1% Wall Street global pols say----
WE CREATE THE ECONOMIC HARDSHIP FOR 99% OF US CITIZENS BY ALLOWING WALL STREET AND GLOBAL CORPORATIONS TO KEEP OUR US AND LOCAL ECONOMIES STAGNANT, FLEECE GOVERNMENT COFFERS AND PEOPLE'S POCKETS WITH FRAUD AND CORRUPTION, THEN PASS LAWS AND POLICY TO TAKE PROPERTY FROM THE 99%.
When 100,000 Baltimore voters voted for establishment candidates for Mayor of Baltimore-----Embry, Warnock, Dixon, Pugh, Stokes, Mosby-----all dedicated to installing Wall Street Baltimore Development ONE WORLD/ONE GOVERNMENT policies.....ARE THEY REALLY VOTING FOR ALL THESE TAX POLICIES?
It is our Baltimore Attorney, state's attorneys, our Baltimore pols who have a duty to PROTECT AND SERVE WE THE PEOPLE OF BALTIMORE----and they KNOW these US Treasury and municipal bond markets are criminal. They know this is taking out our pensions, 401Ks, Social Security Trusts, and setting the stage for 99% of people to be enslaved to rising taxation all for global corporate campus WELFARE QUEEN SUBSIDY.
We will end for now on corporate tax policy by revisiting VAT ----VALUE-ADDED TAX. First, we remember VALUE-ADDED under 1% Wall Street global pols means ----VALUE-ADDED TO CORPORATE PROFIT. Right away we know this tax scheme is about protecting again the corporations at the top from taxation pushing it all on small business and individuals.
Returning to the article on International Economic Zone standard global corporate tax law here was India with its World Bank/IMF/WTO-written tax law and we see 100% VAT REBATES ON EXPORTED INDIA SOURCED COMPONENTS.
The International Economic Zone setup has all global corporations falling into the EXPORTING category. WalMart and its global GREEN CORPORATION opens its global corporate campus to export across Asia and Chinese GLOBAL GREEN CORPORATION opens its global corporation here in Arizona to export. The US has to IMPORT FRESH FOOD from global BIG AG while exporting US grown food overseas.
IT WILL ALWAYS BE CATEGORIZED AS EXPORTING.
Here in the US it is again the Republican Think Tanks writing these global Value-Added Tax policies and even as Congress PRETENDS to be debating this for corporate tax reform------Trans Pacific Trade Pact and World Bank global tax policy is what 1% Wall Street global pols go for the policies they pass----NOT TO YOU AND ME.
'Tax Incentives for Investors
Incentives and facilities offered to units located within an SEZ can include:
As this article makes one feel there is not a concensus on a global VAT----they are already installing this and it looks just like the discussion we had this week.
Should the U.S. Adopt a Value-Added Tax?
Supporters say a VAT can be good for economic growth. Critics say it encourages wasteful government spending.The U.S. is a holdout among developed nations in not having a value-added tax. But one could be part of a broad tax overhaul.
Feb. 28, 2016 10:15 p.m. ET Wall Street Journal
In discussions about changing the U.S. tax system, one topic almost always arises: the possibility of adopting a value-added tax.
After all, most of the industrialized world uses a VAT—which is not to say they all like it.
Unlike a traditional sales tax, a VAT is a levy on consumption that taxes the value added to a product or service by businesses at each point in the chain of production. Businesses along the chain collect the tax and send it to the government, which supporters say is a boon for the efficiency of revenue-collection efforts. But ultimately, it is the consumer who pays the tax, because the final price of the goods and services they buy reflects all of the taxes that have been charged up to that point. The taxes are all baked into the retail price.
In this way, a VAT taxes what people consume rather than how much they earn. But this is also a reason why some consider a VAT to be unfair—because, the critics say, the burden of taxation falls disproportionately on those with lower incomes.
Supporters of a VAT, meanwhile, say it is better for economic growth than an income tax because it doesn’t tax savings or investment. And governments like it because it tends to bring in more revenue, thanks in part to the role that businesses play in its collection.
Incentivizing their efforts, businesses receive credits for the VAT they pay.
Arguing that a VAT can be good for governments and for the economy is Michael J. Graetz, a professor of law at Columbia Law School and author of “100 Million Unnecessary Returns: A Simple, Fair, and Competitive Tax Plan for the United States.” Taking the view that a VAT encourages wasteful government spending is David R. Henderson, an economics professor at the Naval Postgraduate School and a research fellow with the Hoover Institution.
Yes: It is fair and simple, and would spur economic growthBy Michael J. Graetz
For decades after World War II, even a horrible tax system (with a top individual income-tax rate of 91% and corporate rates above 50%) could not keep the U.S. from achieving robust economic growth and widespread prosperity.
A generation later, Ronald Reagan’s 1986 tax overhaul lowered income-tax rates. But it didn’t take long before that reform unraveled.
Now, our income tax is badly broken, and astounding complexities abound. In 1987 our tax rates on businesses were among the lowest in the world; today they are the highest. How can anyone remain optimistic about repairing our tax system without radical surgery?
Different path
What our nation needs is a fair and simple tax structure that is conducive to economic growth and that better positions U.S. workers and businesses to compete in today’s slow-growth global economy. We are hobbled by our heavy reliance on income taxation. The rest of the world has taken a very different path.
While the U.S. is a low-tax country compared with other nations in the Organization for Economic Cooperation and Development, other developed countries get nearly a third of their take by taxing consumption—through value-added taxes—while we get less than 18%, virtually all from state and local sales taxes.
Serious tax reform needs to replace income taxes on businesses and individuals with a value-added tax on sales of goods and services collected at all stages of production. Today, more than 160 countries have a VAT. The U.S. is the only OECD country that doesn’t.
This would free more than 150 million Americans from ever having to file tax returns or deal with the Internal Revenue Service. And it would enable us to cut our corporate income-tax rate to compete with the lowest in the world without shifting the tax burden away from those who can most afford to pay.
A VAT would also spur economic growth, increasing U.S. GDP by as much as 5% in the long run, compared with proposed income-tax changes that would increase GDP by far less.
Shifting taxes from production to consumption would stimulate jobs and investments and induce companies to base headquarters here rather than abroad. Taking the additional step of taxing imports and exempting exports would yield hundreds of billions of dollars for the U.S. Treasury in the decade ahead.
Collection optional
Unlike the income tax, with its exclusions, deductions and credits, we could apply VAT at a single rate to a broad base of goods and services. Like Canada’s VAT, the amount of tax on each purchase should be stated on customers’ receipts. And for 90% or more of businesses, all small businesses, collection should be optional. Before the retail level, the tax just gets collected at the next stage, based on the higher price. And even if a retailer opts out, the amount of tax forgone is modest compared with the VAT already collected at earlier stages.
Former Treasury Secretary Lawrence Summers said Republicans don’t like value-added taxes because they are a “money machine” and Democrats don’t like them because they are regressive. We will get a VAT, he said, when Democrats realize that it is a money machine and Republicans realize that it is regressive.
To the contrary, we will get a VAT only as part of a major tax reform designed to ensure that it is neither regressive nor a money machine. The potential for regressivity should be addressed for low- and moderate-income households by eliminating payroll taxes and through debit cards which cancel taxes at the cash register.
Done right, a VAT would enable us to restructure our tax system to produce greater economic growth and more jobs, fairly, and at far lower costs. For the vast majority of Americans, April 15 would be just another spring day.
Mr. Graetz is a professor of law at Columbia Law School and author of “100 Million Unnecessary Returns: A Simple, Fair, and Competitive Tax Plan for the United States.” He can be reached at reports@wsj.com.
