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Today's Nuze

"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that justifies it."

Frederic Bastiat

VAT TAX ... "MORE PLAUSIBLE TODAY THAN EVER"

By
Neal Boortz
@ September 28, 2009 9:20 AM
Permalink | Comments (36) | TrackBacks (0)

The Obama administration is desperately searching for ways to take more money away from you and use it to fund its dreams and schemes. After all, the painful truth that most people forget is that the government does not earn any money. Basically, there is only one way for the government to get money to spend, and that is to seize it from the private individuals who worked for and earned it. Since government is force, this isn't hard. You have producers and looters. Not hard to figure out which is which, is it?

When you think about it, one big difference between Republicans and Democrats is the manner in which they choose to loot, and the subtlety with which they operate. With all of the spending The Chosen one has generated, you just know that they're burning some midnight oil trying to figure out new methods of plunder. One particularly onus tax is gaining much favor ... the value-added or VAT tax. In fact, John Podesta says that some form of a VAT tax is "more plausible today that it ever has been."

Podesta says that a consumption tax would "create a balance" with other economies and could substantially effect competitiveness. Now, Podesta says that a VAT tax would be regressive but can be "balanced" by exempting certain products and "[supporting] low-wage workers." By "supporting" low-wage workers Podesta, of course, means more income transfer and welfare programs.

Let's wade through some of the rhetorical bull squeeze here, shall we?

Podesta calls the VAT a "consumption tax." When you really think about it, ALL taxes on business are consumption taxes. That would be business tax burdens are passed down to the ultimate consumer of the product or service taxed. Right now businesses and corporations pay federal income taxes, one-half of the Social Security taxes, unemployment taxes, worker's compensation taxes and a bunch more. These taxes are built into the price of whatever that corporation or business sells to its customers. Eventually all of these taxes are paid by the final consumer. All that Podesta (and Obama) are proposing is the addition of one more tax --- one more tax to roll down hill and nail the consumer at the end of the chain of production.

If this idea gains traction in Washington will you be ready? Will you be ready to duplicate the 9/12 DC tea party with a FairTax march on Washington. You know, and these political hacks know that there is a better plan out there. A TRUE consumption tax. Let every product and service reach the ultimate consumer carrying absolutely no tax component at all ... then charge an honest and open inclusive sales tax as the product goes from the marketplace to the final consumer.

It is beyond outrageous that Obama's dog washers would be considering this atrocity when a fully researched and vetted idea like the FairTax is out there. But we all know why the political class will fight the FairTax, don't we? The VAT would ADD to the power of the political class. When they get to sit up there and decide what will be taxed, and what will not be taxed; and to set the rates for those taxes ... now that's what power is all about. The FairTax, on the other hand, transfers that power to the people. The payment of taxes would be voluntary. You could chose to live at the sustenance level and pay no taxes at all to the federal government. You only pay taxes when you make the voluntary decision to expand your spending past that required to provide the basic necessities to your family. You're in control. Complete control And that's what makes the FairTax so frightening to the political class.

Watch this VAT nonsense, my friends. It is something that will not only take dollars out of your pocket; it is a tax you will truly come to hate. Just another wonderful change you can believe in.



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What others are saying

  • @joyce
    i don't cut you off from posting. i go home. your comments don't fall off into an abyss. they'll make it up the next day. or after the weekend.
  • 2 or 1?
    Hmmm! An Income Tax and a VAT or one "FairTax?" Do they really want to crush any chance of this Country's economy to recover fully. Will the culture of envy in this country be replaced by a return to a love of FREEDOM?
  • to francisco
    yep it is kentucky.
    sorry if there was a misunderstanding, don't mean to offend.
    I went back and reread the bill itself, it doesn't specify if it will show on the receipt or not, that would probably be upto the retailer's programmer(people like me in IT), and they could always put in an addendum to the bill.
    I do agreee, the sticker shock will get more people active in what the government is taking from them as opposed to the current system, where they never see it(the money) to begin with.
    the numbers on the paycheck for taxes aren't 'real' for enough people.
    Sometimes wish we still had to write that check every year for taxes as individuals. That would wake more people up.
    I think my misconception was from neal's book. there may have been a graphic or statement there about the receipt issue. have to reread that one, once i get it back from the girlfriend.
    But eventually it will be just like sales tax in states that have them, people don't really pay attention to it.
    it's just there.
    I probably understand it more than most as having been in cash registers years ago when our commonwealth(kentucky is not a state), raised taxes from 5% sales to 6%, that was fun reprogramming, but i digress.
  • Dear john,
    I'll try to give my opinion here on what you're saying.
    It's difficult to abuse this due to the inherent fairness of the law.

