Is it time for the U.S. to consider the value added tax (or VAT)—the consumption tax widely used across the Atlantic? I guarantee, it will be a big debate. The head of President Obama’s Economic Recovery Advisory Board, Paul Volcker, stated in an article on CNN, “If at the end of the day we need to raise taxes, then we need to raise taxes.” So, the United States happens to be the only developed country that does not have this VAT (value-added tax), as it is called. Yet, the United States has a $1.5 trillion federal deficit and a debt of more than $12 trillion. Economist argue this tax would “pack a less potent punch” than a rise in income taxes or corporate taxes.
So, what country does it best? Tax experts and economists point to New Zealand, where a 12.5 percent goods and services tax applies uniformly to nearly everything with very limited exceptions--only rent paid for a private home, charitable contributions and interest earned are exempted. (The government offers clear details, too, on its website). “People think it’s fair because it doesn't exempt some folks and not others."
The VAT is essentially a sales tax, except that it's charged at each stage in the development of a product instead of at the moment when the product is sold.
You can bet that deciding what model to use in the United States, or whether the tax will be imposed at all, “will be a furious political debate in the coming months”. Conservatives and tax opponents hate it of course. "There's nothing to love. It will only lead to bigger government," says Daniel Mitchell of the libertarian Cato Institute.
In New Zealand, the value-added tax contributes about 25 percent to the government's bottom line, and the Tax Policy Center in December projected that a 5 percent VAT tax here would generate over $3 trillion in revenue by 2019. That's not enough to cover America's huge debt obligations, of course, but it could be a start. I feel the VAT would cause business owners to be ultimately “holding the bag”. Other things to ponder are what would be exempt from the tax and how it will affect low income Americans versus the wealthiest.
Read the full article here.
Another CNN article explaining the VAT
Watch my appearance on FOX Business regarding the topic from Monday, April 12, 2010.
- Tax bills are lower this year, but they will incre...
- Tax Bills Won’t Rise for Parents Who Keep Older Ki...
- Government Jobs Not So Cushy
- More Than a Million May Lose Jobless Aid Due to De...
- New Jobless Claims Drop By 11,000
- Latest Good Reads
- 5 Lies The Big Banks Keep Telling Us
- Tax credit end not deterring US homebuyers
- Hawaii Governor Vetoes Oil Tax and Other Bills
- Still no Wall Street bill debate in Senate
- Economists: The Stimulus Didn't Help
- Home Prices in Feb Showed First Annual Gain in 3 Y...
- Obama Tells Panel on Federal Debt to Consider All ...
- Paring Back So You Can Retire Comfortably
- Spring Cleaning for your Finances
- Questions for the Tax Lady: April 26th, 2010
- Sales of New Homes Soar With Help of Tax Credit
- Client Confidentiality: an Important Aspect of Leg...
- More American Expatriates Give Up Citizenship
- Bank Tax Tops G20 Meeting Agenda
- 4 Million Will Pay Health Care Penalty
- Low Income Taxpayer Clinic Grant Recipients Announ...
- Family Swindled By Madoff Fights $61 Million IRS B...
- Cost-Saving Moving Tips
- Happy Earth Day!
- Obama to Wall Street: 'Join Us' In Reform
- Existing U.S. Home Sales Climb to 5.35 Million Rat...
- How to Make Next Tax Season Less Stressful by Prep...
- Latest Good Reads
- Small Businesses Get a Boost from Nonprofit Lender...
- Pistons Rick Mahorn files for bankruptcy
- 10 Tax Breaks for the Home, Room by Room
- Wells Fargo Earns $2.4B, Says Credit Is Improving
- No Job For Years and Still Looking
- Summertime, When The Livin' Is Pricey
- 10 Tax Preparers Plead Guilty of IRS Fraud
- 6 Biggest Mistakes Homebuyers Make
- Hobbies and Small Businesses
- Senate Considers Proposal to Curb Foreign-Tax Cred...
- IRS Announces New Advisory Council Members
- GM to Announce It Will Pay Back Government Loans S...
- What to do if you Missed the Tax Deadline
- Questions for the Tax Lady: April 19th, 2010
- California Jobless Rate Swells to 12.6 Percent
- OECD Crackdown on Tax Havens Seen Lacking Teeth
- How to Avoid Giving Uncle Sam a Free Loan
- Tea-Party Activists Stage Tax-Day Rallies
- 5 Lessons from the Obamas’ Tax Return
- Home Buyer Tax Credits Spark IRS Audits
- 10 Arguments Against Paying Taxes (that will not w...
- What’s in a Nickname? The Origins of MLB Team Nam...
- IRS Spending More Time Auditing Small Businesses
- What a Recession Means for Your Business
- Tax Day Freebies!
- Last Minute Tax Tips on the Today Show
- Tax Day 2010: How the Income Tax Put Al Capone beh...
- IRS Data Show Tax Agency Audits Big Firms Less Oft...
- My Appearance on FOX Business Yesterday
- Taxes: Are You Crossing the Line?
- Haiti Relief Workers Qualify for Combat Zone Exten...
- Washington Lawmakers OK $1-Per-Pack Cigarette Tax ...
- 9 Very Last Minute Tax Preparation Tips
- Can the U.S. learn from New Zealand when it comes ...
- 5 Least Tax-Friendly States to Live In
- Tax Resolution Programs
- Nation's Soaring Deficit Calls for Painful Choices...
- No More Taxes on Short Sales, Foreclosures
- Government Goes High-Tech to Catch Tax Offenders
- Questions for the Tax Lady: April 12th, 2010
- Obama Election-Year Jobs Agenda Stalls in Congress...
- US Tax Bite Smaller than Other Nations'
- Poll: More Americans Say Their Taxes Fair
- Avoid Common Mistakes When Filing Your Tax Return
- CDC: States Not Putting Cigarette Tax Funds Into E...
- Understanding The U.S. Tax Withholding System
- More Than 200,000 Jobless Counting On An Extension...
- Big Brother is Watching: IRS Uses Social Media Sit...
- The Joy of Tax
- Top 10 FAQs About IRS Refunds
- 8 Do's and Don'ts For Your 401k
- Cigarette Tax Bump in 15 States Lifts U.S. Fees to...
- What You Can Learn From Your Tax Return
- 2 Years After Tax Law, Michigan's Making Movies
- Top Ten List Of Things To Know About Making Federa...
- Property Tax Rebellion Brewing After Real Estate C...
- Few Will Use Tax Refund to Indulge: Poll
- Are You Finding Difficulty Coping During Tax Time?...
- 3 Smart Ways You Can Fight Rising Taxes
- Charities and Deductions
- IRS Launches New Global Program to Target High Wea...
- Feeling Blue About Pink-Slip Taxes
- Tax Tips for 2010
- The Pros and Cons of Soda Taxes
- Questions for the Tax Lady: April 5th, 2010
- Californians get Improved $10,000 Home Buyer Tax C...
- 5 Myths About your Taxes
- Three New Issues to be Addressed by IRS Industry I...
- Reminders for Last-Minute Tax Filers
- March Unemployment Rate Unchanged At 9.7%
- FactCheck.org: IRS Will Not Need to Hire 16,500 N...
- ▼ April (104)
- ► 2009 (987)
- ► 2008 (410)
- ► 2007 (191)