Does Rand Support a VAT Tax?

[TommyJeff]

https://www.lewrockwell.com/lrc-blog/rand-paul-isnt-the-only-one-proposing-a-vat/

Can anyone confirm this? does Rand Paul's tax plan include a VAT Tax? if so, this is very scary and a horrible idea. how can he justify this?

[sparebulb]

Anyone who supports a VAT tax can go fuck themselves.

[TaftFan]

It seemed to be a limited version. Don't count me as an expert, I don't see where it adds to every level of production.

Personally, I would have left out the business tax and just settled for a higher income tax rate.

[TommyJeff]

Anyone who supports a VAT tax can go fuck themselves.

Does Rand?????

[TommyJeff]

It seemed to be a limited version. Don't count me as an expert, I don't see where it adds to every level of production.

Personally, I would have left out the business tax and just settled for a higher income tax rate.

Thank you. I will take a closer look at this tax plan. I am not an expert either. Hopefully Rand can explain this possible situation.

But, if there is a 'limited VAT' in this plan(or any plan, talking in more of a theoretical perspective). Couldnt the rates of this 'VAT' be increased at a future date, causing a bigger problem on a tax most people cant 'see'?

[r3volution 3.0]

if so, this is very scary and a horrible idea.

Why?

VAT is one of the most efficient forms of taxation.

It eliminates most of the administrative and compliance costs associated with the income tax.

[Dr.3D]

So where is the added value?

[timosman]

Why?

VAT is one of the most efficient forms of taxation.

It eliminates most of the administrative and compliance costs associated with the income tax.

huh?

[Krugminator2]

Why?

VAT is one of the most efficient forms of taxation.

It eliminates most of the administrative and compliance costs associated with the income tax.


A consumption tax is the best tax in virtually every respect. It creates the fewest distortions

His proposal would require a 2/3rd vote to raise it.

The problem with a VAT is that it makes people drool uncontrollably at just the mention of it. Look at how angry people at just the mention of it. He probably should have just proposed a sales tax instead, but a sales tax is hard sale too.

[timosman]

So where is the added value?

Nowhere for the consumer. The net result is simply higher tax rate. Think how affordable the affordable health care is,

[Dr.3D]

Nowhere for the consumer. The net result is simply higher tax rate. Think how affordable the affordable health care is,
So they call it Value Added just to confuse us like the PATRIOT act confuses.

[The Gold Standard]

I guess I'm not voting then. Are you shitting me? I never would have thought he was capable of such a thing. Adding a new tax they can jack the rates up on? They don't take enough of our money?

[navy-vet]

So they call it Value Added just to confuse us like the PATRIOT act confuses.
yep, and the Affordable Care Act, and Affirmative Action....
It is a kind of sick little joke too I bet.

[Dr.3D]

yep, and the Affordable Care Act, and Affirmative Action....
It is a kind of sick little joke too I bet.
Well, I understand that kind of stupidity started in Europe. I guess those folks want the U.S. to be just like Europe. What a shame they can't let us be the last bastion of liberty left in this world.

[Krugminator2]

Well, I understand that kind of stupidity started in Europe. I guess those folks want the U.S. to be just like Europe. What a shame they can't let us be the last bastion of liberty left in this world.

Singapore, Hong Kong, and Switzerland are all far more economically free than the US and spend far less and they all have VATs.


I guess I'm not voting then. Are you shitting me? I never would have thought he was capable of such a thing. Adding a new tax they can jack the rates up on? They don't take enough of our money?

It eliminates payroll taxes and corporate taxes. Why aren't you worried about those taxes being "jacked up."

[timosman]

Even wikipedia states VAT is the same as GST:


A value-added tax (VAT) or general sales tax (GST) is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price

https://en.wikipedia.org/wiki/Value-added_tax

[The Gold Standard]

It eliminates payroll taxes and corporate taxes. Why aren't you worried about those taxes being "jacked up."

It eliminates them for now. They would come back, and we would have a shiny new sales tax to go with them. No thanks.

[Krugminator2]

It eliminates them for now. They would come back, and we would have a shiny new sales tax to go with them. No thanks.

Oh obviously, they would come back. We all know how often the federal government raises taxes. Voters love 'em. It is such a frequent occurrence. The last tax hike was 22 years ago and it lead to the first Republican controlled house in 40 years.

The US is ranked 11 in the Heritage Economic Freedom Ranking. ALL 11 countries ahead of the US have VATs.

