On 2/2 I wrote
about a bill proposed by Congressman Kevin Brady (R,Tx). The bill would
make the deduction of state sales taxes a permanent part of the tax
code. As of today one can deduct sales taxes but the law allowing this
expires in two years.
What I found interesting was that the (current) deductibility of local
property and state income taxes ("PI") was not included in Brady's’s
bill. The suggestion to me was that as soon as the sales tax issue had
been made permanent, deductions for the other SALT taxes would be
eliminated. I didn’t think that the bill had a snowballs chance in hell
given that it would have opened the door to higher net taxes via lower
deductions. (stealth) This bill would have been very damaging to the big Blue states of CA, Il and NY.
Well, I’m wrong again. Senator Maria Cantwell (D. Wa) has introduced S.24:
To amend the Internal Revenue Code of 1986 to permanently extend the election to deduct State and local sales taxes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
Cantwell’s Bill has the support of other big Democrats including, Reid,
Nelson, plus some senate republicans; Ensign and Alexander.
With that cast of characters this bill is going to pass. Deductibility of state sales taxes is going to be made permanent. What might this mean?
I think this is the first step towards eliminating the other critical deductions of income and property tax.
That would be an absolute disaster for the big Blues. They all have
high property taxes as well as big income taxes. States like Texas with
no income tax but big sales taxes would win big. (What is Harry Reid thinking of??)
Should this happen it will change the way states generate income. Sales
taxes will rise in every state to take advantage of the permanent
deduction and the loss of deductibility of other SALT taxes. I doubt
that this will be offset by any reductions in PI. Net-net the blues
lose, which is the point of this.
I think this legislative maneuvering is leading us to a point where a national VAT is established.
That would imply that there would be very few if any deductions left.
No mortgage, property or income taxes deductions would exist. We shall
see if that develops, if it does it will change everything. One downside
I foresee is that it would significantly undermine the economics of
home ownership. It would also make it more expensive to have/raise
children. More of those unintended consequences you keep hearing about......
I am convinced that a Tax Holiday is coming for large multinational
corporations who have big bucks stashed offshore due to high US taxes.
This will happen as part of a broader restructuring of corporate taxes.
These big tax breaks will be sold to the public as a “Pro Jobs”. Phooey!
We did this in 2004. That holiday was also sold as ‘pro jobs’. Some
results from the companies who got big breaks seven years ago:
When you see/hear the talk of a Tax Holiday over the next month or so think big dividends for the corporate sector and no dividends for workers.
Why do we always debate what kind of food the fat man should eat?
The problem is he is overweight and needs to eat less food, once that becomes the goal who cares what he eats to get those 1500 calories a day!
VAT?
Put on Starship's "Volunteers" and crank up the volume to 11.
There's your theme song for a VAT.
What about that Automated Payment Transaction (APT) tax?
It has something for everyone to hate.
http://www.apttax.com/
That's what I'm talking about. But even cleaner than that.
A VAT, as a replacement for the income tax, would help the U.S. in it's trade deficit. The VAT acts as a tarrif on imported products. Right now the U.S. allows all foreign manufacturers to operate tax free in the U.S. and U.S. corporations are taxed here and doubly taxed overseas.
haha You really think they would replace income tax? VAT would be added to the tax burden and income tax would remain in place.
You have to love the way people discuss taxes.
As if any other human being has a right to your property - if they just designed it the correct way.
If you assemble one billion people, they still don't have the rights to one person's property.
That said if your precious monopolies actually had value then people would naturally fund them. The fact that they have to generate revenue with the threat of imprisonment illustrates their complete worthlessness.
Enjoy your fruitless debate.
That's all well and good as long as you never expect anyone to help defend your claimed right to OWN property in the first place. My take would be you can own whatever you can carry and defend.
Anything else, you don't own it. Some asshole with a ledger somewhere doesn't get to make those decisions.
Boring! You wrote this before! But we still love you Bruce, just don't get the wrong idea.
So rent an apartment, go gay and move to Texas ...