No: It makes it too easy for the government to raise moneyBy David R. Henderson
Many economists who study tax systems do not concern themselves with the issue of government spending. Focusing simply on how the government collects its revenue, they often argue that a value-added tax, which taxes consumption, is more efficient than the alternatives. One main reason they give is that a consumption tax avoids the multiple taxation of saving that occurs now under our tax system. Our current system taxes interest and dividends that people earn on their savings, and also taxes capital gains.
But another efficiency—this one from the revenue collector’s perspective—is that a VAT makes it easier to increase revenue. And that is the part we should balk at.
The evidence is strong that a VAT makes it easier for the government to tax more. The VAT is, in short, a revenue machine for big government.
BIG GOVERNMENT BEING REALLY BIG GOVERNMENT---THE GLOBAL CORPORATE TRIBUNAL.
All other things being equal, the higher taxes are, the lower economic growth is. Moreover, higher taxes, even if they didn’t hurt growth, would put more money in the hands of government, which spends more recklessly and wastefully than we spend our own money.
Europe’s experience
Take Europe, where the VAT is a major source of government revenue. When Belgium, France, Germany, Ireland, Italy and the Netherlands adopted a VAT—all between 1968 and 1971—their stated revenue goal was neutrality: Gains in revenue from the VAT were to be fully offset by reduced taxes elsewhere. (France already had a VAT but needed to revise it to meet European Economic Community Standards.)
All failed. Government revenues—and spending—rose substantially as a percentage of GDP. In 1967 in France, the year before that country adopted its EEC-compliant VAT, total government revenues were 33.4% of GDP. In 1968, France adopted a VAT rate of 13.6%. By 2014, its VAT rate was 20% and government revenues were a whopping 45.2% of GDP. When Britain adopted a VAT, the government’s stated goal was to reduce revenue. That failed, too. Only one country, Denmark, adopted a VAT to increase revenues. It succeeded.
Why does a VAT make it easier for government to raise revenue?
One possible reason is that a VAT is nearly invisible. When you pay for an item and don’t see the tax itemized on your receipt, you may not be aware of how big the tax is. And VATs tend to be hidden. Ironically, another possible reason VATs have led to government growth is that because VATs are more efficient at raising revenue, governments are tempted to raise VATs. Whichever explanation is correct, the sad truth is that VATs are not an engine of economic growth but, rather, an engine of government growth.
Make it visible
Is there a way not to have the VAT be an engine of government growth? There is only one I can think of: insisting that a VAT or similar consumption tax be highly visible. But then any government that implements a large transparent VAT is likely to be defeated. That’s what happened in Canada. In 1991, Prime Minister Brian Mulroney, head of the Progressive Conservatives, imposed a fully transparent 7% sales (consumption) tax. In the next election, his party lost nearly all of its 151 seats—the biggest rout in Canadian parliamentary history. The hugely unpopular sales tax was a major contributor.
One further problem with a VAT is that it would take a much higher percentage of income from lower-income people than the current tax system does. A way around that is to send checks to lower-income people who apply. The checks would be so large, though, that fraud would be substantial.
In short, the VAT is a bad idea.
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Wall Street global pols will sell this global VAT by telling voters that Europe does this and Europe is a social Democracy right? As usual this is propaganda because Europe has all kinds of different taxation that makes sure corporations are paying in other ways. Even Europeans saw VAT is bad and regressive-----Regressive means the real burden of taxes falls to small business and individuals JUST AS WE HAVE TALKED IS HAPPENING IN BALTIMORE.
Indeed, all this week's discussion on global corporate campuses not paying any taxes in US cities deemed International Economic Zones-----all these corporate tax subsidies coming to global corporations now doing all outsourced government work-----subsidizing away the second tier of industry-----LEAVES THE RETAIL AND THE CONSUMER AS THE HEAVIEST HIT WITH TAXATION.
'One may recall that VAT was introduced in Bangladesh in 1991 as part of the liberalisation programme backed by the IMF and the World Bank. Incidentally, it is also the period from when inequality in Bangladesh began to rise'.
So, a global corporate campus like Johns Hopkins and UnderArmour pays no corporate taxes as the INNOVATORS in product creation. Then, all the infrastructure corporations, development corporations, manufacturing factories are given tax subsidy to eliminate their tax burden------
VAT IS 100% REBATED WHEN MANUFACTURING PRODUCTS TO BE EXPORTED.
This eliminates all taxation for what will be the 1% and their 2% global corporations. The next tier is the distribution structure----well that is the DUTY FREE ZONE. No taxation for global corporations distributing outside the US or bringing anything into the US. Once distributed that next tier is the retail outlet. That is where a product is sold. It can be WalMart or our local gas station. This is where a VAT TAX is actually felt. WalMart of course has professional tax people having eliminated all of there global tax obligations-----they are now getting tax as profit. Not so for our local gas station retailer. Same thing for our global food grocery stores vs our local small food stores. The global food stores have professional tax people eliminating any of that VAT that may hit them----our community grocery store does not and ends paying that VAT.
As usual, the low man on the totem pole in VAT is the consumer----WE THE PEOPLE buying anything gets the brunt of VAT. This argument is not about hurting only the poor---it hurts the 99%.
'There is almost unanimity among academic researchers and tax specialists that VAT is regressive; its incidence falls more on lower income group than on households in higher income brackets. That is, VAT hurts the poor disproportionately more than the rich. This is precisely the reason why VAT is not uniformly rated. Countries attempt to reduce the impact of VAT on the lower income groups by either exempting goods and services consumed mostly by them from VAT or having lower rates for these goods and services'.
VAT: A regressive tax
Finance Minister Abdul Muhith
The Honourable Finance Minister has backed down on his decision to reduce VAT. Apparently this was to ensure disbursement of the IMF’s tranches of Extended Credit Facility (ECF). In the words of the Honourable Finance Minister (as reported in the media), “We are not going to reduce the existing VAT rate. IMF feared that the rate would be cut. They set condition not to reduce it for releasing two tranches of ECF (Extended Credit Facility).” So, the current rate of 15% will stay.
There is almost unanimity among academic researchers and tax specialists that VAT is regressive; its incidence falls more on lower income group than on households in higher income brackets. That is, VAT hurts the poor disproportionately more than the rich. This is precisely the reason why VAT is not uniformly rated. Countries attempt to reduce the impact of VAT on the lower income groups by either exempting goods and services consumed mostly by them from VAT or having lower rates for these goods and services.
To address the problem of regressivity, food-stuffs that are typically consumed by the poor such as rice, lentils et cetera, are exempted in Bangladesh. At the same time, “supplementary duty” at a higher rate on certain luxurious and socially undesirable items seems to make the VAT system more equitable.
However, a 2010 study of UK tax system shows that VAT cannot be made progressive even with exemptions and differential rates. The study finds that “the poorest 20% of households in the UK have both the highest overall tax burden of any quintile and the highest VAT burden. That VAT burden at 12.1% of their income is more than double that paid by the top quintile, where the VAT burden is 5.9% of income. VAT is, therefore, regressive.”
The IMF normally prefers a uniformly rated tax on the ground that differential ratings make the VAT system complicated and hence increases administration costs. For example, according to an IMF study in 1991, the total VAT collection, as a percentage of total tax revenue, was only 24% in Turkey. To achieve progressivity, half of it was given back as rebate to the lower income groups through a cumbersome mechanism that required monthly representation of receipts, their verifications, huge bureaucracy and a very high compliance cost.
In addition to administrative complexity (and hence increased administrative and compliance costs) as well as the possibility of court’s involvement on questions of interpretation, exemptions and differential rates distort consumer and producer choices. Thus, it is argued that the advantage of progressivity gained by a whole host of exemptions, zero rating and multiple rates do not offset the disadvantages associated with the departure from an uniform or single rate and comprehensive base.