[LatinsforPaul]

https://www.lewrockwell.com/lrc-blog/rand-paul-isnt-the-only-one-proposing-a-vat/

Can anyone confirm this? does Rand Paul's tax plan include a VAT Tax? if so, this is very scary and a horrible idea. how can he justify this?

But with Rand's plan if you raise the corporate tax you also have to raise the personal tax and by 3/5 vote of congress, which makes it much more difficult to raise the rate...


https://www.youtube.com/watch?v=qoYs-WXhiLs

[The Gold Standard]

Oh obviously, they would come back. We all know how often the federal government raises taxes. Voters love 'em. It is such a frequent occurrence. The last tax hike was 22 years ago and it lead to the first Republican controlled house in 40 years.

The US is ranked 11 in the Heritage Economic Freedom Ranking. ALL 11 countries ahead of the US have VATs.

Oh, well that's a relief. The Heritage Economic Freedom Ranking means the world to me. Let's have it then! I'm always excited to find new ways I can support my government and make sure they get enough revenue.

[timosman]

Keep in mind in most of the countries VAT is about 20%. Let it sink - 20% Federal Sales Tax.

[The Gold Standard]

Keep in mind in most of the countries VAT is about 20%. Let it sink - 20% Federal Sales Tax.

And those countries aren't the policemen of the world. They are, in fact, subsidized by the policemen of the world.

[Krugminator2]

Oh, well that's a relief. The Heritage Economic Freedom Ranking means the world to me. Let's have it then! I'm always exciting to find new ways I can support my government and make sure they get enough revenue.

His plan leads to much less revenue. How do you not know that and have such strong opinion?

So if he proposed purely a national sales and got rid of every other tax, would you oppose that too? I guess you must because it is a new tax.


Keep in mind in most of the countries VAT is about 20%. Let it sink - 20% Federal Sales Tax.

The Fair Tax that Gary Johnson and John Stossel endorse is a 23% sales tax. That would be my ideal but it will never pass.

[r3volution 3.0]

huh?

1. VAT is largely self-policing (= fewer IRS goons = smaller IRS budget). At each stage of production, each firm collects tax from its customers and pays tax to its suppliers, and remits the difference to the government. Suppose a firm wanted to evade by failing to report a sale (i.e. keeps the tax on that sale for itself, rather than sending it along to the government). That's not going to work, because the counterparty to that sale is going to report the sale, so the figures sent into the government by the two firms won't match, and the evader will be easily caught. Why will the counterparty report the sale? Because that reduces his own tax liability. Hence, self-policing.

2. The mere fact that the government deals with businesses rather than individuals (lots more of latter than former) makes for lower administrative costs.

3. Much of the administrative burden is shifted onto business; private enterprises (profit motive) will tend to find ways of doing it more cheaply than government.

4. As for compliance costs, it's altogether simpler than the income tax and - again - would affect far fewer people (H&R Block, however, will not be pleased).

[specsaregood]

Anyone who supports a VAT tax can go fuck themselves.

His father said he would prefer VAT over our current system as well. The only reason he didn't push the Fairtax was that he didn't think it ensured elimination of the income tax as a prerequisite.

I recall him pointing out that you can avoid a VAT tax; and that it helps promote saving over spending.

[Quark]

Not a fan of VAT, even with its advantages over other forms of taxation in terms of market disruptions. Sales taxes are easier to evade than VAT's. Since I buy quite a lot of my things online, I rarely pay sales tax in my state. Food and clothing are untaxed here, and those are the only two things that I commonly don't buy online. And all of the countries that have VAT's also tend to have progressive income taxes as well. The VAT is rarely instead of progressive incomes taxes, and most often in addition to them.

I like Ron Paul's view on the income tax, it should be flat, really flat, as in zero. And we shouldn't replace it with anything. I understand that Rand has to make the budget work on paper, but I hope that is all it is.

[timosman]

1. VAT is largely self-policing (= fewer IRS goons = smaller IRS budget). At each stage of production, each firm collects tax from its customers and pays tax to its suppliers, and remits the difference to the government. Suppose a firm wanted to evade by failing to report a sale (i.e. keeps the tax on that sale for itself, rather than sending it along to the government). That's not going to work, because the counterparty to that sale is going to report the sale, so the figures sent into the government by the two firms won't match, and the evader will be easily caught. Why will the counterparty report the sale? Because that reduces his own tax liability. Hence, self-policing.

2. The mere fact that the government deals with businesses rather than individuals (lots more of latter than former) makes for lower administrative costs.