    The catch is in section 301 of the fair tax, hr 25,
    which states:
    Each qualified family shall be eligible to receive a sales tax rebate each month. The sales tax rebate shall be in an amount equal to the product of--
    (1) the rate of tax imposed by section 101, and
    (2) the monthly poverty level.

    So if you make less than the poverty level you'll get everything back each month, and maybe more.
    If you make more, and spend more, you won't.
    the major catch with the fair tax is that you don't have to buy anything. That's what raises your tax liability.
    Lets take for instance the current poverty level.
    per 2008 U.S. census the threshold for a single person was $10,991(see www.census.gov).
    lets say they spend every cent, none put into savings.
    per month that person makes $915.92(rounded). the total monthly tax under the fair tax(at 23%), $210.66.
    their rebate:210.66.
    Why, you ask?
    the definition in section 301, the rate of tax is 23%, and this person is under the poverty level, so they get everything back, in essence every individual will get the same amount back each month. $210.66
    The amount goes up as the 'family' grows, as the poverty level grows.
    So there's no room for pandering to the 'dumbmasses', as they aren't paying anything anyway.

    If you spend more you will have a higher tax liability, but you don't have to spend it, put in savings, donate to charity, what ever.

    hope that answers your question.
  • BTW
    Beacon Hill study was one I posted.
  • uh
    Yes I have read them and no I'm not going to "trust" you. I'll trust my own research. I have more refuting the 50% crap but doubt I'll have time to post this afternoon, not sure if this post will make it before webwench cuts us off.
  • Truthseeker's lack of honesty is exhausting
    And even if he was correct that the rate would need to be 50% (he's not), what's the big deal? We're still paying that rate now!!! The dollars are the same, its just up front with the FairTax.
  • @ John Morris
    I can't say that your concerns about the prebate being abused are not valid. Really, any gov't program involving disbusrment of $$ will be prone to this kind of abuse.

    However, supposing a sunset clause for the prebate were introduced, there is still a very good chance the Dems will seek to extend it. And for the same reasons you mention, the GOP would either go along with it or hand the Dems a political weapon. But this is a problem with the politicians, not simply a problem with the Fair Tax.

    I agree, we should make sure the prebate isn't an easy target for abuse (and maybe it could be as written), but I don't know that any language written into the Fair Tax bill can ultimately prevent the looters and moochers from doing what they have done for over half a century now. Only our vigilance and our votes can keep them at bay.

    Even with this potential flaw, I'd still rather see the Fair Tax passed, as is. It would wipe the tax code slate clean, and, believe you me, it needs it!
  • Joyce -- I've Read Those Studies; You Haven't.
    Joyce -- By all means, read the research on fairtaxblog.com. You will see that the only "study" there is that comes close to supporting the 23% (tax-inclusive rate) is the BHI study I referenced below.

    All of the other "research" on the fairtaxblog.com website that supports the FairTax begins with the assumption that the 23% rate is revenue neutral. If that basic assumption is wrong (which is what all the independent research shows), all of the other studies fall apart. For example, if you assume a 23% rate, you can produce a study showing that the FairTax would not be particularly burdensome to the middle class. When it turns out the required rate would exceed 50%,you get a completely different result.

    I happen to know Dr. Kotlikoff (who's the only mainstream economist who supports the FairTax), and have had numerous discussions with him on this issue. Kotlikoff reviewed the BHI study prior to its publication and initially thought that it accounted for tax-evasion, but later realized that he was wrong. (To verify this, you would need to look up the FairTax on the AEI.org website where Kotlikoff "debated" the FairTax with William Gale of Brookings and Jane Gravelle of the Congressional Research Service. Kotlikoff thought BHI's error only accounted for a couple of percentage points to the required FairTax rate, but Gravelle showed that it would add fifteen percentage points or more.)

    Trust me, Joyce, the FairTax is something I know quite a bit about.