One may recall that VAT was introduced in Bangladesh in 1991 as part of the liberalisation programme backed by the IMF and the World Bank. Incidentally, it is also the period from when inequality in Bangladesh began to rise. The common measure of income inequality, the Gini coefficient, which remained more or less stable at around 0.37 since the 1970s until the late 1980s, rose to 0.46 by 2010. One wonders to what extent it was caused by the introduction of VAT.
If VAT is found to have contributed to the rise in inequality, the Honourable Finance Minister’s decision has missed an opportunity to address the issue. VAT must be understood to be regressive and it should be replaced more and more by direct tax with a higher threshold, as it would be a more progressive setup.
Countries should be careful in following the advice of the IMF. It does not have a very good track record. Recall how it mismanaged the Indonesian economy when it was hit by the Asian financial crisis in 1997-98. It managed to recover only when it exited the IMF programme. Malaysia saved itself from the same fate as Indonesia by imposing restrictions on capital account against the advice of the IMF. Argentina, Brazil, and Turkey all have had the same experience – they were able to overcome their economic problems and began to grow at respectable rates only after saying ‘good-bye’ to the IMF programme.
The IMF not only failed to caution the countries of the impending global financial crisis in 2008, it in fact projected a rosy outlook! Its advice of premature fiscal consolidation in 2010 has been responsible for the abortive global recovery; Europe is still struggling to come out of the crisis.
The running record of the World Bank or the ADB is not much better. When Singapore was forced to leave the Malaysian Federation in 1965, the World Bank advised against its export-oriented development policy. We all now know the result of Singapore’s defiance.
One needs to keep in mind that the IMF, World Bank, and ADB are lenders. Their survival depends on the profit they earn from the lending they make to developing countries. So, it is not to their interest that the borrowing countries become completely free of debt. They are happy to maintain the lifeline; but not when developing countries are completely out of the woods.
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'This is part of the reason why Michigan’s VAT is currently slated to be repealed by 2009: the VAT is especially painful for businesses not turning a profit'.
Retail stores will see the movement to VAT with Congress passing laws moving the costs of credit card charges from banks to retailer. Remember the retail stores shouting when every time we pay with our credit card they get that processing fee-----not VISA/AMERICAN EXPRESS. This was VAT in action---moving the taxation repressively downward to retail. Wall Street banks don't pay VAT because they are the innovators creating a product----manufacturers and distributors do not pay VAT because they have good tax people----it is the retail store paying for each swipe of our credit card and of course now that retailer raises a product price to cover this.
THIS IS WHAT MAKES VAT REGRESSIVE NO MATTER HOW MANY DIAGRAMS THEY SHOW WHERE CORPORATIONS AT THE TOP ARE PAYING SOMETHING.
When Republican voters support these regressive tax policies thinking its all about allowing JOB CREATORS to keep their money -----they are not creating jobs----they are building an economy of robotics and technology specifically to KILL JOB CREATION. Business creates jobs best at the local level---our small businesses in our communities----and they have since CLINTON/BUSH/OBAMA been made to carry the burden of business taxation. So, then local Chamber of Commerce says----let's get rid of VAT on small business---and again that pushes all burden of tax on WE THE PEOPLE.
WE MUST HAVE CORPORATIONS PAYING THEIR FAIR SHARE OF TAXES. THEY BENEFIT FROM ALL PUBLIC AGENCY SUPPORTS ----IT IS NOT DOUBLE-TAXATION.
Look below at an article from 2004----this is Bush era when Michigan during Clinton switched to VAT. At the bottom of the article it shows why it didn't work and they phased it out as of 2009.
MOVING FORWARD IN BALTIMORE MEANS GLOBAL VAT TAX POLICY RESTRUCTURING ALL CORPORATE AND INDIVIDUAL TAXATION.
Value Added Taxes: An Option for States?
May 1, 2004 12:59 PM | Permalink |
In recent months, lawmakers in a number of states have suggested that a particular type of sales tax, called the value-added tax or VAT, might be a cure-all for state budgetary problems. Although Michigan is the only state that currently relies on a VAT as a major revenue source, several other states have recently considered implementing this type of tax. This policy brief evaluates the case for (and against) implementing a VAT at the state level.
What is a Value-Added Tax?
The value-added tax is exactly what its name implies. It is a tax on the value added at each stage of the production of goods and services. For any firm paying the VAT, the “value added” for a particular item is the amount by which the sales price of the product exceeds the cost of all the products purchased to make that item. Because the tax is paid at each level of production, and often not itemized on the final bill to consumers, some try to characterize the VAT as a tax on business. But most analysts agree that the value added tax is essentially a sales tax on consumer purchases that is collected in stages. From a tax fairness perspective, in other words, a VAT is just like a sales tax—it’s regressive, requiring low-income taxpayers to pay more of their income in tax than wealthier taxpayers must pay. The main difference is that the VAT is collected a little bit at a time from each stage of the production process, rather than being collected in one lump sum at the time of the final retail sale.
The following example shows how a VAT would apply to the production and sale of a chair:
At the end of this process, the outcome from the consumer’s perspective is just the same as if the state had imposed a retail sales tax on the $300 sales price. The main difference is that the VAT is collected a little bit at a time at each stage of the production process, rather than being collected in one lump sum at the time of the final retail sale.
Why Adopt a VAT—and Why Not
Policymakers seeking to impose a state VAT usually have one of two tax policy goals in mind, depending on which existing tax they want to replace. European VATs were created to eliminate structural problems in existing sales taxes. In particular, prior European sales taxes often applied not only to retail purchases but to “business to business” transactions, which should be exempt. When sales taxes apply to these business inputs, the tax is typically passed through to consumers in the form of higher retail prices. In other words, taxing business inputs amounts to taxing consumers multiple times on the same retail purchase. This problem, known as “pyramiding,” makes the sales tax both regressive and unpredictable (because the number of times the tax is paid depends on the number of stages of production), and encourages businesses to “vertically integrate” to avoid paying taxes on inputs to the production process. VATs are especially well designed to avoid taxing business inputs, since each component of a retail product’s value added is taxed exactly once. In other words, European countries replaced their poorly structured sales taxes with a better-functioning sales tax.
In Michigan, the rationale for adopting a VAT was quite different: their VAT was adopted to replace the corporate income tax, not the sales tax. Corporate income taxes tend to fluctuate wildly over the business cycle because they are based on corporate profits, which vary dramatically during periods of economic growth and downturns. Michigan’s corporate tax was especially volatile due to the importance of auto sales to its economy. A VAT is an inherently more stable and predictable revenue source than a corporate profits tax, because the tax base is a firm’s total amount of economic activity, which tends to be less variable than a firm’s profits over time, rather than its profits. In other words, Michigan replaced its corporate profits tax with what amounts to a second sales tax, choosing revenue stability as a primary goal of its “Single Business Tax.”
Problems With a VAT
Each of these rationales has some merit: replacing a sales tax with a VAT will improve the horizontal equity of the sales tax (by ensuring that each retail transaction is taxed the same way), and replacing a corporate profits tax with a VAT will make revenues more stable. But implementing either approach at the state level is problematic, for several reasons:
Value added taxes have been enacted internationally to address important concerns about structural flaws in sales taxes. But as a replacement for corporate profits taxes on the state level, the main impact of a VAT will be a more regressive tax system—and a host of angry businesses.
