Who repays the debt???

[Lurker]

So you meant that one guy wrote a paper about it and gave some testimony. Got it.

The odd thing is that Burman was against a national sales tax because the rate would need to be 44% or higher to replace current revenue. Either the WP article confused his testimony or he completely changed his mind. I'm guessing he wasn't considering eliminating federal income tax. Exempting lower income people, yes. Eliminating it, no. I'll have to find his testimony.

[Embar Angylwrath]

So you meant that one guy wrote a paper about it and gave some testimony. Got it.

The odd thing is that Burman was against a national sales tax because the rate would need to be 44% or higher to replace current revenue. Either the WP article confused his testimony or he completely changed his mind. I'm guessing he wasn't considering eliminating federal income tax. Exempting lower income people, yes. Eliminating it, no. I'll have to find his testimony.

I think his quote in the article outlines it a bit. Eliminate it for most, and drop the max tax rate to 25%.

[Lurker]

Skimming his policy paper that the WP article references, that 25% isn't the VAT. It's the federal income tax rate for top earners that would be in addition to the VAT to cover health coverage.

So you want to make the system more progressive? You want to eliminate federal income tax for millions, have a VAT to cover health coverage for everyone, and tax higher earners at 25% to pay for other Govt. expenditures? Sounds fine to me.

[Embar Angylwrath]

Skimming his policy paper that the WP article references, that 25% isn't the VAT. It's the federal income tax rate for top earners that would be in addition to the VAT to cover health coverage.

So you want to make the system more progressive? You want to eliminate federal income tax for millions, have a VAT to cover health coverage for everyone, and tax higher earners at 25% to pay for other Govt. expenditures? Sounds fine to me.

My read is he is ppoposing a 25% VAT, which will pay for everything, eliminate income taxes for most Americans and for those Americans that still have to pay taxes, cap the rate at 25%. And I'm ok with that proposal.

[Lurker]

Reading closer...

Burman is proposing a 25% VAT to fund health insurance vouchers for everyone which would replace Medicare, Medicaid, SCHIP, and other insurance related tax subsidies. He wants to set up a VAT trust fund run by the Treasury to handle the annual short falls and overruns in the system. The VAT would allow an across the board tax rate reduction of 1/3, reducing the top rate from 39% to 27% for example.

His proposals sound like your worst nightmares. I wonder how many "conservatives" are going to be quoting him and jumping for joy that the flat tax is back on the table, wrongly claiming that federal income taxes are going to be replaced with a 25% VAT.

edit: we stepped on each others posts. Does my description look accurate?

[Embar Angylwrath]

Reading closer...

Burman is proposing a 25% VAT to fund health insurance vouchers for everyone which would replace Medicare, Medicaid, SCHIP, and other insurance related tax subsidies. He wants to set up a VAT trust fund run by the Treasury to handle the annual short falls and overruns in the system. The VAT would allow an across the board tax rate reduction of 1/3, reducing the top rate from 39% to 27% for example.

His proposals sound like your worst nightmares. I wonder how many "conservatives" are going to be quoting him and jumping for joy that the flat tax is back on the table, wrongly claiming that federal income taxes are going to be replaced with a 25% VAT.

edit: we stepped on each others posts. Does my description look accurate?

Can you link what you're looking at? I don't get that from the article I linked.

[Lurker]

The details are in A BLUEPRINT FOR TAX REFORM AND HEALTH REFORM (pdf), the paper Burman published in the Virginia Tax Review. The WP article was horribly misleading.

[Klast Brell]

The only way to fix torts properly is to channel the punitive damages somewhere other than the plaintiff. That removes the jackpot nature of torts where you can reasonably lose 100 frivolous claims to get that 1 big win. Capping the punitive damages simply shifts the equation back to one of calculating risk vs. reward on legal matters - not something you ever want to encourage.

Actual damages are there to pay the plaintiff what they actually suffered.
Punitive damages are there to punish the defendant and have no business being sent to the plaintiff.

Dd

I love that Idea!

[Klast Brell]

Who pays for the debt?

Well... it seems the VAT is back on the table, a national sales tax. Washington isn't left with much else. Some on the Hill are floating the idea now. There are only so many rich people, smokers and drinkers it seems. A rate of about 15%-20% on every sales transaction (service or goods) seems to be the target. Its about time, too. Spend more, pay more. Spend less, save more. Consumers drive the economy and tax revenues. They are in complete control of their tax burden.

Are you going to apply the VAT to investments? If you make $10,000 profit on your sale of stock are you going to pay $1,500 for your %15 VAT?

