tag:blogger.com,1999:blog-582368152716771238.post1208287070743860581..comments2024-03-28T05:14:02.071-05:00Comments on The Grumpy Economist: Tax Reform AgainJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger103125tag:blogger.com,1999:blog-582368152716771238.post-31060030827622986702018-12-12T08:55:38.744-06:002018-12-12T08:55:38.744-06:00Important clarification. Thx. Important clarification. Thx. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-10098885055937323462017-11-03T14:52:48.116-05:002017-11-03T14:52:48.116-05:00The goal of a tax should be to generate revenue fo...The goal of a tax should be to generate revenue for the state, not to redistribute wealth. And eventually wealth moves to where it's most welcome.Gary Lucidohttps://www.blogger.com/profile/09043597026942097915noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-86360363222296758202017-11-03T09:55:00.771-05:002017-11-03T09:55:00.771-05:00How about net worth tax, every year? That would be...How about net worth tax, every year? That would be pretty non-distorting! The rate would be minimal and redistributional effect is just right (or should I say left?). I would throw in a distorting balance sheet size tax to discourage leverage though. I'm sure everybody loves this idea!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-52028725622253564272017-10-01T11:55:40.703-05:002017-10-01T11:55:40.703-05:00Geech,
I was thinking in terms of making the VAT ...Geech,<br /><br />I was thinking in terms of making the VAT better (not worse).<br /><br />I think that longer duration (5, 10, 30) year ITC's make a lot of sense from a government finance perspective.<br /><br />I think that trying to introduce progressiveness into a VAT is a mistake.<br /><br /><br />FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-13231460188715114112017-10-01T10:57:46.548-05:002017-10-01T10:57:46.548-05:00Gary, any tax is going to seem complex when you ge...Gary, any tax is going to seem complex when you get into the nuts and bolts of it. However, in my personal experience a VAT is less complex for businesses than current sales or income tax in the United States. I think the experience for consumers would be very similar to a sales tax.<br /><br />To be fair, I don't think sales and income taxes in the US need to be as complicated as they are currently, so there may be room in the tax reform discussion to improve those rather than switching to a VAT.Geechhttps://www.blogger.com/profile/07833008553890245685noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-91678505863148599152017-10-01T08:35:43.761-05:002017-10-01T08:35:43.761-05:00See Geech's comment above. "throughout th...See Geech's comment above. "throughout the United States" seems like a geographic statement.Gary Lucidohttps://www.blogger.com/profile/09043597026942097915noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-20802573696270598162017-10-01T01:21:40.800-05:002017-10-01T01:21:40.800-05:00Geech,
I did a little research.
http://law.justi...Geech,<br /><br />I did a little research.<br /><br />http://law.justia.com/constitution/us/article-1/16-power-to-tax-and-spend.html<br /><br />"The clause accordingly places no obstacle in the way of legislative classification for the purpose of taxation, nor in the way of what is called progressive taxation." (558)<br /><br />The note 558 references a Supreme Court Decision (Knowlton v. Moore)<br /><br />https://supreme.justia.com/cases/federal/us/178/41/case.html<br /><br />And you are correct, uniformity (per the majority opinion written by Justice White) is limited to geography.<br /><br />Though it should be noted that the particular case being decided did not involve a federal excise tax or tariff. Instead, it was a case over a New York State law that assessed a progressive tax rate on inherited property.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-87526553264048112522017-10-01T00:01:43.995-05:002017-10-01T00:01:43.995-05:00Frank, it's true that we have no single plan w...Frank, it's true that we have no single plan we can imagine. However, I don't think it's reasonable to object to a VAT as a category by imagining that it might have traits that would make it a uniquely horrible VAT in the entire world. That's discuss what's more likely to happen until we have something more concrete.Geechhttps://www.blogger.com/profile/07833008553890245685noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-2632487842373100922017-09-30T23:59:20.070-05:002017-09-30T23:59:20.070-05:00Frank, the Constitution says "uniform through...Frank, the Constitution says "uniform throughout the United States." So that means it must apply to all of the states equally. I don't think progressive features would obviously violate that particular clause.Geechhttps://www.blogger.com/profile/07833008553890245685noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-3523366452492448782017-09-30T19:13:08.957-05:002017-09-30T19:13:08.957-05:00Gary,