3. Much of the administrative burden is shifted onto business. This is good, because private enterprises (profit motive) will tend to find ways of doing it more cheaply than government.

4. As for compliance costs, it's altogether simpler than the income tax and - again - would affect far fewer people (H&R Block, however, will not be pleased).

You are engaging in deception. From the end user perspective the internal mechanics of VAT are not relevant. It is no different than the sales tax.

The amount of scrutiny businesses are going to be subjected to will increase, as government will have the ability to track closely the entire manufacturing process. Not sure how this will result in lower overhead and fewer bureaucrats?

[r3volution 3.0]

You are engaging in deception. From the end user perspective the internal mechanics of VAT are not relevant.

They are if the end user wants to reduce government spending.


It is no different than the sales tax.

From the end user perspective, that's right.

And?


The amount of scrutiny businesses are going to be subjected to will increase, as government will have the ability to track closely the entire manufacturing process. Not sure how this will result in lower overhead and fewer bureaucrats?

See point #1 in my last post.

[The Gold Standard]

His plan leads to much less revenue. How do you not know that and have such strong opinion?

So if he proposed purely a national sales and got rid of every other tax, would you oppose that too? I guess you must because it is a new tax.


I will always oppose every tax. If he were to propose a national sales tax on the condition that the 16th amendment was repealed first, then I wouldn't bitch about it.

[Root]

1. VAT is largely self-policing (= fewer IRS goons = smaller IRS budget). At each stage of production, each firm collects tax from its customers and pays tax to its suppliers, and remits the difference to the government. Suppose a firm wanted to evade by failing to report a sale (i.e. keeps the tax on that sale for itself, rather than sending it along to the government). That's not going to work, because the counterparty to that sale is going to report the sale, so the figures sent into the government by the two firms won't match, and the evader will be easily caught. Why will the counterparty report the sale? Because that reduces his own tax liability. Hence, self-policing.

Sounds like a system full of black market opportunities.

[sparebulb]

Those who entertain the notion of a VAT obviously have never purchased a manufactured item in Great Britain.

[specsaregood]

Sounds like a system full of black market opportunities.

Criminal organizations made bank in the EU when VAt was introduced.
http://moneyweek.com/how-carousel-fraud-is-putting-the-vat-system-in-a-spin/
https://en.wikipedia.org/wiki/Missing_trader_fraud

[TaftFan]

Thank you. I will take a closer look at this tax plan. I am not an expert either. Hopefully Rand can explain this possible situation.

But, if there is a 'limited VAT' in this plan(or any plan, talking in more of a theoretical perspective). Couldnt the rates of this 'VAT' be increased at a future date, causing a bigger problem on a tax most people cant 'see'?

Here is what his website says:

I would also apply this uniform 14.5% business-activity tax on all companies—down from as high as nearly 40% for small businesses and 35% for corporations. This tax would be levied on revenues minus allowable expenses, such as the purchase of parts, computers and office equipment. All capital purchases would be immediately expensed, ending complicated depreciation schedules.

Any business tax is a hidden tax on product prices.

[r3volution 3.0]

Those who entertain the notion of a VAT obviously have never purchased a manufactured item in Great Britain.

No one here is proposing a VAT in addition to existing taxes; it would be a replacement.

Yes, living expenses would rise, but you'd have much more in the paycheck to cover it.

[r3volution 3.0]

Any business tax is a hidden tax on product prices.

Any tax will reduce living standards.

Whether the immediate effect is to lower income (as with income tax) or raise prices (as with VAT) is irrelevant.

[r3volution 3.0]

Let's have it then! I'm always excited to find new ways I can support my government and make sure they get enough revenue.

Think of it this way: if you're going to be robbed, and the robber is going to bill you for his expenses (gun, mask, etc), do you want his expenses to be higher or lower?

A more efficient tax system (like VAT) means the government has to spend less (of your) money to rob you.

It's a good thing.

[TaftFan]

Any tax will reduce living standards.

Whether the immediate effect is to lower income (as with income tax) or raise prices (as with VAT) is irrelevant.

It matters because people vote and therefore taxes need to be very transparent.

[r3volution 3.0]

It matters because people vote and therefore taxes need to be very transparent.

I'd say VAT's actually more visible than income tax.

You see the income tax only once a year, or once a pay-check.

You see VAT every time you go shopping.

[Ronin Truth]

It may just largely depend on what exactly is in the vat.

[erowe1]

Why?

VAT is one of the most efficient forms of taxation.

It eliminates most of the administrative and compliance costs associated with the income tax.

What the...

Since when is being a more efficient form of taxation a good thing?

