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A National Sales Tax is Coming

Econophile's picture



By Jeff Harding of The Daily Capitalist

The “Center for American Progress” is the best example of an oxymoronish name that I can think of. This is a “progressive” (socialist) “think tank” (another misleading term) lead by John Podesta, a former Clinton Chief of Staff and Obama adviser.

They are coming out with a report on Wednesday that will recommend that:

[T]he administration should consider a tax on consumption, such as a value-added tax [VAT] system similar to that in use in the European Union. Mr. Podesta suggested that its impact should be limited to protect lower-income people, who otherwise might be hit particularly hard.

The center’s president and chief executive, John Podesta, who is an Obama adviser, said the administration should consider a tax on consumption, such as a value-added tax system similar to that in use in the European Union. Mr. Podesta suggested that its impact should be limited to protect lower-income people, who otherwise might be hit particularly hard.

“As progressives we need to debate the policy merits [of] a range of options, including designing a small and more progressive value-added tax,” Mr. Podesta said in a statement Tuesday.

Apparently even they recognize that you just can’t tax the rich enough to cover the Administration’s vast spending programs:

In order to pay for the national health care plan, the Democrats were already planning to impose a tax surcharge of between 1.0% and 1.5% on those whose income is $350,000 or more. I did the numbers on this and I came up with 300,000 lucky taxpayers who will be burdened with the privilege of paying for our health care (the Democrats say it’s more like 1,000,000 taxpayers, but I think I’m closer). Now it looks as if the regressives agree with me.

The report, which will be released on Wednesday, said the administration can’t rely on taxing richer Americans and companies to reduce the deficit to sustainable levels by 2014 because those groups would see 40% tax increases.

Guess what else is happening on Wednesday? Just a coincidence I’m sure, but the Volker Panel on How to Raise Taxes Without Anyone Noticing is meeting as well. The meeting will be streamed live starting at 12:30 if you wish to tune in to their public deliberations.

predicted in March of this year that the Administration would look to a VAT to raise taxes:

My guess is that it will include non-food retail sales and they will add services (information, professional, technical and scientific, administrative and support, waste management and remediation, but excluding medical services). The services aspect is important because this will skew the tax more to corporations and upper income taxpayers. …[Obama] will structure it so that low income people will get a refund of taxes paid. The refund will be phased out as income increases.


In 2008 retail sales (excluding food) were about $4 trillion. Services in 2007 were another $2 trillion. Let’s say they need to raise $1 trillion over the next 4 fiscal years, or $250 billion a year. That would require a 4.5% national sales tax. In Europe they call this a value added tax (VAT) and the rate in the E.U. is about 15%.

Volker already said he thinks the VAT is a good idea. No surprise there; that’s why Obama chose him.

So, let’s see. They want to stimulate consumer spending to revive the economy. How do we get people to part with their money instead of socking it away in the bank? I know: let’s tax consumption. Brilliant.



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Tue, 11/16/2010 - 10:30 | Link to Comment MaldelBot
MaldelBot's picture

This will never happen


1) The US government would never institute a policy that is better for poor people than rich people (or at least on par).

2) They believe in the flawed Keynesian model where spending money you don't have on shit you don't need= an economy.


The best model would be to tax consumption and not labor. It's all ass backwards. The hostile elite really got their claws in the ol' US of A.

Tue, 11/16/2010 - 09:59 | Link to Comment healthelectron
healthelectron's picture

ply all kinds of sling backpacks. We could also supply the hiking backpacks, so we could be called the hiking backpack manufacturer, hiking backpack supplier and hiking backpack factory.

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Wed, 12/30/2009 - 00:20 | Link to Comment Anonymous
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Fri, 10/02/2009 - 08:46 | Link to Comment River Tam
River Tam's picture

Everyone knows the sales tax is a regressive tax, the poor pay more percentage wise than the rich. But if they start with a 0.5% sales tax it might pass. They can raise it later.

Congresspersons do like their pork (presidents too). Maybe we can add in an Olympics surtax for Chicago (a minor .01% - you wont even feel it, and it will be good for our nation).