Because a sales tax / VAT is an excise tax ...Gary,<br /><br />Because a sales tax / VAT is an excise tax and under the Constitution:<br /><br />hhttps://en.wikipedia.org/wiki/Enumerated_powers<br /><br />Article I, Section 8:<br /><br />"To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common defense and general Welfare of the United States; but all Duties, Imports and Excises shall be UNIFORM throughout the United States"<br /><br />"Why not just go with a sales tax with exclusions for food, medical care, and reasonable housing costs? That should actually be plenty progressive."<br /><br />And it would also mean that the sales (excise) tax is no longer uniform.<br /><br />FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-36248527532240616712017-09-29T07:48:15.220-05:002017-09-29T07:48:15.220-05:00Just look at all these comments and issues. This V...Just look at all these comments and issues. This VAT - at least the way it's being conceived here - is starting to sound just as complicated as the current income tax. Why not just go with a sales tax with exclusions for food, medical care, and reasonable housing costs? That should actually be plenty progressive. If you really feel the need to redistribute wealth then just write people a check. That should not be the goal of taxation.Gary Lucidohttps://www.blogger.com/profile/09043597026942097915noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-51185823832340905222017-09-28T18:28:28.622-05:002017-09-28T18:28:28.622-05:00Geech,
My only point is that a U. S. VAT may not ...Geech,<br /><br />My only point is that a U. S. VAT may not precisely match what is done in Europe, Canada, or Japan. The U. S. could conceivably require companies to hold onto ITC's until they can be deducted against their VAT receipts on future sales.<br /><br />Again, John doesn't indicate how a VAT should be implemented in the U. S. FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-68213622037185460172017-09-28T18:21:45.522-05:002017-09-28T18:21:45.522-05:00Geech,
The only thing I was pointing out is that ...Geech,<br /><br />The only thing I was pointing out is that there are a number of ways to skin a cat. If the U. S. did adopt a VAT, it would likely be somewhat different than what either the Japanese or Canada / Europe has adopted (see English system of units vs. Metric).<br /><br />What is apparent is that under the Japanese system, there are no assets for VAT paid in a previous time period that are carried forward (unlike the Canada / European system).<br /><br />There is nothing to stop the U. S. from adopting a Canada / European style VAT and allow ITC's to be carried forward 10 years, 50 years, or even indefinitely.<br /><br />See above:<br /><br />"A government could conceivably finance it's deficits or reduce it's outstanding debt obligations with the use of ITC's that are held by the public."FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-62888605806556840302017-09-28T18:13:24.320-05:002017-09-28T18:13:24.320-05:00What is the legal definition (under Constitutional...What is the legal definition (under Constitutional Law) of "Uniform"?<br /><br />See John C's statement above:<br /><br />"What about progressivity and redistribution? The oped explains briefly how to make a VAT progressive, if that's what you want."<br /><br />If a VAT tax is progressive, is it no longer uniform?<br /><br />Also, does a uniform VAT exclude the possibility of Congress changing the VAT rate over time?<br /><br />I don't know these answers, I have a pretty basic understanding of Constitutional Law.<br /><br />FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-67157692440013137422017-09-27T22:08:56.636-05:002017-09-27T22:08:56.636-05:00As I said below, even the Japanese system does not...As I said below, even the Japanese system does not seem to match ITCs with the sale of a specific finished goods. It sounds to me that the difference between the Japanese system is that it doesn't require the VAT to actually be charged on every invoice. Instead, companies just calculate the ins and outs each filing period and remit the difference. I have no professional experience with Japanese VAT, though, so take that with a grain of salt. I'm just basing that assessment on the link you found.Geechhttps://www.blogger.com/profile/07833008553890245685noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-8074682332458587142017-09-27T21:45:37.135-05:002017-09-27T21:45:37.135-05:00Frank,
I'm not sure I understand what you mea...Frank,<br /><br />I'm not sure I understand what you mean. Virtually all VAT taxes are uniform throughout their country. Why wouldn't they be?Geechhttps://www.blogger.com/profile/07833008553890245685noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-71167070754871509202017-09-27T21:43:50.885-05:002017-09-27T21:43:50.885-05:00Frank, I'm not familiar with Japan's syste...Frank, I'm not familiar with Japan's system in my professional capacity, but it sounds nothing like the matching system you seemed to be proposing above. As I said, this problem of upfront expenditures with no payoffs is not a feature of VAT taxes.Geechhttps://www.blogger.com/profile/07833008553890245685noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-91617408433497308602017-09-23T13:28:34.594-05:002017-09-23T13:28:34.594-05:00Perhaps the solution would be for the U.S. to depo...Perhaps the solution would be for the U.S. to deposit the VAT tax percentage (ex. 20%) into citizens taxable and Roth accounts based on balances held the night prior to implementation of the VAT!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-60894855831269271992017-09-21T13:52:00.641-05:002017-09-21T13:52:00.641-05:00Please explain the affects a VAT Tax would have on...Please explain the affects a VAT Tax would have on money that has already been taxed, i.e. Taxable accounts and Roth IRA's.