The Value Added Tax: A Hidden New Tax to Finance Much Bigger Government

[miamijane]

VAT would raise the effective tax rate of middle class and poor. It's simple, really. Those two groups of people spend a higher percentage of their earnings each year. Therefore, the VAT is a consumption-based tax that will hurt those who are suffering the most right now.

[pdwheaton]

Enact the FairTax (H.R. 25) plan to REPLACE the current broken tax system with a progressive luxury consumption tax--raise the same amount of revenue as all the replaced taxes, tax both wealth and income at the point of consumption for the lowest possible effective tax rates. Tax imports sold here. Don't tax exports sold there. Don't tax business at all since consumers pay all taxes anyway.

[CasualSoul]

This video is a little ridiculous; just because VAT's have been used in countries that are even less fiscally responsible than the US doesn't mean that there's something wrong with the tax itself. Canada has a VAT (the GST) and we're one of the most fiscally healthy countries in the world. The speaker is correct though in that a VAT should be used to replace income taxing, which is a very inefficient system. A VAT is also the only way to tax the underground economy and the tax evaders.

[raystinsky]

What an eccentric performance!

[alcraig]

Do you notice there is no mention of how much tax corporations pay. In the US there is a disproportionate tax burden placed on income tax payers. For example In 2009 and 2010, Exxon Mobile paid only $39 million on its $9.9 billion profit - an effective tax rate of only 0.4%. Although everyone hates taxes the benefit of a consumption tax is it captures everyone including the corporates. This guy is definitely not looking after YOUR wellbeing.

[friday0408]

@alcraig Cato wants a consumuption based tax, but they want it instead of an income tax. This is not changing the income tax, or closing loopholes in it, it is merely a new tax on top of the old ones.

[raystinsky]

@alcraig And if the corporation directly paid taxes, do you imagine the money they pay employees (for instance) would remain the same? I suppose you believe employers are bound to accept lower profit margins. In the late 1920s and 1930s, wage rates were fixed and in many cases kept above the profitable level. It worked out great.

[alcraig]

@raystinsky Sorry I think your counter argument is poor. I thought the trickle down effect had been discredited long ago. Corporations are supposed to pay tax like every other company otherwise they are receiving special treatment which enables them to eliminate competition. Competition is what keeps companies honest. Giving special deals to Corporations while other business have to pay 35% company tax surely encourages corruption, gives them an unfair advantage and is anti-competitive.

[raystinsky]

@alcraig I agree that special treatment is wrong. I don't argue for special treatment, I argue for non-intervention. Favoritism is a form of interventionism.

[alcraig]

@raystinsky In 1890, Congress enacted the Sherman Antitrust Act, a law designed to restore competition and free enterprise by breaking up monopolies. This was deened necessary because the consolidation of U.S. industry into increasingly powerful corporations spurred government intervention to protect small businesses and consumers. I am presuming you are not one of the 195000 people from Florida who have lost their jobs in the latest devastating oil spill.

[raystinsky]

@alcraig Looking beyond bill titles is the first step to understanding the nature of the State. The government supports and even participates in cartels. The government is notorious for failing to protect property rights. mises.org/daily/331

Are you arguing that taxes will prevent oil spills, or are you just attempting to use the spectre of victimhood to diminish sound economic principles.

[alcraig]

@raystinsky I realise this but the point I am trying to make is that corporations will fight tooth and nail to prevent the introduction of a consumption tax primarily because at the moment the are paying none. Their tax evasion puts an increased and unfair burden on income tax payers. A tax structure that lowers the income tax rate in preference to a consumption tax is a lot fairer and less complicated. Not that this will ever happen as the powerfull are benefiting most from the current system.

[raystinsky]

@alcraig I really like that you used an "s" in "realise". I think it's a superior way to spell it.

The breaks are built in because we have an interventionist government. If we went free market (which, admittedly companies often don't really want) taxes would become far simpler. Yes, businesses themselves are a large part of the tax problem through their own avarice and willingness to manipulate government power. If you're saying that we certainly agree there.

[MrBenotdismayed]

Taxes will destroy the freedoms we enjoy.......

[Pakkwondo]

You should listen to this man, he wears a white suit

[rwjize]

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[MrArdata]

There is no end to the many layers of taxation. They will need to do this to pay for their bloated entitlement programs. They will get more heavy handed with the people by forcing them to comply. Even if all of the American people were to wake up to this extortion and theft, they would still continue to raise taxes until the house of cards collapses. The American people are most certainly a docile "screw me real good will ya" lot of sheep!

[iooo007]

@MrArdata man when i hear you americans with that goverment programs ,you must mean war spending ,you think laughin at other countries for how good the american army is doesn't come with a cost? US would shatter EU in a war even though EU has a larger economy why EU spends 1,5% of gdp on military US 4,5% at least some say it's even 6% with the hidden cost of war support ,that's why you guys get vat is not for railway not for clean energy not for research WAR 3-4,5% means a level of 5-8% VAT TAX

[FRSFreeStateES]

A Value Added Tax on top of an Income Tax would just be another Tax Hike that would hit the Middle Class hard.