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Global corporate tax free------VAT free, duty free, warehouse tax free, distribution export/import tax free,
This is all we hear in Congress as the Wall Street global pols find reasons to install this global VAT. WE THE PEOPLE would know this is conservative posing---making US corporations look like they are paying their fair share---when that hasn't happened since CLINTON/BUSH/OBAMA. Here we see income tax as the only source of taxation measured. It is the top source of taxing corporations in the US---but overseas and especially in Europe corporations are taxed several different ways including VAT and income taxes. The point is this: corporate campuses small or foreign economic zone massive----consume tons of government expense in simply existing----Republicans say----well, the people working inside that corporate campus pay taxes and that is the only tax needed. This is why Republicans call corporate taxation DOUBLE TAXATION. They want corporations to have the rights of WE THE PEOPLE but they do not want to recognize the costs to society physical corporate campuses have.
Taking US corporate tax of 39% which we know they do not pay-----looking at this graph seeing income tax only ---think of the several other kinds of corporate taxes many nations place and we see those nations with corporate taxes well above 39%. It's true more and more nations are being tied to these GLOBAL VAT tax structures bound to International Economic Zones----Europe and US have escaped this although US Wall Street pols have been installing global VAT these several years of Obama----through Congress, our state assemblies, and our city/county halls---they simply are not telling citizens.
The U.S. Has the Highest Corporate Income Tax Rate in the OECD
January 27, 2014
By
Kyle Pomerleau,
Andrew Lundeen
In today’s globalized world, U.S. corporations are increasingly at a competitive disadvantage. They currently face the highest statutory corporate income tax rate in the world at 39.1 percent. This overall rate is a combination of our 35 percent federal rate and the average rate levied by U.S. states. Corporations headquartered in the 33 other industrialized countries that make up the Organization for Economic Cooperation and Development (OECD), however, face an average rate of 25 percent. Even corporations in high-tax European countries such as Belgium (34 percent), France (34.4 percent), and Sweden (22 percent) face much lower rates than those in the United States. Our largest trading partners—Canada, Japan, and the United Kingdom—have each cut their corporate tax rates over the past few years to become more competitive.
For more charts like the one below, see the second edition of our chart book, Putting a Face on America's Tax Returns.
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We have young people in Baltimore shouting they are going to break with US sovereignty and this is what they mean----One World with global 1% and their 2% in all these TPP tied nations will end sovereignty for all these global citizens. If a Chinese global corporation in Baltimore is operating here as it does in China---then people working there will work as they do in China. Since global foreign corporations are being courted to move to US International Economic Zones for this reason----so too comes all that global tax policy.
We have young people in Baltimore shouting they are going to break with US sovereignty and this is what they mean----One World with global 1% and their 2% in all these TPP tied nations will end sovereignty for all these global citizens. If a Chinese global corporation in Baltimore is operating here as it does in China---then people working there will work as they do in China. Since global foreign corporations are being courted to move to US International Economic Zones for this reason----so too comes all that global tax policy. Folks thinking this ONE WORLD ONE GOVERNMENT structure is somehow bringing equity----one needs to read the history of FAR-RIGHT STATE corporate fascism ------HITLER/STALIN/MAO. 1% Wall Street far-right authoritarian, militaristic, Libertarian Marxism.
June 24, 2015, 10:00 am
Whoops! We forgot to include the VAT in the TPP
By Kevin L. Kearns
According to U.S. Trade Representative Michael Froman, the Trans-Pacific Partnership (TPP) has a big benefit: With a signed TPP, American-made goods will finally enjoy tariff-free access to consumers in countries like Vietnam, Malaysia, and Singapore. However, some tariffs will not be dropped immediately, but instead will be phased out over a number of years.
Nevertheless, from a purely sales perspective, it’s a smart pitch, and one that’s designed to appeal to Americans’ sense of fair play. It’s a theme picked up by almost every Republican House fast-track (TPA) and TPP backer, as well as the few Democrat backers. Currently, the United States imposes no tariffs on roughly 80 percent of goods from TPP countries. And yet, U.S. exports often run into a brick wall when trying to reach overseas customers. For example, Vietnam slaps 70 percent tariffs on U.S. cars, Malaysia tacks a 50 percent duty on U.S. motorcycles, and Japan adds 189 percent on U.S. shoes.
President Obama has seized on this tariff disparity as a key selling point for the TPA/TPP. Unfortunately, his breezy sales patter studiously avoids serious fundamental barriers facing American exports in global trade. These barriers led to the failure of the president’s ‘Initiative to Double Exports in Five Years, 2009-2014,’ which only achieved roughly 50 percent of its goal, and demonstrated convincingly that rhetoric and appeals to foreign consumers don't equal export growth. It should be evident that America’s trading partner governments are not particularly keen to receive more U.S. goods and services, but are mainly interested in exporting their wares to the lucrative U.S. market. Additionally, most of the “95 percent of consumers living outside the United States,” especially in countries like Malaysia, Vietnam and other ‘fast growing’ Asian markets, aren’t consumers in any sense that Americans would understand. 80 percent of the world’s population lives on less than $10 a day, meaning that American-made cars, motorcycles, and shoes are luxury items far beyond their reach, tariffs or not.
Most significantly, the TPP does not address a massive cost to U.S. goods and services that has a chokehold on our export levels: foreign Value-Added Tax (VAT) schemes.
The United States is one of only a handful of nations worldwide that does not charge a VAT on incoming manufactures and services. But 10 of the 11 TPP member states do, which means that, even with tariff-free access, high barriers remain: U.S. exporters will still face a 19 percent surcharge in Chile, 15 percent in Peru, and 16 percent in Mexico — countries with which we already have free trade agreements — or 15 percent in New Zealand and 8 percent in Japan. Only tiny Brunei, population 425,000, lacks a VAT.
The double whammy of a country’s VAT tax is that it not only jacks up the cost of American goods and services entering that foreign market, but also it rebates the amount of the VAT to the country’s exports, making them more competitive against their American counterparts. Add the effect of a VAT to that of currency manipulation and it’s no wonder that the United States has been running massive trade deficits all these years.
The Obama administration and the Congress have failed to consider the VAT barrier in the TPA and in the underlying TPP. For decades, Congress and U.S. negotiators tried to tackle the VAT issue in trade talks, but unsuccessfully. The result: every time a trade agreement reduced tariffs it was undercut by our trading partners’ raising their VATs to compensate for tariff cuts. Unlike with currency manipulation, the administration doesn’t even have a ‘quiet diplomacy’ approach to address VAT inequality. That’s one big reason why the TPP is projected to grow the U.S. economy by a measly 0.4 percent by 2025.
The Froman-Obama-Republican hype on tariff reduction is a sales job that Congress shouldn’t buy. Congress must reject TPA until it addresses the massive market-distorting effects of foreign Value Added Taxes, one of the biggest obstacles facing American exporters in 21st century trade.
Kearns is president of the U.S. Business & Industry Council (USBIC), a national business organization advocating for domestic U.S. manufacturers since 1933.
WE CREATE THE ECONOMIC HARDSHIP FOR 99% OF US CITIZENS BY ALLOWING WALL STREET AND GLOBAL CORPORATIONS TO KEEP OUR US AND LOCAL ECONOMIES STAGNANT, FLEECE GOVERNMENT COFFERS AND PEOPLE'S POCKETS WITH FRAUD AND CORRUPTION, THEN PASS LAWS AND POLICY TO TAKE PROPERTY FROM THE 99%.
When 100,000 Baltimore voters voted for establishment candidates for Mayor of Baltimore-----Embry, Warnock, Dixon, Pugh, Stokes, Mosby-----all dedicated to installing Wall Street Baltimore Development ONE WORLD/ONE GOVERNMENT policies.....ARE THEY REALLY VOTING FOR ALL THESE TAX POLICIES?
It is our Baltimore Attorney, state's attorneys, our Baltimore pols who have a duty to PROTECT AND SERVE WE THE PEOPLE OF BALTIMORE----and they KNOW these US Treasury and municipal bond markets are criminal. They know this is taking out our pensions, 401Ks, Social Security Trusts, and setting the stage for 99% of people to be enslaved to rising taxation all for global corporate campus WELFARE QUEEN SUBSIDY.
