Cruz’s plan would cause the federal government to collect billion less, Cruz’s plan would cause the federal government to collect to an employee. A well-known fact that is. Both would now pay taxes on only 50000, or phrasephraseobvadjobvadj50000, and the contractors would have to pay both taxes but could deduct their hospital insurance. Of course, not really. Seriously. At least it won’t change much compared to the preferences inherent in the current system. The tax deductions for medical insurance will still exist, just in a modified form.
The contractor simply pads its bill to make its clients pay it, just as it does with a number of the taxes it pays today.
Why this is called a subtraction method valueadded tax, the client gets to deduct that from it’s ST bill. For instance, this ensures that the government gets its full 16 of VAT revenue through the entire production run to sale to consumer while the tax is applied just one time each according to added appropriate portion value along each step in the way. Another thing to have in mind about this ‘eliminating’ the payroll and corporate income taxes. That’s interesting right? It is just combining them AND nonprofits will have to pay it.
They will in effect be paying more while for profit entities will pay less, in the aggregate, while ‘non profits’ and governments have never paid corporate income taxes while always paying payroll taxes. So difference is only that the employee has to pay taxes on the salary not the health certificate, because currently they also deduct employee salaries as a business expense. Neither would on the insurance, under Cruz’s plan, both the employer and employee would pay taxes on the salary.
Excise taxes work pretty well for cigarette and liquor.
The efficient way to levy consumption taxes is at wholesalers higher level, importers and distributors. Cruz’s article in the WSJ calls his business tax a tax on gross receipts. Ponnuru calls it a ‘Value Add’ Tax. Of course, plus Cruz’s article sets his business tax rate at 16percentage, not the 19percentage in Ponnurul’s posting. On top of that, why?
That’s why Ramesh said effectively at 19, if you take 16 of the end sale price as the cut for the taxman. That’s probably what Ramesh is thinking, and that’s my understanding of how a VAT works. Also, i don’t think that’s what Cruz’s article says. It says he’d take a company’s gross receipts, reduce it by some allowed expenses, and multiply what’s left by 16percent to get the tax due, as I read it. Then again, so there arelook, there’re a lot of details left to the imagination, that article is a ‘highlevel’ plan description.
It doesn’t matter what rate the VAT and flat tax start at, soon after implementation they will both be much higher.
Look at the history of Lincoln’s unconstitutional income tax, this is what always happens. Avoid new taxes and cut government spending. Wouldwouldwould VAT work like in the UK, where nonresidents can get it refunded by following some particular process? It’s a well shouldshouldshould undocumented people be eligible for a refund of VAT, this is the case right? Needless to say, wouldwouldshould H 1B and F1″ people be eligible for VAT refunds, this is the case right? Nonetheless, that would be a hell of a note if either one of those were the case.
VATs are cumbersome and difficult to administer. You’d be better off with a national sales tax than a VAT, as it’s much easier to administer and the final consumer ends up paying it all in the end anyway, if you want to go to a consumption tax. While VATs are collected all the way along the line, vAT because it’s collected by millions of small businesses, quite a few of which would be unreliable tax collectors, largely by big businesses, that are more likely to comply.
Under a VAT regime, the roofing makers materials would have paid the VAT and the only thing lost to the tax system would be the roofer’s labor and profit. Don’t think I’m arguing for a VAT. So, a VAT might be better than an income tax, So if we were starting with clean slate. Although, we all know that where we will wind up is with both income and valueadded taxes.
Another disadvantage of enacting a VAT is that it really harms older people, who are spending down savings in retirement. Is now taxed by VAT when they spend it double taxation, and very unfair, their income was taxed when they earned it. How a VAT works is that the taxes paid upstream are deductible against the taxes collected downstream, while I’m not particularly keen on either tax. Basically the mom and pop businesses are going to have to track both the taxes they paid and the taxes they collected and reconcile and report them. Not so great if your a startup, as it adds additional costs to bear in order to enter the market, this is great if you happen to be an accountant as it creates a whole new set of billable hours.
Just as it does now under state sales tax regimes, as to your example of craftsmen evading taxes -that’ll happen anyway.
Federal tax will add to evading risk because you would face another extent of enforcement. VAT. It may start out as a flat tax, percentx on everything sold retail. I doubt the politicians will resist messing around with it -more for bacon and guns, less for beansprouts, baby food, and solar panels, and similar We have many VATs of different types of products types in Brazil, and the shopkeeper has to deal with sorting out the bureaucratic details.
VAT rates would remain uniform. VAT would almost certainly be used to reward some behaviors and discourage others, to promote some industries and punish others, and to implement you in fact never know what objectives of social engineers. With a large contingent of federal inspectors and enforcers, my expectation is that the rules for any VAT would eventually become as complex as current those federal income tax. Now regarding the aforementioned fact… VAT. Once a federal VAT collection regime is in place, it’s a good idea to use it to collect taxes for the states, after all.