    And Twistedsaint, I agree with you. Our government spends too much. And we need radical tax reform. But the FairTax isn't the answer.
  • VAT vs. Fair Tax
    The VAT sounds somewhat similar to the Fair Tax, except it is added to the existing taxes rather than replacing them.

    Like government-provided health care, the VAT exists in other countries and may be a competitive advantage. Imports have to help pay the taxes. In the US the US corporations may foot a large portion of the bill, giving a penalty to the US corporations that is not seen by imports.
  • To CD in KY
    First off, I hope that's Kentucky you are in, and not any alternative...

    What I was proposing was a difference to the FairTax, as proposed. I was suggesting that it be external to the price, rather than internal, so that everyone could see how much they are paying, rather than it being "under the covers" as the gas tax is.

    Having lived in Oregon, where there is no sales tax, when one goes to the store to buy that DVD player, they bring a $100 bill, lay it on the counter and they get a DVD player. The store owner takes that $100, pays for his costs of business, and has to set aside some for taxes.

    With the current version of the FairTax, he raises his price once to cover the newly imposed tax (possibly accounting for the difference between his allocation of taxes and the cost of the new tax, say if he were paying $10 in taxes, he would raise the price by $15 to cover $25 in taxes, but that is up to him), and puts that $25 in the tax receipts to send to the Federal government, but all I see is that the DVD player went up by $25 (or whatever he raised the price by). It'll be sticker shock once.

    What I was hoping for is sticker shock each time someone goes to the store and sees the amount that the Federal government takes.

    As a premise, I love the FairTax. It is the most intellectually honest tax system that I have seen.
  • Truthseeker (not) why do you keep spewing untruths?
    Here it is all in one place, a list of must be a dozen or two, taking out the pdf's from their own group (want to be fair ya know). Course if YOU do more research, you'll find even more.

    http://www.fairtaxblog.com/research/

    And before you go spewing "this list is from their site it's biased", check out the sources of many of these studies: UofCal Berkeley; Institute for Public Policy; National Bureau of Economic Research;Brookings Institution; Boston University, etc.

    Some are even negative! But their questions have been addressed in these studies.

    http://people.bu.edu/kotlikoff/New%20Kotlikoff%20Web%20Page/Revised%20Kotlikoff%20on%20Barlett%201-15-08.pdf

    If you can't find more than the above, you aren't really looking.
  • @Truthseeker
    Truthseeker, you did not answer a single one of my questions. All you came back with was a vague "It won't work because the government won't get enough of my money."

    And that's a problem because.....??

    The government's spending has been a joke and completely out of control since FDR. It's time it learned how to cut costs and balance its budget just like every honest person in this country has to do.
  • The left has a monopoly on stupidity
    The so-called "VAT" tax is another stupid idea of the left. All it does is create disproportionate tax burdens for those with lower incomes. Hey, don't believe me? There are countless studies published in Europe about the inequities of the VAT tax. The FairTax makes allowances for these inequities. A VAT tax does not.

    Oh, and TruthTwister: the Fair Tax studies you refer to? They're not. You have demonstrated glaringly apparent weakness on the subject.
  • The FairTax Still Doesn't Work
    I've read each of the FairTax books (including the recent one by Hugh Hewitt, which I doubt any of you even knew about). I've also read each of the studies I mentioned. And, yes, each of those studies is of the FairTax as written. Then do not contain exemptions, etc. If you took the time to read them yourselves, you would realize that Boortz has been lying for years about the FairTax.

    And, Joyce, there are not numerous studies supporting the FairTax. There is precisely one -- done by a completely unknown company called the Beacon Hill Institute -- which was paid for by AFFT, the group behind the FairTax. Among it's many problems is that it failed to account for any tax avoidance, tax evasion or shifts of consumption behavior away from taxable goods and services. In other words, it's a joke, but even it couldn't get the FairTax rate down to 23%.

    Boortz knows all this, but he is relying on the fact that his listeners (i.e., you guys) won't bother to check out his claims for yourselves.
  • Bug in the FairTax
    I ask this question every so often whenever the FairTax is mentioned. Never get an answer.

    One of the stated goals is to make government less powerful. So why give them a new power which has such an obvious abuse? The prebate.