We will end for now on corporate tax policy by revisiting VAT ----VALUE-ADDED TAX. First, we remember VALUE-ADDED under 1% Wall Street global pols means ----VALUE-ADDED TO CORPORATE PROFIT. Right away we know this tax scheme is about protecting again the corporations at the top from taxation pushing it all on small business and individuals.
Returning to the article on International Economic Zone standard global corporate tax law here was India with its World Bank/IMF/WTO-written tax law and we see 100% VAT REBATES ON EXPORTED INDIA SOURCED COMPONENTS.
The International Economic Zone setup has all global corporations falling into the EXPORTING category. WalMart and its global GREEN CORPORATION opens its global corporate campus to export across Asia and Chinese GLOBAL GREEN CORPORATION opens its global corporation here in Arizona to export. The US has to IMPORT FRESH FOOD from global BIG AG while exporting US grown food overseas.
IT WILL ALWAYS BE CATEGORIZED AS EXPORTING.
Here in the US it is again the Republican Think Tanks writing these global Value-Added Tax policies and even as Congress PRETENDS to be debating this for corporate tax reform------Trans Pacific Trade Pact and World Bank global tax policy is what 1% Wall Street global pols go for the policies they pass----NOT TO YOU AND ME.
'Tax Incentives for Investors
Incentives and facilities offered to units located within an SEZ can include:
- Duty free importation of required machinery, production lines and related equipment
- Duty free import and domestic procurement of component parts as required for the final product
- 100% VAT rebates on exported India sourced components;
- Income tax breaks – depending on the scope of business and where the business is located'
As this article makes one feel there is not a concensus on a global VAT----they are already installing this and it looks just like the discussion we had this week.
Should the U.S. Adopt a Value-Added Tax?
Supporters say a VAT can be good for economic growth. Critics say it encourages wasteful government spending.The U.S. is a holdout among developed nations in not having a value-added tax. But one could be part of a broad tax overhaul.
Feb. 28, 2016 10:15 p.m. ET Wall Street Journal
In discussions about changing the U.S. tax system, one topic almost always arises: the possibility of adopting a value-added tax.
After all, most of the industrialized world uses a VAT—which is not to say they all like it.
Unlike a traditional sales tax, a VAT is a levy on consumption that taxes the value added to a product or service by businesses at each point in the chain of production. Businesses along the chain collect the tax and send it to the government, which supporters say is a boon for the efficiency of revenue-collection efforts. But ultimately, it is the consumer who pays the tax, because the final price of the goods and services they buy reflects all of the taxes that have been charged up to that point. The taxes are all baked into the retail price.
In this way, a VAT taxes what people consume rather than how much they earn. But this is also a reason why some consider a VAT to be unfair—because, the critics say, the burden of taxation falls disproportionately on those with lower incomes.
Supporters of a VAT, meanwhile, say it is better for economic growth than an income tax because it doesn’t tax savings or investment. And governments like it because it tends to bring in more revenue, thanks in part to the role that businesses play in its collection.
Incentivizing their efforts, businesses receive credits for the VAT they pay.
Arguing that a VAT can be good for governments and for the economy is Michael J. Graetz, a professor of law at Columbia Law School and author of “100 Million Unnecessary Returns: A Simple, Fair, and Competitive Tax Plan for the United States.” Taking the view that a VAT encourages wasteful government spending is David R. Henderson, an economics professor at the Naval Postgraduate School and a research fellow with the Hoover Institution.
Yes: It is fair and simple, and would spur economic growthBy Michael J. Graetz
For decades after World War II, even a horrible tax system (with a top individual income-tax rate of 91% and corporate rates above 50%) could not keep the U.S. from achieving robust economic growth and widespread prosperity.
A generation later, Ronald Reagan’s 1986 tax overhaul lowered income-tax rates. But it didn’t take long before that reform unraveled.
Now, our income tax is badly broken, and astounding complexities abound. In 1987 our tax rates on businesses were among the lowest in the world; today they are the highest. How can anyone remain optimistic about repairing our tax system without radical surgery?
Different path
What our nation needs is a fair and simple tax structure that is conducive to economic growth and that better positions U.S. workers and businesses to compete in today’s slow-growth global economy. We are hobbled by our heavy reliance on income taxation. The rest of the world has taken a very different path.
While the U.S. is a low-tax country compared with other nations in the Organization for Economic Cooperation and Development, other developed countries get nearly a third of their take by taxing consumption—through value-added taxes—while we get less than 18%, virtually all from state and local sales taxes.
Serious tax reform needs to replace income taxes on businesses and individuals with a value-added tax on sales of goods and services collected at all stages of production. Today, more than 160 countries have a VAT. The U.S. is the only OECD country that doesn’t.
This would free more than 150 million Americans from ever having to file tax returns or deal with the Internal Revenue Service. And it would enable us to cut our corporate income-tax rate to compete with the lowest in the world without shifting the tax burden away from those who can most afford to pay.
A VAT would also spur economic growth, increasing U.S. GDP by as much as 5% in the long run, compared with proposed income-tax changes that would increase GDP by far less.
Shifting taxes from production to consumption would stimulate jobs and investments and induce companies to base headquarters here rather than abroad. Taking the additional step of taxing imports and exempting exports would yield hundreds of billions of dollars for the U.S. Treasury in the decade ahead.
Collection optional
Unlike the income tax, with its exclusions, deductions and credits, we could apply VAT at a single rate to a broad base of goods and services. Like Canada’s VAT, the amount of tax on each purchase should be stated on customers’ receipts. And for 90% or more of businesses, all small businesses, collection should be optional. Before the retail level, the tax just gets collected at the next stage, based on the higher price. And even if a retailer opts out, the amount of tax forgone is modest compared with the VAT already collected at earlier stages.
Former Treasury Secretary Lawrence Summers said Republicans don’t like value-added taxes because they are a “money machine” and Democrats don’t like them because they are regressive. We will get a VAT, he said, when Democrats realize that it is a money machine and Republicans realize that it is regressive.
To the contrary, we will get a VAT only as part of a major tax reform designed to ensure that it is neither regressive nor a money machine. The potential for regressivity should be addressed for low- and moderate-income households by eliminating payroll taxes and through debit cards which cancel taxes at the cash register.
Done right, a VAT would enable us to restructure our tax system to produce greater economic growth and more jobs, fairly, and at far lower costs. For the vast majority of Americans, April 15 would be just another spring day.
Mr. Graetz is a professor of law at Columbia Law School and author of “100 Million Unnecessary Returns: A Simple, Fair, and Competitive Tax Plan for the United States.” He can be reached at reports@wsj.com.
No: It makes it too easy for the government to raise moneyBy David R. Henderson
Many economists who study tax systems do not concern themselves with the issue of government spending. Focusing simply on how the government collects its revenue, they often argue that a value-added tax, which taxes consumption, is more efficient than the alternatives. One main reason they give is that a consumption tax avoids the multiple taxation of saving that occurs now under our tax system. Our current system taxes interest and dividends that people earn on their savings, and also taxes capital gains.
But another efficiency—this one from the revenue collector’s perspective—is that a VAT makes it easier to increase revenue. And that is the part we should balk at.
The evidence is strong that a VAT makes it easier for the government to tax more. The VAT is, in short, a revenue machine for big government.
BIG GOVERNMENT BEING REALLY BIG GOVERNMENT---THE GLOBAL CORPORATE TRIBUNAL.
All other things being equal, the higher taxes are, the lower economic growth is. Moreover, higher taxes, even if they didn’t hurt growth, would put more money in the hands of government, which spends more recklessly and wastefully than we spend our own money.
