How We'll Get The VAT

Here's an as good a prediction on how we'll get a Value Added Tax in the very near future.  After all, this will be just about the only way to pay for the hugely expensive takeover of our health care system by the government.  I found this in the comments in the Newsweek column by Howard Fineman...

Posted By: Ghostmaker (March 30, 2010 at 8:21 PM)

 

Basically the Democrats wish for the press to continue trying to sell this dog. While the Republicans can't wait for November. A poll is a poll and this reform was not supported by a simple majority of the American people for 6 months or longer. I was under the impression that elected representatives were supposed to represent voters. So what happens in November will reflect the majority of Americans that feel there elected officials did not reflect there wishes.

 

My Swedish friend told me there National Tax rate is 48.3% this pays for there great health care and they also receive 2 months if needed payed sick time at 100% of pay. If they need more time off it falls to 80%. What a fantastic health program. He also mentioned that he carries private health insurance because his family is not willing to wait for treatment.

 

From a pay of "100", the Employer first pays "32" in Income tax (direct - 32%), on top of that the Employer also pays an additional "31.42" in Employers social fees (indirect - 31.42%).

 

Thus, from a pay check of "100", 63.42/131.42 (i.e. 48.3%) is paid as income taxes. This effective rate may be lowered by for example earned income tax credits and private retirement savings contributions.

 

Now I realize that what was passed in the USA so far is not nationalized health care but I feel that the long range goal of this current presidency is to set up the medical system we do have for a big fail. Premiums are expected to rise and this will cause a huge hatred toward the private sector. It may take 10 years, Obama's words by the way. But the Democrats will be clambering to nationalize health care at that time. By then the average American sheep will be begging for it.

 

The one thing most Democrats seem to forget is all these wonderful social programs cost big dollars. So they scream tax corporations tax the rich. In reality any tax on any business is directly passed down to the end consumer in the form of higher prices. For example My business now charges 100 dollars a billable hour and pays no tax. Lets say we decide to tax my business at 50% to pay for social programs. Some would think I would need 200 dollars a billable hour to make up for that. But in all honesty I will probably need to charge 250 dollars a billable hour to make the same amount of money I made prior to the tax because of some potential lost business.So in the end the consumer will see a 150% increase in what they pay.

 

Now as for tax the rich depending on ones view a truly poor person might feel that a persons who is making 30 grand a year is rich. A person making 80 grand a year surely feels that 200 grand is rich so it really depends on your income level But what the heck lets go and tax anyone over 200 grand a year at 75% of there income sounds great huh. If I was a rich person I sure as all get out can afford one of those real slick willy tax lawyers. So my income now falls to 50 grand a year.... So in the end that will not pay for the social programs. Now we just can't keep printing new money to pay now what does the government do?

 

They will raise everyones tax because the lower income cannot afford them high priced attorneys and they will have to pay it or else. It might not be an income tax but there will be some form of tax coming maybe VAT.

 

An Example With a 10% VAT:

• The manufacturer pays $1.10 ($1 + $1x10%) for the raw materials, and the seller of the raw materials pays the government $0.10.
• The manufacturer charges the retailer $1.32 ($1.20 + $1.20x10%) and pays the government $0.02 ($0.12 minus $0.10), leaving the same gross margin of $0.20.
• The retailer charges the consumer $1.65 ($1.50 + $1.50x10%) and pays the government $0.03 ($0.15 minus $0.12), leaving the gross margin of $0.30 (1.65-1.32-.03).

 With VAT, the consumer has paid, and the government received, the same as with sales tax. The businesses have not incurred any tax themselves. Their obligation is limited to assuming the necessary paperwork in order to pass on to the government the difference between what they collect in VAT (output tax, an 11th of their sales) and what they spend in VAT (input VAT, an 11th of their expenditure on goods and services subject to VAT). However the are freed from any obligation to to request certifications from purchasers who are not end users, and of providing such certifications to their suppliers.

 

Note that in each case the VAT paid is equal to 10% of the gross margin, or 'value added'.

 

The advantage of the VAT system over the sales tax system is that under sales tax, the seller has no incentive to disbelieve a purchaser who says it is not a final user. That is to say the payer of the tax has no incentive to collect the tax. Under VAT, all sellers collect tax and pay it to the government. A purchaser has an incentive to deduct input VAT, but must prove it has the right to do so, which is usually achieved by holding an invoice quoting the VAT paid on the purchase, and indicating the VAT registration number of the supplier.

 

This is what I expect to happen by next year.

 

So all income levels will lose but heck the politicians can honestly say they didn't raise your income tax, they just invented a new one.