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-14287593347997321032017-09-20T13:35:01.351-05:002017-09-20T13:35:01.351-05:00The big thing missing from this post is utility. U...The big thing missing from this post is utility. Utiltiy is key here because when we want minimal "economic cost" of taxes, we really want minimal "happiness cost". Let that sink in. <br /><br />The point of economic policy isn't to maximize dollars, it's to maximize happiness. We know this because people vote on what makes them happy, not on what makes them wealthy. We should tax the dollars least cared about. <br /><br />On that note, why not push for a wealth tax? Doing the math shows that a federal 3% wealth tax could replace all other forms of federal income. And, if you do your personal math, you'll realize that just about everyone but the most wealthy pay much more in income taxes every year than 3% of their wealth. So, a flat-wealth tax would be much more progressive in terms of utility than even a very progressive VAT or income tax.Fish Goldsteinhttps://www.blogger.com/profile/13864053986442147618noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-68348149232809334442017-09-17T22:00:28.279-05:002017-09-17T22:00:28.279-05:00Some fascinating history on a VAT in the U. S.:
h...Some fascinating history on a VAT in the U. S.:<br /><br />http://www.taxhistory.org/thp/readings.nsf/ArtWeb/21804E04DAC2A47B85257D1B0041C871?OpenDocument<br /><br />FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-32740236093794530742017-09-17T10:04:38.656-05:002017-09-17T10:04:38.656-05:00Geech,
"ITCs expire after a certain amount o...Geech,<br /><br />"ITCs expire after a certain amount of time. I think it's two or four years depending upon the size of the business. As a practical matter, this shouldn't be that significant, because getting that refund sooner is almost certainly better than trying to hold on to it for some reason."<br /><br />First, as I describe below, some countries (like Japan) don't use the invoice based method for a VAT, they use an accounts based method instead.<br /><br />Second, getting that refund sooner may be beneficial to the owner of the IST, however, it may be beneficial to the government (Canadian or otherwise) if people / companies held onto ITC's rather than cashing them in immediately.<br /><br />A government could conceivably finance it's deficits or reduce it's outstanding debt obligations with the use of ITC's that are held by the public.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-38060976060137889472017-09-17T09:36:56.018-05:002017-09-17T09:36:56.018-05:00Geech,
"A VAT or consumption would be a type...Geech,<br /><br />"A VAT or consumption would be a type of excise tax, which is in the Constitution."<br /><br />Okay. As an excise tax, it would need to be uniform throughout the United States.<br /><br />Article I, Section 8:<br /><br />"To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common defense and general Welfare of the United States; but all Duties, Imports and Excises shall be uniform throughout the United States"<br /><br />Notice that uniformity is not a requirement on the federal government's power to tax income under the 16th Amendment:<br /><br />"The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."<br /><br />Finally and most importantly - the power of the federal government to tax income is granted to it under the 16th Amendment. To ensure that the Federal Government could not assess both an income and VAT tax, the 16th Amendment would need to be repealed.<br /><br />See John C's statement above:<br /><br />"Zero is important. Eliminating the personal income, corporate income and estate taxes is important. Taxes are like zombies. If you just reduce the rates but leave the taxes in the code, they come back. And all the deductions, exclusions, credits and the rest come back too."<br /><br />FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-87363066973059251602017-09-17T09:20:48.195-05:002017-09-17T09:20:48.195-05:00Geech,
See below for differences in the invoice b...Geech,<br /><br />See below for differences in the invoice based method (Canada / EU) versus the accounts based method (Japan) in calculating a VAT. Notice that Canada and the EU aren't the only economies that have implemented a VAT. Notice also that John C. does not stipulate the type of VAT that he prefers.<br /><br />https://en.wikipedia.org/wiki/Value-added_tax<br /><br />"There are two main methods of calculating VAT: the credit-invoice or invoice-based method, and the subtraction or accounts-based method. Using the credit-invoice method, sales transactions are taxed, with the customer informed of the VAT on the transaction, and businesses may receive a credit for VAT paid on input materials and services. The credit-invoice method is the most widely employed method, used by all national VATs except for Japan. Using the subtraction method, at the end of a reporting period, a business calculates the value of all taxable sales then subtracts the sum of all taxable purchases and the VAT rate is applied to the difference. The subtraction method VAT is currently only used by Japan, although subtraction method VATs, often using the name flat tax, have been part of many recent tax reform proposals by US politicians."FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-47589504414293232562017-09-16T16:04:41.337-05:002017-09-16T16:04:41.337-05:00A VAT or consumption would be a type of excise tax...A VAT or consumption would be a type of excise tax, which is in the Constitution.Geechhttps://www.blogger.com/profile/07833008553890245685noreply@blogger.com