    So long as the prebate exists the government still has to keep careful track of everyone, in fact that gets worse since the IRS only really needs accurate information once per year. The prebate is a monthly check sent to every Citizen.

    Now imagine what will happen here in the real world once the government is sending every person a monthly check. Democrats will be assured of wanting two things and being very vocal about it every election season. First they will want to convert it into a means tested entitlement and second they will want to make it as large as possible for 'their' (i.e. the moochers) voters. Republicans will either go along or hand the Dems a club to beat them with.

    See every other entitlement program for how it works. Remember Social Security was sold as a pure retirement system and is now just another means tested entitlement program.

    I'll buy into the FairTax when the prebate gets a sunset clause in the same Constitutional Amendment that eliminates the income tax. Forbid the government to tax OR dispense money to individuals.
  • here's the biggest windfall of the fair tax
    well here goes the tax man again.
    we're in a recession, people loosing jobs left and right, and our elected officials want to add the vat.
    who pays, the consumer. when the consumer can't pay, the company producing the product goes out of business. more jobs lost.

    lets get the fair tax going. its simplicity is overwhelming, the more you spend the more you pay.
    It'll be a tax on the 'evil rich' as they will spend the most.
    the best part the illegals will get the screws put to them, they won't be getting the prebates associated with the fair tax, as they don't have a ssn.
    free money from those breaking our laws to begin with. this also applies to the cash only illegal activities, you gotta buy food and other staples.

    Now to the ignorant posters, or stupid if you've actually done any kind of research.
    truthseeker: Seek the truth, read the fairtax books. read the actually house bill. then go read the tax code, last check it's only about 13 volumes of the cfr(congressional federal register).
    And you'll get an idea why the fair tax works vs. our current graduated income tax system, and embedded taxes.

    To Francisco:
    The dvd analogy is a good one, one flaw in your comment. the fair tax does show that on the receipt. so you know how much in taxes you paid. it's not embedded as it is under the current code.
  • it was either me or mark..........................
    J T CORNPONE........it couda been me or mark T.......we was all drunk......
  • @ Truthseeker
    Oh the irony in your name. Those studies you cite did not evaluate the FairTax. They evaluated versions of a national sales tax that included numerous exceptions, etc. and were not in any way the FairTax as proposed.

    Of course, one has to wonder whether you already knew that.
  • @Truthseeker
    Truthseeker as usual you are NOT living up to your "name." You say all these studies say the FairTax won't work. Really? Why not? What do they say exactly? That's a pretty broad-based "conclusion." Where's the evidence? What data did these studies actually gather, and how reliable is it?

    You say the tax rate needs to be over 50%. Why is that? To keep up with all of government's incredibly wasteful spending? You say the numbers don't add up. Which numbers? What do they "need" to add up to?

    Here are some more obvious questions, you who supposedly is seeking the truth (but clearly haven't found it yet):

    Do you like devoting countless hours of your life each year trying to understand a tax code that is so big and complex not one person in the world knows everything in it? Do you really think such a tax code is needed in ANY system of government? Or if not hours how about your money going to accountants who understand more than you but are still pitifully unaware of much of it. Do you like that politicians try to control people via the tax code? Hey, here's one, so called seeker of truth: Have you even READ the Fair Tax book?

    I think I know the answer to that one. Hey, your displays of ignorance would not be so bad, except for your self-appointed misnomer of a nickname. I am really, really, getting tired of it.
  • @TruthTwister
    If all of the taxes and government-imposed fees were all brought forward and levied in ONE place (i.e., the Fair Tax), two things happen. One is the "WHOOMP! There It Is!" effect. The other is the management of the "Fair Tax" rate involves not just the rate of tax but the "base" (the up-front "discount", if you will).

    The total cost of government is carefully hidden behind income taxes, sales taxes, excise taxes, tariffs and fees. Make it all be right out in the open.

    The gub'mint loses the "opportunity" to raise corporate income tax rates (to fix those evil corporations and "seize back" those evil profits), thereby causing consumer prices to increase (it was those evil corporations, not us politicians).

    I'm all growed up and haired over and can take the shock. I won't get any angrier (I already added up the total cost of gub'mint to me, and I'm getting a royal screwing - but that's OK, so are you and you're getting it worse than me)
  • Tax rate > 50%
    At least it would be honest.