VAT is another way of taxing the poor and leaving the rich, the wealthy and the "job-creators" to whom you should be grateful more of their "earnings." Regressive as hell - go ahead and do it but only after the top marginal tax rates are increased for the super-wealthy. It's their turn to pay the tab after getting all of the government largesse they have enjoyed for so long, especially in the past 2 years via Ben's stealth tax on the many to benefit the very few.
VAT, Fair, Flat -- All just splashing around in the kiddy pool.
Fiat Fee -- 0.49% fee on every transaction counted in USD, payable immediately.
No filing. No exemptions. No F-ing around only within that tiny fraction of the economy called the GNP. Why we have a tax code that only punishes those who make or earn money, and gives the losers a free ride is beyond me.
Pay to play, bitches. Burn the code.
Bruce,
What's Reid thinking?
Reid is thinking of NV, it has no income tax and a high sales taxes - just like TX.
good point! He is also aware that he almost lost an election to an insane lady, so he must veer toward the insane a little more.
It could be something as simple as Obummer and Congressional-Douche-Bag-A-Ramas talking VAT tax to make the Amerikan public finally snap and go Egyptian on our idiot political class...
Note to Wash DC Dickwads:
From The Bernank to Obummer to Orange-Man-Tan John Bohne-er
The more you talk VAT tax... The more support from unexpected places is going to pour in behind Ron Paul for 2012....
The American people might well snap, but they will never go Egyptian. The US military is massively powerful and firmly on the side of the rich. Hence the massive military budget. The US government has no problem with using the military to suppress any uprising if it should result and even if it didn't, what happened in Egypt? A Military coup d'état. The people might have thought they were overthrowing a dictator to get "democracy" but they were really just pawns in a military takeover. And, if you think an armed population would be able to stand up to the US military, then you haven't been paying attention to the massive urban warfare training the US military has been receiving the past ten years.
The US is no closer to a revolt than China is, and they have more than four times the population. It wont be long, however, before the majority of US citizens are no better off than the Chinese citizens.
Senators and Reps from blue states voting on something that will make blue state residents poorer through roundabout means... sounds about right to me. Easier to play the class war card when people are poor.
I guess a 20% VAT tax is one way to slow future sales of coins. Theoreticaly it would make every holder of PM's 20% richer though. People in need of fiat would sell to their family and friends as 1st resort buyers no? I imagine they will keep changing the rules to manage our bankruptcy. Kind of pays to stay ahead of the curve when it comes to the Poliburo's Central Planning. I have my own think tank at the Gonzo household where I go over all kinds of scenarios on what could happen. Basicly it's a pretty intense chess game with myself. The conclusion is always the gold coin strategy. Sometimes it's silver. Gold has been winning recently in the Gonzo think tank. Property could start winning in a few years when mortgage rates hit 15% but for now gold is winning almost all of my chess games.
It's also a handy way to perform a "stealth" confiscation of Roth IRA savings from the trillions saved up in after tax accounts. Or even taxable accounts for that matter.
Ladies and Gentlemen, there is no more nibbling around the edges on this, or so many other issues facing us Americans. The politicians are not suddenly going to grow a spine, there are some excellent legislators but not nearly enough, and they know it.
"They" have their schemes down to a science and have for many years, and as distasteful as it may be, virtually all legislators and elected officials, judges, etc, need to be de-elected, repeatedly. The system may be too far gone for salvage but to let the charade continue unabated is not helping.
Several iterations should at least garner their interest and attention. Only by huge turnouts can the election fraud be stymied as well. So many folks still get their pom-poms out and genuinely believe that if only their party can run everything, this thing can get turned around. The politicians are bad enough, but the electorate that votes for them isn't cause for much confidence either.
For a start, a genuine, "none of the above" ballot must be indicated. We've had too many decades of false choices, the stable of candidates is underwhelming and certainly not representative of working people nor business. Strange, isn't it?
I bet your choices are going to be Mitt Romney and Barack Obama. I know by the time I could have chosen anyone for president, the choice was made for me before the train even set foot in Texas territory.