[claudialepo]

Don`t worry, Hungary reached you! 25%

[anlzd]

Australia has a GST since 1980s, and overall tax burden hasn't increased. Usually basic food/medicine/rent necessities are excluded or on a much lower rate. High income earners consume more and higher priced items, therefor paying more (ie, luxury goods, cars). A threshold for income taxes should be implemented, where no one earning under a prescribed amount should pay income tax at all (in Australia i think its about 12,000USD), this should result in less enforcement, less government.

[lostbuffalo]

DOUBLE TAXATION HIDDEN WITHIN FRAUD OF COMPLEX DESCRIPTION.

FICA is a payroll tax. It is on the act of paying earned income opening the door for double taxation.

A VAT is a performance tax on labor + earned income

Sales tax on a service is VAT collected at the time of sale. the methods of tabulation and collection are different but the thing taxed is the same

The sales tax on services and the VAT are the same and tax the production of earned income.

Neither apply to capital gains they tax labor

[BrianAlexanderDell]

Republicans need to stop propagating the totally discredited "starve the beast" doctrine and actually cut spending. Mitch McConnell refused to support a deficit commission because it would actually mean cuts instead of just TALKING about cuts like this guy and the rest of the GOP.

[BrianAlexanderDell]

The suggestion that Europe's corporate rate is currently higher than the US is wrong.

What the speaker also does not seem to appreciate is that deficit financed government is government at a discount and accordingly more popular government. If you want smaller government then increase taxes so that people know what big government actually feels like. A value added tax is a lot more investment and entrepreneur friendly than corporate tax.

[harrisonconstantinou]

5% canada vat

[NewsChat]

A VAT tax is a horrible idea for America.

[DeezilB]

here in the uk VAT is only at 17.5 % but still its bullshit

[harrisonconstantinou]

@harrisonconstantinou vat is gst just a different name

[FireHicks26]

I also agree. As tax burdens keep increasing, what is going to happen eventually in the future? Government is reactive in the here and now, but are they considering (or care about) what is going to happen in the future when they are no longer in office? What will happen to our economy when it gets so out of control that we finally reach a breaking point? It scares me because at this rate, I know that I will live to see the ramifications.

[tutorturtle]

VAT is yet another tax that disproportionally hurts poor people, the poorer you are, the more profoundly you will be hurt. More jobs will leave the country, and less likely entrepreneurs will start a new venture.

VAT is regressive, suicidal and promotes Total Absolute Government Control, no wonder "Progressives" find it so irresistible. It sucks the freedom out of life.

[uzimodem]

libturds have a boner about taxes...jeez

[tommag82]

Then they wonder why businesses and jobs are leaving the country in droves. We now have more government jobs than manufacturing jobs.

[quizerry]

It is another hidden tax that raises prices on all products and services. The Government waste billions of tax dollars a year. The average house hold spends $8000 in regulatory and hidden tax already. If the Federal and States can not balance their budgets they don't deserve one penny more of our hard earned dollars.

[wogdoggy]

get busy this fall vote out a dummycrat in 2010

[cjellwood]

read the small print because VAT is a massive scam to get illegal tax revenue from consumers through business accounting. 70% of people that pay VAT are not eligable to pay VAT but they do because it has been added to their final value bill

[maggie1715]

Just another way to pick your wallet for their big government programs. they will dime us to death.

[danielmy08]

This guy is 100% correct...VAT for governments is like a life of crime to a bum...the more they get habituated to it ...the more corrupted and money hungry they become.

[fireicer]

well that's how it should work anyway weather it does is another matter lol. a intel processor at cost $500.00 sold in us is sold to the UK at $500.00 after conversion then mark-up and 17.5% VAT makes this processor much more expensive reducing the overall export sales from America due to the higher price. Hence VAT would help balance out and strengthen the global export sales from America. again i am not saying it works but that's the supposed principle.

[fireicer]

VAT does not work like that lol it is designed to stop traders charging you silly high prices that's what it for. where you fail in the above explanation is that you cant tax on top of tax technically. a furniture builder claims back the VAT or does not pay VAT if they are VAT registered its the consumer that pays the TAX VAT not manufacturer/supplier. to compete the retailer would have to reduce there prices to match the current price forcing sellers not to overprice product

[InstantRipOffService]

Log on InstantRipoffserviceDOTcom to voice your frustrations on the IRS with a T-Shirt

[tommag82]

Our goverment is out of control. Vote, get involved at a local level.

[plutocratarianism]

A VAT tax in the U.S. would cripple Free Trade as it would be placed on all consumption and tariffs on imports, it would bring us into a deeper recession, Herbert Hoover tried this with the Smoot Hawley Tariff Act and that just deepened the Depression.

VAT taxes could also give the government enough power to cap and trade imports and put price ceilings on imports coming into the country.

I really can't see Libertarians or Conservatives voting for a VAT tax because they both want Free Trade.

[fireicer]

@plutocratarianism VAT in the UK only becomes compulsory at 65,000 annum turnover bellow this you do not need to be registered or charge vat to your customer. but if your supplier has a turnover of 65k+ then you buy parts with VAT and sell at your price. It does hurt your pocket i just got VAT registered and on everything i buy for my business as a supply, parts or tools i don't pay VAT. I charge the VAT on the product i sell to the customer at % rate.