Fri, 10/02/2009 - 08:34 | Link to Comment Anonymous
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Thu, 10/01/2009 - 22:28 | Link to Comment californiagirl
californiagirl's picture

With yesterday's tax announcement in California, I thought I would have to make plans to move my manufacturing business out of the state.  Now it looks like I just need to move out of the Country. Why did I bother immigrating from Germany. I just got my citizenship last year. If any of you are in California, please send emails to your representatives.  I already sent an email around:

Since some of you are unfamiliar with a VAT (Value Added Tax) or Business Net Receipts Tax (BNRT), I though I would clarify.  I was being facetious yesterday when I titled my email "Schwarzenegger Proposes a Tax Cut".  Everyone needs to understand how this is a huge tax increase for most businesses and a hidden tax on the middle and lower income classes.  The increased business taxes will be passed onto the consumer in the form of higher prices and will result in job losses. Businesses will leave the state and reduce the taxable base. Most businesses will pay significantly higher taxes, even in years that they have large losses.    This tax, if enacted, will have a huge impact on our tiny little manufacturing company and, during loss years such as we are currently experiencing, could be the straw that breaks the camels back. It will substantially increase the cost of doing business in California and will drive more businesses out of the state rather than attract business to California. We already have a hard enough time competing with the rest of the world because of the high cost of living, high compensation and high administrative burden and taxes.  Any labor-intensive or manufacturing business will be taxed heavily.  A better name for this tax would be a labor or payroll tax.  It would not be conducive to job creation in California.   For those of you that have never heard of a VAT, net receipts are calculated as follows: a business adds up its gross receipts from the sale of goods and services and then deduct the goods and services they buy from other businesses.  This is the "Net Receipts" number that is taxed by 4%. None of the sales of goods or services would be exempt from inclusion in the gross receipts number, even if the sales are for resale or sold to a tax-exempt organization such as the Federal government.  Salaries/wages, employer payroll taxes, any interest paid on business loans and/or debentures, etc., are not deductible.  I suspect that depreciation of equipment and facilities purchased prior to the effective date will also be non-deductible, but I am not sure.  I guess I will have to read the bill if I can find the language online. Any labor intensive businesses that provide labor related services and all manufacturing businesses will have large, taxable "net receipts" under this approach every year.   For example, here we buy aluminum, steel, machine oil, machine tools, office supplies, plating and anodizing services, screws and other small hardware, etc.  However, since we do all of our own machining and assembly work, the majority of the cost of producing our products is the labor expense.    At least very small businesses would be exempt, because the requirement to pay the tax would not be triggered until a business reached $500,000 in annual gross receipts.  I would imagine that governments will be excluded.  Perhaps they will also exclude some non-profit and for-profit businesses.    Please pass this information along to everyone you know.  People need to understand what this is and email their congressional members before it is too late.  This is not an equitable tax.  It penalized businesses that create numerous jobs.  Restaurants, UPS/FedEx, day care, CPAs, doctors/dentists, all manufacturers, employment agencies, software businesses, plumbers, electricians, and repair service providers, are just a few small examples. In other words, it will just raise the prices that these types of services have to charge.  And for those of us that compete on a global scale, like our company, and therefore cannot raise their prices, it will drive them out of the state or out of business.  My business partner and I had already discussed moving our company out of the state earlier this year when we say the ballot initiatives listed for the May election.  Fortunately they were defeated with a wide margin.    Last Monday, on the day of the commission’s final public meeting, Richard Pomp, a tax policy expert appointed to the commission, sent a memo detailing what he saw as a litany of problems with the BNRT, including that fact it would encourage businesses to outsource jobs to independent contractors because payments to contractors could be written off while payroll costs could not.   Assembly Speaker Karen Bass said it would disproportionately tax knowledge-based industries, which “everyone agrees is the best thing California has going for it.”  She said the net receipts for a company such as Wal-Mart would be a much smaller percentage of gross receipts than a company such as Oracle. While much of Wal-Mart’s expenses are buying inventory, “most of the value of what Oracle sells is the brainpower of its highly compensated, highly skilled work force.”  “What type of businesses do we want to encourage in the California economy?”   Lenny Goldberg, president of the California Tax Reform Association, notes the BNRT would compound the shifting of the tax burden to the poor and middle-class by effectively taxing rents. Especially since landlords could not subtract interest payments on their property from their gross receipts, they would be forced to raise rents to cover the new taxes, he said.   At least a few in our legislature have some brains.   I suspect the rest think the public is stupid and will not get it, that this is a way to make the public think they are getting a tax cut because the individual tax rate is decreasing, when in reality the state, at least temporarily, will collect more tax revenue than ever and the government will continue to grow out of controldisproportionately with the population of the state.  Unfortunately there are those that will never realize that they are paying more taxes because the taxes will be hidden in the price increases, tax-induced inflation.  Or possibly, much of the legislature is handicapped with tunnel vision or near sightedness and cannot see the big picture and the "unintended consequences".  If this bill goes through, the only businesses it makes sense to have would be a small business with less than $500K in revenue or a pass-through distributor/dealer operation with low overhead, utilizing a just-in-time system, fulfilling orders by having suppliers drop ship directly to the customer.  Retailers/distributors with low overhead can make astronomical profits and get away with significantly lower taxes than they are currently subject to. CPA's will practically have to pay the tax amount on their full gross receipts.
Fri, 10/02/2009 - 08:51 | Link to Comment River Tam
River Tam's picture