Has no one ever wondered why presidents are selected in Iowa, of all places? Or why election day is on a Tuesday? In November?
The entire election process is a farce and has been for decades. It should be scrapped for a more interactive approach with tons of candidates. You could even do it like American Idol where someone gets eliminated until there is an actual vote- on a Saturday in May- between two or three of the front-runners.
As long as no one complains, They are happy. At least start complaining!
I think that Romney uses hairspray ... and is really a 2 dimensional cardboard cutout.
I've never heard of deducting sales taxes. How would you keep track? You would have to add up hundreds of entries, for all your purchases throughout the year. Or am I completely missing the obvious?
Yes, if you're a VAT registered company, that's exactly what you have to do - keep reciepts for everything so you can calculate how much VAT you paid to claim back. It's further complicated by the fact that VAT is charged at one rate for some things (gas and electricity: 4.95%) and 20% for others (practically everything else). And at 0% for yet other things... books, clothing (children's, not adults), food (unless bought in a restaurant, but only if eaten on the premises). The VAT code is huge, with bizarre exemptions (certain types of cake are charged VAT, but not biscuits... or is it the other way around?).
I estimate VAT costs me 6 working days a year in admin time in my puny company.
Here in TN (no income tax) we are allowed to file on a % of our income based on the assumption that we live here and we spend the majority of what we earn in the state. Ended up being a couple hundred bucks back to me on this year's return.
Just make as many purchases online as possible. It is better than keeping up with receipts! pay cash and ask for a discount with small operators who want to play that game too.
I appreciate the spirit of your suggestion but it won't work.
All companies over a certain size (> £75,000 turnover here in the UK, last time I looked) are obliged to charge VAT. Most online companies will be over this threshold, so will charge you VAT. If you were to buy from a smaller, non-VAT registered company, you will still be paying for all the VAT paid by all the other VAT-registered companies that were involved in the supply chain of that particular item. You'll only save VAT on the portions of the final cost that were added by non-VAT registered companies.
If you buy an item from overseas, customs will charge you VAT (as well as import duty) before releasing it to the state monopoly carrier to deliver it to you, who will charge an additional 'handling fee' that might well be more than the import duties and VAT on smaller items.
You can buy using cash locally, of course, but many suppliers won't drop their prices much because i) if they get caught by HMRC they'll have their balls cut off, and ii) the system itself ensures that it's in the interest for the company to declare their earnings.
Over the years I've been occasionally asked if I'll do a 'cash deal'. The answer is always a polite no - why would I? The risks are too great, and any discount I give them means I can't deduct from my own taxes.
The monkeys have got it sewn up pretty good, I'm afraid.
You keep track, save receipts. Nice, eh?
Many states used to have a personal property tax as well. They would tax you on the value of the contents of your home, your couch, furniture, television, etc. Every now and then a nice man would come around for a visit to see what's what. One could depreciate 10 per cent a year, iirc. Way before my time, but can see howthat would have been fairly unworkable. But today? Totally doable. If we don't stop these goons, it's all over but the cages and treadmills.
This micro level parsing of the political prospects for additional taxation is a waste of time. In the coming state of emergency, the Feds will levy such taxes as they see fit in order to perpetuate their Ponzi scheme for another generation or two. Congress will roll over as it always rolls over, and the sheeple will carry on in their traditional role as rectal recipients of the big warty one.
all politicians who vote for this, should be dropped in a VAT of hot boiling oil
That is correct...a VAT will only go up without much fanfare...just attach it to an apprpriations bill.
Flat tax or Fair Tax.
The Fair Tax is the most progressive, meaning, the more you spend the more you are taxed.
Flat tax is simply that...X amount of wages.
The Fair Tax has been completely demagogued, almost to irrelevancy, because a key feature of it, is stripping the power of politicians to confer special tax treatment on corporations.
They don't like it when their little dooby doo is upset.
As you can tell it is my preference.
What good are deductions when you get hit by the AMT? I think I would prefer a VAT that taxes everyone. If you disagree please show me where my logic is wrong.
You fucking tools.
