TrainTrac,
I do know the difference between a sales tax and a VAT tax. And I am not advocating a VAT tax for the US, but I also dont agree with every negative thing the Fair Tax people say about the VAT taxes in Europe.
Good things about a VAT tax are, Consumers dont see the VAT tax, but they know its there. We pay a lot of taxes in the US that are hidden or buried in the cost of the item. The difference in Europe is if you go into a store and buy something marked as 100 Euros, thats what you pay. In the US if you buy something marked as costing $100 you have to pay state and local sales taxes, which are added on to the quoted price and might make that $100 item cost you about $110.
We as American consumers are paying a form of VAT tax now. When we purchase anything all the taxes and overhead costs as well as the profit for all of the manufacturers, producers, handlers, distributors, etc are included in the quoted sales priceand then they add state and local sales taxes on top of that? Even the gasoline we buy includes all the costs, taxes and profit Exxon or Chevron had to pay as well as a hefty load of Federal, state and local taxes as well. A Tax is a Tax whether you want to call it a VAT tax, Sales Tax, Income tax, etc.
So I disagree with the Fair Tax website that a VAT Tax is any worse than our current Sales
Tax system, with the exception that the VAT tax in some European countries is excessively high, and may be more complicated. But most European countries do not have income tax as we know it. They may or may not have a payroll tax but this is to fund and pay for their various form of Social Security and socialized Healthcare costs..
The problem I see with the US income tax system is that everyone pays excessively high initial tax rates, The concept of filing an income tax return to qualify for certain deductions is somewhat like applying for rebate on a piece of electronic equipment you purchased. They know some people wont file, and if you made less than a certain amount of money for that year, you indeed dont have to file, but you also will not get back the taxes you did pay?
Our current income tax system uses Deductions and Exemptions to reduce the individuals tax burden, however most of the Deductions and Exemptions have very specific rules to qualify and unnecessarily complex that most average or middle income taxpayers cannot understand the convoluted rules and dont even apply for those deductions or exemptions.
The government is counting on the fact that most people will not understand the deductions, or will assume they do not qualify, so will never get those deductions. Even the IRS cannot always accurately interpret their own tax regulations, and they frequently lose court cases when challenged by a taxpayer with the money and fire power to take them on in court.
Of course the wealthiest people have tax attorneys available to delve into these complex tax laws and extract every penny in deductions and exemptions so that the wealthiest people often pay far less tax than those who are at or barely above poverty levels.
So even though we can see that the wealthiest people are taxed at a high 35% rate, few if any of them ever pay anywhere close to that rate. As Warren Buffet said, he pays less taxes than his secretary. If we did away with all the deductions and exemptions, everybody could pay the same 9% to 12% tax rate and the government would have more money than they know what to do with (but Im sure they will find ways to spend as fast as they get it...:grin
So I think we need to pass a Balanced Budget Ammendment to insure that they don't spend more than they revenue the collect. We probably also need some ammendment to stop our politicians from inventing new sources of revenue...:grin:
...Rich
