It’s Fix the Tax Code Friday!
This week, I wrote a piece for WalletPop about the possibility of a VAT being imposed in the US. The idea is that the VAT would be similar to those in Europe and Asia and would be imposed at each stage of a transaction in an effort to mitigate fraud. It’s a controversial proposal.
So today’s Fix the Tax Code Friday question is:
Would you be in favor of such a tax in the US? And if so, what would you want to happen to offset it: eliminate state and local sales tax; eliminate income tax on dividends and interest, etc.
Hmm.. I don’t believe that a VAT will replace any tax currently imposed. In my opinion, it’s just a ruse to make people ok with it. Kind of like the slot machines in PA were supposed to lower property taxes. Seen any of that money? And now they want table games…
The only way to make the VAT tolerable here would be to eliminate ALL income taxes and ALL local sales taxes. Of course, since the VAT would be collected on the federal level, there would have to be revenue sharing to return the appropriate share to states and localities to replace the eliminated sales taxes.
What do you want to bet that the great sticking point would be determining what constitutes an appropriate share of the revenue? Population? Local income? Local business activity? Number of congresspeople?
Then there is the spectre of “double taxation”: We were promised favorable tax treatment of IRA, 401k, and Roth moneys when we made these investment decisions … but the favorable part would go out the window. Pity the poor soul who converted a $100,000 traditional IRA to Roth the month before deliberations on the VAT began!
if one of the advantages of the VAT is ease of administration, it would seem the logical choice would be to get rid of the income tax
Sounds to me VAT would be an additional tax. I find it hard to believe it would replace another revenue stream to either the federal government or the states.