our incomes and costs of living are not comparable, meaning I pay a much higher percentage of my marginal income than the rural guy, even though my housing costs are proportionately the same, so I am left having a much harder time saving any money.Personally, I prefer taxes on property and estates before sales taxes, but anything IMHO is better than income and especially payroll taxes. Excise taxes are also an idea, since I do think it would be a good incentive for the US to start putting a non-joke-level tax on gasoline and other fuels (don't expect that under Bush).

Gentlemen, what about the idea of a financial transactions tax of say, for discussion purposes, 3 basis points per transaction? This would raise billions and more.As far as I understand, Germany instituted such a thing about 15 years ago and everyone said their capital markets would be aghast at such a thing, risk capital would flee, etc. And the capital markets of Germany seemed to have survived this sacrilege rather well.We have over a trillion dollars in large dollar payments clear through CHIPS and Fedwire in New York every single day. As traders and participants in this fantastic juggernaut, we possess and consume so much of the wealth of the world, spinning out our endless streams of derivatives with very little productive effects in terms of industrial capacity or patents or the like. Why can't we pay our fair share rather than adopting yet another profoundly regressive tax upon the poor such as a VAT?3 basis points will not collapse the system.Matthew

QuoteOriginally posted by: mdubuqueGentlemen, what about the idea of a financial transactions tax of say, for discussion purposes, 3 basis points per transaction? This would raise billions and more.As far as I understand, Germany instituted such a thing about 15 years ago and everyone said their capital markets would be aghast at such a thing, risk capital would flee, etc. And the capital markets of Germany seemed to have survived this sacrilege rather well.We have over a trillion dollars in large dollar payments clear through CHIPS and Fedwire in New York every single day. As traders and participants in this fantastic juggernaut, we possess and consume so much of the wealth of the world, spinning out our endless streams of derivatives with very little productive effects in terms of industrial capacity or patents or the like. Why can't we pay our fair share rather than adopting yet another profoundly regressive tax upon the poor such as a VAT?3 basis points will not collapse the system.MatthewMatthew,That sounds far too much like the original rhetoric supporting the income tax. Before the 16th ammendment when congress tried to pass a 3% tax on high incomes to help pay for the Civil war, it was slammed by the supreme court as unconstitutional. Now look at where we are now that congress has been given the power to start with a "small" tax. Similarly, look at the social security payroll tax rates and limits over the years.There already are such ideas in place, partly as SEC fees on sales and the original proposal of a "Tobin tax". Overall I think per-transaction taxes, of which income taxes are a form (since my income is taxed when I earn it, then if I go spend it, the guy I pay for services gets taxed on that leftover money again), is that they dissincent money to move around an act. I won't say 3bps is crippling, but we've seen what governments can do when you give them a little thread. Things like property taxes, which are assessed periodically on capital assets based on their value, are properly progressive and don't tax any money twice. In theory we could have a tax that automatically transfers a portion of every dollar of your wealth to the government, so that taxes effectively become a fee for using and holding dollars (which military and other services protect, after all).The reason income and transaction taxes incent the wrong way is because many politicians and their constituencies have trouble separating the "wealthy" into "high income" and "high net worth", or similarly, telling you the difference between an income statement and a balance sheet. These taxes punish those with high incomes, making it difficult for them to accumulate net worth, while rewarding those lucky enough to already have a high net worth, while dissincenting them to do anything with their money that would cause it to be taxed.

If we scrap current tax code, I'd agree to a VAT.

Alas, your link is broken PPauper ?Another plus would be that Teresa Heinz Kerry might pay more than the 12.4% she paid in 2003Yes, might.Some rich people will pay more, but...PPauper, please forgive me if you know this, but having run a business in a country with VAT, perhaps I could point out some issues.If the sales tax works like the VAT used in many other countries then tax on "business" expenses can be claimed back.Thus her jet being run by her company will pay tax on fuel and the a/c itself, but her accountants merely claim it back.The nature of VAT is that unlike income taxes, it is quite common for one to get back more money than one pays.An obvious example is where you buy goods for sale.You then charge VAT on the goods you sell, and the expectation is that you sell for a profit so the VAT on the goods you sell is greater thanthe goods you buy.You send the government a cheque for the difference.But what if you make a mistake, and you can't sell the goods ? What if they go wrong, or rot ? What if people just won't pay the asking price ?You may sell at a loss. In that case you actually get a cheque from the government.Yes, really.Of course "loss" is an accounting term, and Mrs. Kerry has good accountants. It is easy to see a scenario where the net transfer of wealth is not Mrs. Kerry to the US government, but a smaller one from Mrs. Kerry to her accountants.

I think we do know that difference. However, the problem with starting with policy X, is that there is a good chance that the process will turn out a policy near it, but different.

QuoteOriginally posted by: mikebellIf we scrap current tax code, I'd agree to a VAT.Also note that Sales tax functions as a tax on tax, on the various production phases, where is VAT doesnt. That is, everything else kept equal, with the sales tax regime much more revenues are generated for the IRS than with the VAT regime.

Also never forget that the wealthier people have always more options and more chances to reduce their tax liabilities than the rest, in other words its easier for them to tax evade or even tax avoid. And this is not due to the fact that they can afford to hire the best accountants and lawyers. Most governments are well aware of this phenomenon, thus their tax regulations are designed primarily in order to secure revenues for public expenditures by primarily taxing those who are easier to tax. Its a risk return issue as well.