California Girl, the sales tax can be more complicated than the Federal income tax. In Florida there is a different rule for practically every item. And numerous exemptions.

California needs to cut out the fat, but the people dont seem to have the will.

When too many people are in on the "take" there is no one left to make the donuts.

Move your business to Texas.


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Thu, 10/01/2009 - 16:40 | Link to Comment Crook County
Crook County's picture

Some listening music for this post -

Thu, 10/01/2009 - 15:51 | Link to Comment Anonymous
Thu, 10/01/2009 - 15:43 | Link to Comment Econophile
Econophile's picture

Channel Zero, the problems you mention are good reasons why we shouldn't let government run anything. If you think government action is a "cure" for the "serious" problems, why didn't they prevent them in the first place? A: They don't have a clue what the problems are.

Thu, 10/01/2009 - 14:20 | Link to Comment channel_zero
channel_zero's picture

Most of you whiners need to get a grip.

1. I agree a sales tax is not what's needed.  It discourages consumption.

2. As much as you whiners complain about paying taxes, you then complain MORE when bridges collapse and regulators can't do their job.  Well, which one is it?

The U.S. has *serious* problems and you morons are standing around calling each other names.  This only contributes to the worsening situation.

Grow up.

Fri, 10/02/2009 - 12:11 | Link to Comment Anonymous
Tue, 10/13/2009 - 09:18 | Link to Comment Ghostdog
Ghostdog's picture

Hmmm, I just wonder if you were organizing a partys about "lax" regulation over the past few years or just joined the party after the mess so you could whine about it.. And the only reason these "evil" corporations exist is because "we" buy their products. We stop buying.. they go away... So at the very least anyone that drives a car is a hypocrate if they are bitching about the oil companies and anyone that has a kid is contributing to global warming or climate change or whatever they are calling it this week. So talk to me when you stop using oil and stop procreating and stop acting like a spoiled entitled moron.

Thu, 10/01/2009 - 10:00 | Link to Comment Anonymous
Thu, 10/01/2009 - 01:01 | Link to Comment Lux Fiat
Lux Fiat's picture

Around 40% of working Americans currently don't owe federal taxes on their income and have no skin in the game.  Is it any wonder Congress doesn't feel the heat from the electorate to spend prudently and within our country's means when this type of situation exists?  I think everyone needs to have some skin in the game - period. 

Sadly, the chances of making this happen short of a *real* financial meltdown are slim to none.  As usually, the freight train that has been coming down the track fo the last 40+ years will have to wreck and do lots of damage before the political will for real change exists.

Thu, 10/01/2009 - 00:34 | Link to Comment Ignore Amos
Ignore Amos's picture

There is no way Obama would support such a proposal.  After all, he said he would not raise taxes on any family making less than $250,000/yr.

You sir owe President Obama an apology!

<sarcasm off>



Wed, 09/30/2009 - 23:26 | Link to Comment Anonymous
Wed, 09/30/2009 - 21:13 | Link to Comment grunk
grunk's picture

I'm waiting for a national real estate tax.  The Feds could glom off the local assessment records.

Thu, 10/01/2009 - 00:00 | Link to Comment digalert
digalert's picture

We're getting there. State of California has robbed my city of $10million, in fact they're raiding every city.

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