[erowe1]

You see VAT every time you go shopping.

Only if the receipt includes the breakdown of taxes included in the final cost.

[r3volution 3.0]

What the...

Since is being a more efficient form of taxation a good thing?

Since always

Tax A -- It costs the government $1 to collect $100. The government needs $1000, so it actually has to raise $1010 ($1000 + $10 collection costs).

Tax B -- It costs the government $1 to collect $50. The government needs $1000, so it actually has to raise $1020 ($1000 + $20 collection costs).

...under which are the people paying more total taxes?

As I said earlier: if the robber robbing you is going to bill you for his expenses, do you want his expenses to be higher or lower?


Only if the receipt includes the breakdown of taxes included in the final cost.

True, but that's easy enough.

Where I live, sales tax is noted on every receipt - not sure if this is a legal requirement or if businesses do this voluntary.

Either way, the same could be done with VAT.

[erowe1]

True, but that's easy enough.

Where I live, sales tax is noted on every receipt - not sure if this is a legal requirement or if businesses do this voluntary.

Either way, the same could be done with VAT.

That would be pretty difficult. Each stage of the production and resale of the product would have to keep track of their VAT and VATs that came earlier in the chain. And even if the initial law required them to do this, it would be easy to repeal that part.

[r3volution 3.0]

That would be pretty difficult. Each stage of the production and resale of the product would have to keep track of their VAT and VATs that came earlier in the chain.

10% VAT

---raw material producer sells wheat for $100, collects $10 tax and sends to government

---manufacturer sell bread for $150, collects $15 and sends $5 ($15 - $10) to government

---wholesaler sells bread for $200, collects $20 and sends $5 ($20 - $15) to government

---retailer sells bread for $300, collects $30 from end user and sends $10 ($30 - $20)) to government

The total tax paid as a good passes through the production chain ($10 + $5 + $5 + $10) equals the final sale price x the VAT rate ($30).

So, to put VAT on his customer's receipt, the retailer doesn't need any information from any other firms higher up the supply chain.

He just needs to know the VAT rate and the sale price of his own product.

Just like sales tax, easy.

[timosman]

10% VAT

---raw material producer sells wheat for $100, collects $10 tax and sends to government

---manufacturer sell bread for $150, collects $15 and sends $5 ($15 - $10) to government

---wholesaler sells bread for $200, collects $20 and sends $5 ($20 - $15) to government

---retailer sells bread for $300, collects $30 from end user and sends $10 ($30 - $20)) to government

The total tax paid as a good passes through the production chain ($10 + $5 + $5 + $10) equals the final sale price x the VAT rate ($30).

So, to put VAT on his customer's receipt, the retailer doesn't need any information from any other firms higher up the supply chain.

He just needs to know the VAT rate and the sale price of his own product.

Just like sales tax, easy.

A nightmare

[r3volution 3.0]

A nightmare

Because reasons?

[timosman]

Because reasons?

Just look at the number of transactions.

[r3volution 3.0]

Just look at the number of transactions.

Yes, economies are complicated.

We should have one firm producing everything!

[Chester Copperpot]

Not a fan of VAT, even with its advantages over other forms of taxation in terms of market disruptions. Sales taxes are easier to evade than VAT's. Since I buy quite a lot of my things online, I rarely pay sales tax in my state. Food and clothing are untaxed here, and those are the only two things that I commonly don't buy online. And all of the countries that have VAT's also tend to have progressive income taxes as well. The VAT is rarely instead of progressive incomes taxes, and most often in addition to them.

I like Ron Paul's view on the income tax, it should be flat, really flat, as in zero. And we shouldn't replace it with anything. I understand that Rand has to make the budget work on paper, but I hope that is all it is.
AGREED

[timosman]

Yes, economies are complicated.

We should have one firm producing everything!

http://www.mandm.org.nz/wp-content/uploads/2011/02/dino.png

[r3volution 3.0]

^^^I was being sarcastic, of course.

;)

I understand that you're complaining about the number of VAT-related transactions.

As to that, I don't see the problem. All that firms have to do is (1) apply the VAT on their sales to their customers, and (2) keep track of what VAT they paid in transactions with their suppliers, and then (3) subtract the one from the other and send a check in that amount to the IRS once a year/quarter/whatever. Since every firm is already, VAT or no VAT, keeping track of what their customers paid them, and what they paid their suppliers...what's the big deal?

Seems to be that firms would spend far less time/money/effort complying with VAT than with the byzantine corporate income tax.