[Lurker]

Klast,
Catch up on the thread. The VAT being discussed by Congress was in addition to other taxes, not a replacement for them as Embar thought.

[Klast Brell]

I am aware that this would supplement other sources of revenue.

Feel free to skip this part if you want.
Correct me if I'm wrong. This is my understanding of how VAT works. VAT is a different way of applying sales tax. Instead of taxing the final price of the product at the final sale to the end user, they tax the Value Added to the product every time it changes hands no mater who is buying it. If I buy lumber and cut it in to boards, the difference between what I paid for the tree trunks and what I was paid for the boards is the amount that would be taxed. That price difference is the value added to the wood by my transforming it in to boards. The difference between the price paid for the boards and the price charged for the picture frames is taxed. And every step of the way when something changes hands the price difference between the input and the output is charged VAT.

Even if I am just a middle man, buying a product and then selling it to someone else, the difference between my purchase price and my sale price will be taxed. I buy 30 shipping containers of widgets from a Chinese factory. My price includes the cost of shipping it to the dock in the US. I pay my money for 30 containers of widgets delivered to a dock in California. I simultaneously arrange for the sale of those widgets to a distributor who will pick them up at the dock. The containers come off the Chinese boat and are immediately loaded on to the distributor's trucks. The product is essentially handed from the Chinese company to the American one without even being in my possession. But because I sold the widgets or more than I paid for them, that difference will be charged VAT.

If I bought 10,000 cell phones and flipped them the next day for 19,900 profit VAT would be applied. If I bought 10,000 shares of MSFT on April 23 and sold them the next day I would have made $19,900 on that. What is the difference between physical products I resell without ever touching or having on my property, and a share of stock that is just a bunch of ones and zeros on the NYSE servers? I think they should be taxed equally.

[Lurker]

Klast,
For the top four income brackets short term capital gains are already taxed at 25% - 35%. Your example of buying MSFT and selling it the next day at a profit results in short term capital gains.

[Klast Brell]

But capital gains are not income. If I am independently wealthy and live off of the money I make buying and selling stock, wouldn't I have 0 income?

[Lurker]

Hmmm. Good point. I'm not sure the answer to that.

[Ddrak]

What is the difference between physical products I resell without ever touching or having on my property, and a share of stock that is just a bunch of ones and zeros on the NYSE servers?

The argument generally is that the difference is buying shares is reinvesting the money in a company while buying goods isn't.

Having said that, most VAT systems also have capital gains tax and also income tax to preserve the progressive nature that you typically want taxation to sustain. VAT by itself tends to be flat at best and regressive in the usual case (when measured against income).

Dd

[Klast Brell]

I guess my point is that I would be fine with a flat tax if it was applied universally. Sales or VAT if it truly applied to every transaction regardless of the nature of that transaction. Or if it were an income tax, to all earnings regardless of the nature if that earning.

[Partha]

The argument generally is that the difference is buying shares is reinvesting the money in a company while buying goods isn't.

Erm, what? The only time the company gets money from buying shares is when the initial offering is made. Otherwise, you're just forking over money to another speculator and gambling that you'll find a sucker to take it off your hands at a higher price. This is why reducing capital gains taxes has made Warren Buffett pay a smaller share of tax then his secretary, which is ludicrous.

[Klast Brell]

The argument generally is that the difference is buying shares is reinvesting the money in a company while buying goods isn't.

Erm, what? The only time the company gets money from buying shares is when the initial offering is made. Otherwise, you're just forking over money to another speculator and gambling that you'll find a sucker to take it off your hands at a higher price. This is why reducing capital gains taxes has made Warren Buffett pay a smaller share of tax then his secretary, which is ludicrous.

Yup. I agree.

If I buy an old lamp at a garage sale, then sell it on Ebay for a profit, I am not investing in the maker of the lamp. But lets put it in more financial terms. If I buy foreign currency, or gold when the dollar is up, then sell them when the dollar is down I will make a tidy profit. Why is reselling the currency or the gold different than reselling a lamp.

Here is a different scenario. If I buy a product from a company I am giving them money. The company puts the money in the bank. Those dollars go in the books as assets right? If I buy a share of stock in an IPO I am also giving that company money. The company puts the money in the bank. Those dollars all go on the books as assets right? Now I understand that there is also the liabilities column. The company has ongoing costs, and future expenses coming up. They have to buy more raw materials and they have to pay wages, etc. Those outstanding shares of stock are also in the liabilities column. Either way I end up with something of value, and the company ends up with some cash. That product or share of stock will still represent a future liability. Just like they are expected to pay dividends on the stock, they are expected to provide warranties and customer service on the product. So why should these transactions be taxed differently.