By Mary Pilon
More for eggs?
A debate in Washington could lead to you paying more for everything.
The possible tradeoff? Better health care for all.
Policymakers are debating a value-added tax, or VAT. Put simply, it’s a national sales tax. The concept was dismissed as a nonstarter among policymakers in the past, but is now wiggling its way into political conversation, according to the Washington Post.
From the WaPo:
A VAT is a tax on the transfer of goods and services that ultimately is borne by the consumer. Highly visible, it would increase the cost of just about everything, from a carton of eggs to a visit with a lawyer. It is also hugely regressive, falling heavily on the poor. But VAT advocates say those negatives could be offset by using the proceeds to pay for health care for every American — a tangible benefit that would be highly valuable to low-income families.
Some debate that end result, the article says, and argue that the details could work out differently in practice in the U.S. One argument claims that those who are wealthier tend to consume more, and therefore would pay more VAT.
Although the VAT is only an idea at this point and unlikely to hit taxpayers anytime soon, it’s interesting to note that it’s now part of the conversation and that top VAT advocates are now represented in discussions. Especially now as the federal government looks for new ways to create revenue.
Europeans are no strangers to the VAT. It started in France in the 1950s and has spread to other European countries as well as Australia and India. Europeans even have to pay the VAT on U.S.-based things such as memberships on Second Life. The VAT has experienced success in countries where collecting taxes based on income is difficult, such as developing nations.
Fortune offers an example of how the VAT could figure into the purchase of a car:
Take, for instance, a car with a sticker price of $30,000 and a value-added rate of 10%. Ford might buy its steel and other materials for $8,000 plus $800 in a VAT tax. A dealer then pays $25,000 plus a $2,500 tax for the finished vehicle. Ford takes an $800 credit for the tax it already paid and sends $1,700 to the government. A buyer then pays $30,000 for the SUV and $3,000 in taxes. The dealer collects the $3,000, takes a credit for the $2,500 worth of taxes already paid, and sends $500 to tax authorities. Ultimately, the government pockets $3,000, or 10% of the retail price of the car, in taxes.
Source: WSJ Blog – The Wallet
The concept of the VAT is not a new thing… but when it has been looked at before it was to replace Federal Income Tax not in addition to, which is what is being considered presently. It is a hidden tax source and it is a bad thing unless it replaces the Federal Income Tax.
Cap and Trade (tax) – BAD
the VAT unless it replaces National Income Tax – BAD
Remember Obama’s campaign promise of no tax increases for people who make under $250,000 and hold him to it!!
It there was ever a time to pay attention to what is going on… it is now!