...and, obviously, for the vast majority of people, who don't own businesses, compliance costs drop to zero. No interaction with the IRS ever, at all.

[navy-vet]

NO MORE TAX SCHEMES!

[r3volution 3.0]

NO MORE TAX SCHEMES!

The present tax system is the best possible?

[TaftFan]

Tell me again why a VAT is preferable to a one time sales tax?

[r3volution 3.0]

Tell me again why a VAT is preferable to a one time sales tax?

harder to evade ---> smaller IRS --> lower government spending

[dusman]

^^^I was being sarcastic, of course.

;)

I understand that you're complaining about the number of VAT-related transactions.

As to that, I don't see the problem. All that firms have to do is (1) apply the VAT on their sales to their customers, and (2) keep track of what VAT they paid in transactions with their suppliers, and then (3) subtract the one from the other and send a check in that amount to the IRS once a year/quarter/whatever. Since every firm is already, VAT or no VAT, keeping track of what their customers paid them, and what they paid their suppliers...what's the big deal?

Seems to be that firms would spend far less time/money/effort complying with VAT than with the byzantine corporate income tax.

...and, obviously, for the vast majority of people, who don't own businesses, compliance costs drop to zero. No interaction with the IRS ever, at all.

As a business owner, I'd much prefer a tax system in the form Rand is proposing than the present tax system any day.

[kahless]

Just imagine a manufacturer to produce a product purchases 20 items from 20 different companies will now pay 14.5% tax on each of those 20 items rather than the current 0%. In many cases the manufacturer does not sell directly to retail, you have the middle man - the reseller. The reseller then pays 14.5% tax on the purchases from the manufacturer up from 0%. Then you have the retailer that purchases the item from the reseller. The retailer then pays 14.5% up from 0%.

That is quite a bit of new tax for a single product that did not exist before and will increase the sale price of the product at retail. The higher costs at retail will certainly hurt low income folks like the poor and the elderly the most.

[r3volution 3.0]

Just imagine a manufacturer to produce a product purchases 20 items from 20 different companies will now pay 14.5% tax on each of those 20 items rather than the current 0%. In many cases the manufacturer does not sell directly to retail, you have the middle man - the reseller. The reseller then pays 14.5% tax on the purchases from the manufacturer up from 0%. Then you have the retailer that purchases the item from the reseller. The retailer then pays 14.5% up from 0%.

That is quite a bit of new tax for a single product that did not exist before and will increase the sale price of the product at retail. The higher costs at retail will certainly hurt low income folks like the poor and the elderly the most.

Yes, the VAT is less progressive than the income tax.

The rich will still pay more (they buy more stuff), but not by as large a margin.

*shrug*

...to my mind, the goal in tax reform is not to make them "fair," but to make them lower overall and more efficient.

[timosman]

Singapore, Hong Kong, and Switzerland are all far more economically free than the US and spend far less and they all have VATs

This is not true. Hong Kong does not have VAT.

[erowe1]

harder to evade ---> smaller IRS --> lower government spending

I want taxes that are easier for me to evade.

[Krugminator2]

This is not true. Hong Kong does not have VAT.

Okay? You are right. Singapore and Switzerland were more than enough to make my point along with the other examples. But apparently Hong Kong doesn't have a VAT.

[TommyJeff]

harder to evade ---> smaller IRS --> lower government spending

VAT may be preferred to an income tax. But do you favor a VAT over a flat sale tax?

[r3volution 3.0]

VAT may be preferred to an income tax. But do you favor a VAT over a flat sale tax?

Yes, because it's harder to evade, as mentioned earlier.

[misterx]

They are if the end user wants to reduce government spending.

The end user would have no reason to want to reduce government spending because from his point of view it is not costing him anything. Yes, people are that stupid. That's why I don't like taxes that people can't see.

[navy-vet]

The end user would have no reason to want to reduce government spending because from his point of view it is not costing him anything. Yes, people are that stupid. That's why I don't like taxes that people can't see.
That's an interesting point that I haven't heard before.

[Zippyjuan]

Yes, because it's harder to evade, as mentioned earlier.

Vat is hidden in the price of goods. Sales tax is added on to it. They both have the same net effect to the consumer but one is more noticable.

[r3volution 3.0]

Vat is hidden in the price of goods. Sales tax is added on to it. They both have the same net effect to the consumer but one is more noticable.

See post #44 (http://www.ronpaulforums.com/showthread.php?485320-Does-Rand-Support-a-VAT-Tax&p=6045544&viewfull=1#post6045544).