Europe’s experience
Take Europe, where the VAT is a major source of government revenue. When Belgium, France, Germany, Ireland, Italy and the Netherlands adopted a VAT—all between 1968 and 1971—their stated revenue goal was neutrality: Gains in revenue from the VAT were to be fully offset by reduced taxes elsewhere. (France already had a VAT but needed to revise it to meet European Economic Community Standards.)
All failed. Government revenues—and spending—rose substantially as a percentage of GDP. In 1967 in France, the year before that country adopted its EEC-compliant VAT, total government revenues were 33.4% of GDP. In 1968, France adopted a VAT rate of 13.6%. By 2014, its VAT rate was 20% and government revenues were a whopping 45.2% of GDP. When Britain adopted a VAT, the government’s stated goal was to reduce revenue. That failed, too. Only one country, Denmark, adopted a VAT to increase revenues. It succeeded.
Why does a VAT make it easier for government to raise revenue?
One possible reason is that a VAT is nearly invisible. When you pay for an item and don’t see the tax itemized on your receipt, you may not be aware of how big the tax is. And VATs tend to be hidden. Ironically, another possible reason VATs have led to government growth is that because VATs are more efficient at raising revenue, governments are tempted to raise VATs. Whichever explanation is correct, the sad truth is that VATs are not an engine of economic growth but, rather, an engine of government growth.
Make it visible
Is there a way not to have the VAT be an engine of government growth? There is only one I can think of: insisting that a VAT or similar consumption tax be highly visible. But then any government that implements a large transparent VAT is likely to be defeated. That’s what happened in Canada. In 1991, Prime Minister Brian Mulroney, head of the Progressive Conservatives, imposed a fully transparent 7% sales (consumption) tax. In the next election, his party lost nearly all of its 151 seats—the biggest rout in Canadian parliamentary history. The hugely unpopular sales tax was a major contributor.
One further problem with a VAT is that it would take a much higher percentage of income from lower-income people than the current tax system does. A way around that is to send checks to lower-income people who apply. The checks would be so large, though, that fraud would be substantial.
In short, the VAT is a bad idea.
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Wall Street global pols will sell this global VAT by telling voters that Europe does this and Europe is a social Democracy right? As usual this is propaganda because Europe has all kinds of different taxation that makes sure corporations are paying in other ways. Even Europeans saw VAT is bad and regressive-----Regressive means the real burden of taxes falls to small business and individuals JUST AS WE HAVE TALKED IS HAPPENING IN BALTIMORE.
Indeed, all this week's discussion on global corporate campuses not paying any taxes in US cities deemed International Economic Zones-----all these corporate tax subsidies coming to global corporations now doing all outsourced government work-----subsidizing away the second tier of industry-----LEAVES THE RETAIL AND THE CONSUMER AS THE HEAVIEST HIT WITH TAXATION.
'One may recall that VAT was introduced in Bangladesh in 1991 as part of the liberalisation programme backed by the IMF and the World Bank. Incidentally, it is also the period from when inequality in Bangladesh began to rise'.
So, a global corporate campus like Johns Hopkins and UnderArmour pays no corporate taxes as the INNOVATORS in product creation. Then, all the infrastructure corporations, development corporations, manufacturing factories are given tax subsidy to eliminate their tax burden------
VAT IS 100% REBATED WHEN MANUFACTURING PRODUCTS TO BE EXPORTED.
This eliminates all taxation for what will be the 1% and their 2% global corporations. The next tier is the distribution structure----well that is the DUTY FREE ZONE. No taxation for global corporations distributing outside the US or bringing anything into the US. Once distributed that next tier is the retail outlet. That is where a product is sold. It can be WalMart or our local gas station. This is where a VAT TAX is actually felt. WalMart of course has professional tax people having eliminated all of there global tax obligations-----they are now getting tax as profit. Not so for our local gas station retailer. Same thing for our global food grocery stores vs our local small food stores. The global food stores have professional tax people eliminating any of that VAT that may hit them----our community grocery store does not and ends paying that VAT.
As usual, the low man on the totem pole in VAT is the consumer----WE THE PEOPLE buying anything gets the brunt of VAT. This argument is not about hurting only the poor---it hurts the 99%.
'There is almost unanimity among academic researchers and tax specialists that VAT is regressive; its incidence falls more on lower income group than on households in higher income brackets. That is, VAT hurts the poor disproportionately more than the rich. This is precisely the reason why VAT is not uniformly rated. Countries attempt to reduce the impact of VAT on the lower income groups by either exempting goods and services consumed mostly by them from VAT or having lower rates for these goods and services'.
VAT: A regressive tax
Finance Minister Abdul Muhith
The Honourable Finance Minister has backed down on his decision to reduce VAT. Apparently this was to ensure disbursement of the IMF’s tranches of Extended Credit Facility (ECF). In the words of the Honourable Finance Minister (as reported in the media), “We are not going to reduce the existing VAT rate. IMF feared that the rate would be cut. They set condition not to reduce it for releasing two tranches of ECF (Extended Credit Facility).” So, the current rate of 15% will stay.
There is almost unanimity among academic researchers and tax specialists that VAT is regressive; its incidence falls more on lower income group than on households in higher income brackets. That is, VAT hurts the poor disproportionately more than the rich. This is precisely the reason why VAT is not uniformly rated. Countries attempt to reduce the impact of VAT on the lower income groups by either exempting goods and services consumed mostly by them from VAT or having lower rates for these goods and services.
To address the problem of regressivity, food-stuffs that are typically consumed by the poor such as rice, lentils et cetera, are exempted in Bangladesh. At the same time, “supplementary duty” at a higher rate on certain luxurious and socially undesirable items seems to make the VAT system more equitable.
However, a 2010 study of UK tax system shows that VAT cannot be made progressive even with exemptions and differential rates. The study finds that “the poorest 20% of households in the UK have both the highest overall tax burden of any quintile and the highest VAT burden. That VAT burden at 12.1% of their income is more than double that paid by the top quintile, where the VAT burden is 5.9% of income. VAT is, therefore, regressive.”
The IMF normally prefers a uniformly rated tax on the ground that differential ratings make the VAT system complicated and hence increases administration costs. For example, according to an IMF study in 1991, the total VAT collection, as a percentage of total tax revenue, was only 24% in Turkey. To achieve progressivity, half of it was given back as rebate to the lower income groups through a cumbersome mechanism that required monthly representation of receipts, their verifications, huge bureaucracy and a very high compliance cost.
In addition to administrative complexity (and hence increased administrative and compliance costs) as well as the possibility of court’s involvement on questions of interpretation, exemptions and differential rates distort consumer and producer choices. Thus, it is argued that the advantage of progressivity gained by a whole host of exemptions, zero rating and multiple rates do not offset the disadvantages associated with the departure from an uniform or single rate and comprehensive base.
One may recall that VAT was introduced in Bangladesh in 1991 as part of the liberalisation programme backed by the IMF and the World Bank. Incidentally, it is also the period from when inequality in Bangladesh began to rise. The common measure of income inequality, the Gini coefficient, which remained more or less stable at around 0.37 since the 1970s until the late 1980s, rose to 0.46 by 2010. One wonders to what extent it was caused by the introduction of VAT.
If VAT is found to have contributed to the rise in inequality, the Honourable Finance Minister’s decision has missed an opportunity to address the issue. VAT must be understood to be regressive and it should be replaced more and more by direct tax with a higher threshold, as it would be a more progressive setup.