    When you run a business, you always pass on the costs of business to your clients. My suppliers do the same.

    A business exists on 3 pieces of paper: Income, Expenses, and Assets. When expenses > income to the point that the assets < 0, the business fails.
  • Who was it said ...
    "No one's life, liberty or property is safe while Congress is in session"
  • VAT tax?
    I'm going to be pedantic here, but I'm sick of people saying VAT tax. It's stupid and redundant. Hey, I know! Let's go down to the ATM machine, enter our PIN number and pull out enough money to pay the VAT tax.

    There must be a law requiring a surplus of stupid people these days. They appear to be everywhere.
  • VAT and FairTax together
    I like the FairTax idea. Using a VAT instead of a consumption tax would solve 2 glaring weaknesses in the FairTax: the black/grey market economy, and the potential for corporate abuses.
    First, auditors can follow material through every stage of production, distribution, and sale through a VAT, looking for discrepancies; with the FairTax, it's a crapshoot. Natural consequences state that if you don't pass the tax on, and put product out into the grey market, you're left holding the bag... not good for being competitive.
    Second, individuals can shift personal expenses to corporate expenses as company perks, and thereby skirt the FairTax. This is what happened to healthcare, and it has disadvantaged the individual consumer. Every corpus consumes... why should a corporation be exempt from being taxes on it?
  • Oh please
    Truth, we can find just as many (or more) studies that say the exact opposite. Looking at it with a common sense approach, it's great.

    FairTax is exactly what we need.
  • Taxes
    ultimate power corrupts ultimately
  • Matt is right...
    ...and the ironic thing is the same people in Washington that you will hear promoting a VAT will be the same ones that knocked the FairTax because it would "put an unfair burden on the poor".
    Can't wait to hear what our Congressman (John Barrow, D-GA) will say about it, he's very vocal about opposing the FairTax because he is either incapable of understanding it or just prefers to be a liar.
  • Public Servant
    I vaguely remember when that term referred to a government employee.

    Now it refers to me - a servant of the "public": I exist only to provide tax dollars to the gub'mint.
  • the only thing I would change
    about the FairTax is to have it exclusive of the purchase price. When purchasing gasoline, the tax is hidden into the price/gallon, and the animosity when the tax is raised is unfairly directed towards the owner of the station.

    Here's an example...
    You buy a DVD player for a total price of $133.
    Current FairTax proposal:
    The recipt reads:
    DVD player: $125
    Sales Tax: $8
    Total: $133

    My proposed FairTax idea:
    You pay $133 for that DVD player and the receipt reads:
    DVD player: $100
    Sales Tax: $8
    Federal Tax: $25
    Total: $133

    If the tax goes up, then the individual line item stays the same, and the person buying the product can clearly see where their money is going, thus reducing the power of Congress.

    A quick quiz... how much is the federal part of each gallon of gas you purchase?

    Yeah, I had to look it up too: 18.4 cents/gallon
  • Taxes
    The biggest problem with taxes is that the government sets the rates. It does not matter if it is income tax, VAT, or the Proposed Fair Tax, government will find a way to burrow deeper into our pocket books to serve their ends and not ours.
  • vat tax
    They are going to try and do exactly what you don't want with the fair tax, install a vat in addition to the income tax. Talk about increasing the tax burden on the people. mpw
  • Get off the FairTax for Heaven's Sake
    Oh, give it up, Boortz.

    Your own book -- FairTax: The Truth states that a VAT is more efficient than the FairTax would be.

    Also, every independent study of the FairTax over the last decade -- by the Brookings Institution, the Joint Committee on Taxation, President Bush's Tax Reform Commission, Rice University and the Center for Economic and Tax Policy -- have all shown that the FairTax wouldn't work. The numbers don't add up. The tax rate would need to be over 50% and it would crush the middle class and retirees.

    Boortz must be planning to write another FairTax book, I guess, so he's going to start promoting it again.
  • The VAT tax would not be bad IF...
    You got rid of all Federal Income taxes. Make no mistake- the VAT is on top of Federal Income Taxes. It will really impact everyone.
  • A VAT...
    Wow this place really is becoming a 3rd world socialist nation. Us amongst the Ron Paul voter tried our best to warn people though... November 2010 can't get here fast enough.
  • Just another way
    to follow Europe down the drain...
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