You are debating which tax is better.
Jesus Christ are you in Canada or the U.K.?
Fucking pitiful...
It's a perfectly valid debate - it's just like asking whether it's better to be beaten up by a complete stranger, or your dad.
I like a VAT too, personally, but only if it *guarantees* that income-based taxes are eliminated.
The problem with VAT is that it's a pretty safe bet that you end up with a compromise bill which results in a smaller than initially-proposed VAT and a lingering income/gains tax in place because "it would be too extreme" to dump income/capital-gains taxes completely.
Once the VAT is in place, it's trivially easy for legislators to tweak it up 0.05% when revenue falls a bit short, but go ahead and just try to get rid of it.
Such promises will be as good as the classics.
"I love you"
"I'll call you tomorrow"
"I promise I won't cum in your eyes"
"If it hurts I'll stop. I swear!"
"I'll only stick the tip in"
"No, I didn't sleep with your sister while you were at work"
I've been waiting for a VAT, need another way to extract tribute from the masses right? Makes EU look better, rumor has it they have social services beyond blowing up brown people. Would prefer to fend for myself, but if I have to pay either way I'll take state health care over killing people.
Exactly the dilemma, and exactly why I don't support any proposal from anyone ever unless it involves me coming in their mouth.
But hey, I'm a man of simple tastes.
At least with the AMT, you know how much you've paid and therefore how much you should be pissed off. With a VAT, I suspect you as the consumer and the ultimate payer of all taxes will really not see it on your checkout bill.
Because of the nature of VAT (it's deductable by VAT-registered companies) any VAT charging company is obliged to give a VAT reciept on request, to enable the purchaser to claim the VAT back from the government.
In practice, most companies print the VAT amount on all their reciepts by default. (at least here in the UK)
no question that a tax holiday is coming and it will goose dividends, the question is when will it be announced and when will it leak out in advance of that announcement.
what's on the political calendar that might provide a clue?
Good point. How do we ('The People') play this?
Suggestions, anyone?
A couple of weeks before QE II runs out. Not very long now. Buy calls on the SPY.
The effect on the USD will be a wash but it could turn the notch up on "risk" just a bit, so it will probably bump the Euro much more so than the USD.
dont worry... QEx will go on forever because someone needs to buy allthose t-bills...and the chinese don't
Let us please hear no more bullshit about how low tax rates are now compared to other bygone eras of national prosperity or how letting the evil Bush tax cuts expire will merely duplicate the fiscal landscape of Clinton's economic utopia.
As deductions slowly but steadily evaporate the American taxpayer applies tax rates to a figure that increasingly looks like his or her gross and not net income.
Since state and especially local tax burdens only ratchet upwards that means taxes paid by Americans who actually work, make money and own property are higher than ever.
The largest tax the majority - over 60% - of workers pay is the payroll tax (SS and Medicare)
Isn't this a good thing, though?
Why should there be any deductions for anyone ever? You earned a certain amount, spend it how you like.
Unless we expect the government to subsidize expenditures on this or that or the other.
If you run a business and the expenditures are greater than the revenues, well duh, close the doors. We don't need to subsidize failing businesses, I don't think.
"We don't need to subsidize failing businesses, I don't think."
You mean like farming and government?
Farming, yep, but government isn't, and never has been, a business.
It's a racket.
Pesky things like police, fire departments, national defense (bloated and they have lost a trillion dollars worth of stuff - government accounting), libraries.
Those all belong in the 'free market' with the ensuing higher prices. Get mugged? Got no police insurance protection racket money? Get phucked. Discriminated against by your employer or are refused service at the restaurant because you have a different skin color? Well, if you do not have court insurance, get phucked.
Etc... etc... etc...
The 'free market' will solve all ills, won't it?
Of course it will! The world will become a moral meritocracy where winners will rule by example, not by force. The rest of us will be blinded by the light. They are all Galt--aching producers yearning for their innate nobility to be set free!
Yup... the idea that the US is some kind of low-tax, free-market utopia always makes me smile, too.
(wryly, of course)