Countries should be careful in following the advice of the IMF. It does not have a very good track record. Recall how it mismanaged the Indonesian economy when it was hit by the Asian financial crisis in 1997-98. It managed to recover only when it exited the IMF programme. Malaysia saved itself from the same fate as Indonesia by imposing restrictions on capital account against the advice of the IMF. Argentina, Brazil, and Turkey all have had the same experience – they were able to overcome their economic problems and began to grow at respectable rates only after saying ‘good-bye’ to the IMF programme.
The IMF not only failed to caution the countries of the impending global financial crisis in 2008, it in fact projected a rosy outlook! Its advice of premature fiscal consolidation in 2010 has been responsible for the abortive global recovery; Europe is still struggling to come out of the crisis.
The running record of the World Bank or the ADB is not much better. When Singapore was forced to leave the Malaysian Federation in 1965, the World Bank advised against its export-oriented development policy. We all now know the result of Singapore’s defiance.
One needs to keep in mind that the IMF, World Bank, and ADB are lenders. Their survival depends on the profit they earn from the lending they make to developing countries. So, it is not to their interest that the borrowing countries become completely free of debt. They are happy to maintain the lifeline; but not when developing countries are completely out of the woods.
_________________________________________
'This is part of the reason why Michigan’s VAT is currently slated to be repealed by 2009: the VAT is especially painful for businesses not turning a profit'.
Retail stores will see the movement to VAT with Congress passing laws moving the costs of credit card charges from banks to retailer. Remember the retail stores shouting when every time we pay with our credit card they get that processing fee-----not VISA/AMERICAN EXPRESS. This was VAT in action---moving the taxation repressively downward to retail. Wall Street banks don't pay VAT because they are the innovators creating a product----manufacturers and distributors do not pay VAT because they have good tax people----it is the retail store paying for each swipe of our credit card and of course now that retailer raises a product price to cover this.
THIS IS WHAT MAKES VAT REGRESSIVE NO MATTER HOW MANY DIAGRAMS THEY SHOW WHERE CORPORATIONS AT THE TOP ARE PAYING SOMETHING.
When Republican voters support these regressive tax policies thinking its all about allowing JOB CREATORS to keep their money -----they are not creating jobs----they are building an economy of robotics and technology specifically to KILL JOB CREATION. Business creates jobs best at the local level---our small businesses in our communities----and they have since CLINTON/BUSH/OBAMA been made to carry the burden of business taxation. So, then local Chamber of Commerce says----let's get rid of VAT on small business---and again that pushes all burden of tax on WE THE PEOPLE.
WE MUST HAVE CORPORATIONS PAYING THEIR FAIR SHARE OF TAXES. THEY BENEFIT FROM ALL PUBLIC AGENCY SUPPORTS ----IT IS NOT DOUBLE-TAXATION.
Look below at an article from 2004----this is Bush era when Michigan during Clinton switched to VAT. At the bottom of the article it shows why it didn't work and they phased it out as of 2009.
MOVING FORWARD IN BALTIMORE MEANS GLOBAL VAT TAX POLICY RESTRUCTURING ALL CORPORATE AND INDIVIDUAL TAXATION.
Value Added Taxes: An Option for States?
May 1, 2004 12:59 PM | Permalink |
In recent months, lawmakers in a number of states have suggested that a particular type of sales tax, called the value-added tax or VAT, might be a cure-all for state budgetary problems. Although Michigan is the only state that currently relies on a VAT as a major revenue source, several other states have recently considered implementing this type of tax. This policy brief evaluates the case for (and against) implementing a VAT at the state level.
What is a Value-Added Tax?
The value-added tax is exactly what its name implies. It is a tax on the value added at each stage of the production of goods and services. For any firm paying the VAT, the “value added” for a particular item is the amount by which the sales price of the product exceeds the cost of all the products purchased to make that item. Because the tax is paid at each level of production, and often not itemized on the final bill to consumers, some try to characterize the VAT as a tax on business. But most analysts agree that the value added tax is essentially a sales tax on consumer purchases that is collected in stages. From a tax fairness perspective, in other words, a VAT is just like a sales tax—it’s regressive, requiring low-income taxpayers to pay more of their income in tax than wealthier taxpayers must pay. The main difference is that the VAT is collected a little bit at a time from each stage of the production process, rather than being collected in one lump sum at the time of the final retail sale.
The following example shows how a VAT would apply to the production and sale of a chair:
- First, a supplier sells raw materials (for example, wood) to a manufacturer for use in producing the chair. If the raw materials are sold for $40, the materials supplier pays tax on the whole $40. A 5 percent tax rate on the $40 of value added equals a $2 tax.
- Second, the manufacturer builds the chair and sells it to a wholesaler for $140. The manufacturer pays a VAT only on the value it has added to the chair. Since the manufacturer has taken raw materials worth $40 and made a chair worth $140, the manufacturer’s value added is $100. A 5 percent tax on the $100 value added is $5.
- Third, the wholesaler sells the chair to a retailer for $200. The wholesaler bought the chair for $140 and sells it for $200, so the wholesaler’s value added is $60. The 5 percent tax is $3.
- And finally, the retailer sells the chair for $300. Since the retailer bought the chair for $200 and sold it for $300, the retailer’s value added is $100.
At the end of this process, the outcome from the consumer’s perspective is just the same as if the state had imposed a retail sales tax on the $300 sales price. The main difference is that the VAT is collected a little bit at a time at each stage of the production process, rather than being collected in one lump sum at the time of the final retail sale.
Why Adopt a VAT—and Why Not
Policymakers seeking to impose a state VAT usually have one of two tax policy goals in mind, depending on which existing tax they want to replace. European VATs were created to eliminate structural problems in existing sales taxes. In particular, prior European sales taxes often applied not only to retail purchases but to “business to business” transactions, which should be exempt. When sales taxes apply to these business inputs, the tax is typically passed through to consumers in the form of higher retail prices. In other words, taxing business inputs amounts to taxing consumers multiple times on the same retail purchase. This problem, known as “pyramiding,” makes the sales tax both regressive and unpredictable (because the number of times the tax is paid depends on the number of stages of production), and encourages businesses to “vertically integrate” to avoid paying taxes on inputs to the production process. VATs are especially well designed to avoid taxing business inputs, since each component of a retail product’s value added is taxed exactly once. In other words, European countries replaced their poorly structured sales taxes with a better-functioning sales tax.
In Michigan, the rationale for adopting a VAT was quite different: their VAT was adopted to replace the corporate income tax, not the sales tax. Corporate income taxes tend to fluctuate wildly over the business cycle because they are based on corporate profits, which vary dramatically during periods of economic growth and downturns. Michigan’s corporate tax was especially volatile due to the importance of auto sales to its economy. A VAT is an inherently more stable and predictable revenue source than a corporate profits tax, because the tax base is a firm’s total amount of economic activity, which tends to be less variable than a firm’s profits over time, rather than its profits. In other words, Michigan replaced its corporate profits tax with what amounts to a second sales tax, choosing revenue stability as a primary goal of its “Single Business Tax.”
Problems With a VAT
Each of these rationales has some merit: replacing a sales tax with a VAT will improve the horizontal equity of the sales tax (by ensuring that each retail transaction is taxed the same way), and replacing a corporate profits tax with a VAT will make revenues more stable. But implementing either approach at the state level is problematic, for several reasons:
- What works on a national level in Europe may not work on the state level in the United States. If one state adopts a VAT while neighboring states do not, the inability of states to tax purchases from some out-of-state sellers will mean that some value added won’t be taxed, and sales made to other states will create the same problem. Put another way, a VAT cannot usually work in one state without a lot of help from other states.
- Unlike a retail sales tax, a VAT often isn’t itemized on retail receipts (although it can be). Thus, consumers may be less aware that they are paying a VAT. Invisible taxes make it harder for consumers to see how much they are really paying.
- People don’t understand how VATs work. Calling a VAT a “Single Business Tax” may fool people into thinking that a VAT falls on business rather than consumers.
- Abandoning a corporate profits tax for a VAT makes the tax system less responsive to a business’s ability to pay taxes. This is part of the reason why Michigan’s VAT is currently slated to be repealed by 2009: the VAT is especially painful for businesses not turning a profit.
- Because a VAT is passed through to consumers like a sales tax, replacing a corporate profits tax with a VAT will make already-unfair state tax systems even more regressive.
Value added taxes have been enacted internationally to address important concerns about structural flaws in sales taxes. But as a replacement for corporate profits taxes on the state level, the main impact of a VAT will be a more regressive tax system—and a host of angry businesses.
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Global corporate tax free------VAT free, duty free, warehouse tax free, distribution export/import tax free,
This is all we hear in Congress as the Wall Street global pols find reasons to install this global VAT. WE THE PEOPLE would know this is conservative posing---making US corporations look like they are paying their fair share---when that hasn't happened since CLINTON/BUSH/OBAMA. Here we see income tax as the only source of taxation measured. It is the top source of taxing corporations in the US---but overseas and especially in Europe corporations are taxed several different ways including VAT and income taxes. The point is this: corporate campuses small or foreign economic zone massive----consume tons of government expense in simply existing----Republicans say----well, the people working inside that corporate campus pay taxes and that is the only tax needed. This is why Republicans call corporate taxation DOUBLE TAXATION. They want corporations to have the rights of WE THE PEOPLE but they do not want to recognize the costs to society physical corporate campuses have.
Taking US corporate tax of 39% which we know they do not pay-----looking at this graph seeing income tax only ---think of the several other kinds of corporate taxes many nations place and we see those nations with corporate taxes well above 39%. It's true more and more nations are being tied to these GLOBAL VAT tax structures bound to International Economic Zones----Europe and US have escaped this although US Wall Street pols have been installing global VAT these several years of Obama----through Congress, our state assemblies, and our city/county halls---they simply are not telling citizens.
The U.S. Has the Highest Corporate Income Tax Rate in the OECD
January 27, 2014
By
Kyle Pomerleau,
Andrew Lundeen
In today’s globalized world, U.S. corporations are increasingly at a competitive disadvantage. They currently face the highest statutory corporate income tax rate in the world at 39.1 percent. This overall rate is a combination of our 35 percent federal rate and the average rate levied by U.S. states. Corporations headquartered in the 33 other industrialized countries that make up the Organization for Economic Cooperation and Development (OECD), however, face an average rate of 25 percent. Even corporations in high-tax European countries such as Belgium (34 percent), France (34.4 percent), and Sweden (22 percent) face much lower rates than those in the United States. Our largest trading partners—Canada, Japan, and the United Kingdom—have each cut their corporate tax rates over the past few years to become more competitive.
For more charts like the one below, see the second edition of our chart book, Putting a Face on America's Tax Returns.
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We have young people in Baltimore shouting they are going to break with US sovereignty and this is what they mean----One World with global 1% and their 2% in all these TPP tied nations will end sovereignty for all these global citizens. If a Chinese global corporation in Baltimore is operating here as it does in China---then people working there will work as they do in China. Since global foreign corporations are being courted to move to US International Economic Zones for this reason----so too comes all that global tax policy.
We have young people in Baltimore shouting they are going to break with US sovereignty and this is what they mean----One World with global 1% and their 2% in all these TPP tied nations will end sovereignty for all these global citizens. If a Chinese global corporation in Baltimore is operating here as it does in China---then people working there will work as they do in China. Since global foreign corporations are being courted to move to US International Economic Zones for this reason----so too comes all that global tax policy. Folks thinking this ONE WORLD ONE GOVERNMENT structure is somehow bringing equity----one needs to read the history of FAR-RIGHT STATE corporate fascism ------HITLER/STALIN/MAO. 1% Wall Street far-right authoritarian, militaristic, Libertarian Marxism.
June 24, 2015, 10:00 am
Whoops! We forgot to include the VAT in the TPP
By Kevin L. Kearns
According to U.S. Trade Representative Michael Froman, the Trans-Pacific Partnership (TPP) has a big benefit: With a signed TPP, American-made goods will finally enjoy tariff-free access to consumers in countries like Vietnam, Malaysia, and Singapore. However, some tariffs will not be dropped immediately, but instead will be phased out over a number of years.
Nevertheless, from a purely sales perspective, it’s a smart pitch, and one that’s designed to appeal to Americans’ sense of fair play. It’s a theme picked up by almost every Republican House fast-track (TPA) and TPP backer, as well as the few Democrat backers. Currently, the United States imposes no tariffs on roughly 80 percent of goods from TPP countries. And yet, U.S. exports often run into a brick wall when trying to reach overseas customers. For example, Vietnam slaps 70 percent tariffs on U.S. cars, Malaysia tacks a 50 percent duty on U.S. motorcycles, and Japan adds 189 percent on U.S. shoes.
President Obama has seized on this tariff disparity as a key selling point for the TPA/TPP. Unfortunately, his breezy sales patter studiously avoids serious fundamental barriers facing American exports in global trade. These barriers led to the failure of the president’s ‘Initiative to Double Exports in Five Years, 2009-2014,’ which only achieved roughly 50 percent of its goal, and demonstrated convincingly that rhetoric and appeals to foreign consumers don't equal export growth. It should be evident that America’s trading partner governments are not particularly keen to receive more U.S. goods and services, but are mainly interested in exporting their wares to the lucrative U.S. market. Additionally, most of the “95 percent of consumers living outside the United States,” especially in countries like Malaysia, Vietnam and other ‘fast growing’ Asian markets, aren’t consumers in any sense that Americans would understand. 80 percent of the world’s population lives on less than $10 a day, meaning that American-made cars, motorcycles, and shoes are luxury items far beyond their reach, tariffs or not.
Most significantly, the TPP does not address a massive cost to U.S. goods and services that has a chokehold on our export levels: foreign Value-Added Tax (VAT) schemes.
The United States is one of only a handful of nations worldwide that does not charge a VAT on incoming manufactures and services. But 10 of the 11 TPP member states do, which means that, even with tariff-free access, high barriers remain: U.S. exporters will still face a 19 percent surcharge in Chile, 15 percent in Peru, and 16 percent in Mexico — countries with which we already have free trade agreements — or 15 percent in New Zealand and 8 percent in Japan. Only tiny Brunei, population 425,000, lacks a VAT.
The double whammy of a country’s VAT tax is that it not only jacks up the cost of American goods and services entering that foreign market, but also it rebates the amount of the VAT to the country’s exports, making them more competitive against their American counterparts. Add the effect of a VAT to that of currency manipulation and it’s no wonder that the United States has been running massive trade deficits all these years.
The Obama administration and the Congress have failed to consider the VAT barrier in the TPA and in the underlying TPP. For decades, Congress and U.S. negotiators tried to tackle the VAT issue in trade talks, but unsuccessfully. The result: every time a trade agreement reduced tariffs it was undercut by our trading partners’ raising their VATs to compensate for tariff cuts. Unlike with currency manipulation, the administration doesn’t even have a ‘quiet diplomacy’ approach to address VAT inequality. That’s one big reason why the TPP is projected to grow the U.S. economy by a measly 0.4 percent by 2025.
The Froman-Obama-Republican hype on tariff reduction is a sales job that Congress shouldn’t buy. Congress must reject TPA until it addresses the massive market-distorting effects of foreign Value Added Taxes, one of the biggest obstacles facing American exporters in 21st century trade.
Kearns is president of the U.S. Business & Industry Council (USBIC), a national business organization advocating for domestic U.S. manufacturers since 1933.
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