[danielmy08]

@fireicer what does it cost to register for VAT in the UK? How is it you don't pay VAT on tools etc...seems to me that VAT is levied on everything except essentials like food and stuff for kids.

[fireicer]

@danielmy08 Its free to register. If the tools etc you buy are to be used solely for your business then you don't pay VAT on them. Yet you must charge VAT at current rate on top of the product price to your customer at the point of sale. If you buy from a VAT registered company and then sell on to your customer adding an additional VAT on top of an already paid VAT, your taxing twice. In the UK this is illegal and you can be fined for not doing your books correctly. You can not tax on tax.

[fireicer]

@danielmy08 you must calculate subtract the vat from your suppliers price work out how much you want to charge then add the VAT to equal your selling price. when it comes to doing your books you adjust as stated you get the tax back for the supplied parts/stock and pay the government the tax on your final sale. If that makes any sense.

[kishido002]

thanks dan

[ToxicOdiousOne]

It's unconstitutional. It violates the tenth amendment. Sales tax is state powers. The federal government has never charged sales tax.

[justkevy]

Fuck politicians,they are traitors and the sentence for treason is DEATH! Why is O'bummer still alive?

[snakesinmypants]

I love how the VAT discovers a new sourse of energy: ANGER!

[SenorZorrozzz]

How can they do this to us? The gov. truly runs the people. We are the slaves, they are our masters. In the state I live in ALL the politicians are far left. I've written, called their offices but they will never want anything other than pure Marxism.

I know of VAT-it will help kill America!

[jers59]

@SenorZorrozzz stop sitting on your ass if obama and the other scum try to inpose VAt, start revolution remove the filthy anti american scumbags from our country

[SenorZorrozzz]

@jers59 But how? Other than voting in November (but ACORN may rig the elction again) what can we do?

You are a slave. You live on a plantation called America. You masters? Obama, Pelosi....

[Injustice360]

I suggest people to look at more videos about the VAT tax and not just a conservative think-tank like Cato.

[docdrew87]

i just can't believe that the government would add a sales tax to stuff. that's unamerican

[vdvsoldat]

@docdrew87 The Goddamn USA is the most un-American country in the world. Isn't it amazing?

[thatVeteran]

@SigEpIranian So your saying the Facts in the video are wrong? your saying that you know for sure that the nation will drop the federal income tax and replace it with a Vat only..I think your wrong

[sparky41684]

this would start a war!!

[666789443]

Thanks for explaining everything, it helped put things in perspective. Do we get to vote on whether or not Obama gets to impose this VAT tax on us, do is he going to force it on us?

[Psychosmurf547]

@666789443 Well what do you think?

[altops]

its pure compound inflation

[Roddyoneeye]

You forgot that the proposed VAT will greatly expand the 'black' market throughout the US.

[Futuramapwnsall]

@Roddyoneeye fuck yea i'll use the black market if i have to pay 35% sales tax. What a bullshit idea

[jms46120]

Not one country with government run healthcare runs without a vat. It runs fine in some countries but India is showing people arent paying there yearly vat.

[indigo11274]

The VAT hurts billionaires spending millions on houses, boats and cars. It hurts the poor billionaire KOCH family who are paying for this video! Learn about the EVIL Koch family who don't care about you or me, but love money more than anything! They formed the CATO institute to campaign for the ultra wealthy.

[Mikevdog]

@indigo11274 The VAT affects everyone. That iPad you wanted will be $599 instead of $499.

[robe619]

For a second I thought this was Andrew Bernard.

[misschieviousone]

I stumbled on a guy called Jarl (Moe) who talks about reducing taxes. He has videos on You Tube if any of you are interested. They're quite informative and can probably help people who are paying way too much tax.

It helped me anyway and I agree with imso4socr about what he's saying regarding the Government!

[dachickenman]

I don't like the idea of a national sales tax or VAT to replace the income tax as much as the idea of abolishing the income tax and replacing it with nothing. Of course, with that I would like the size of the federal government to be reduced to a ghost's shadow of what it is now.

[ajpmathwiz]

You can't replace the income tax with nothing- we couldn't pay the interest on the debt with just tariffs, royalties and state enterprise profits. That may be a decent endgame, but we can't get there in a single year, or even a single decade.

[dachickenman]

And just how much of the federal gov't's money comes from income taxes? The revenue from 2008 income taxes was not enough to cover the sum of the TARP bailout and Bush's and Obama's stimulus packages.

[ajpmathwiz]

About half the government's revenue is from personal income taxes. The total of personal income, corporate income and payroll taxes comprises about 90% of Federal revenue. Don't get me wrong, I'd like it if we could pay our bills and meet our national security objectives off of just the money from tariffs, excise taxes and fees for various legal papers (passports, patents, etc.). However, we just can't do it today. Maybe someday, but we are no where near that yet. FairTax helps us get there

[joewalter222]

A VAT tax would be great for manufacturers in America if it replaced the already high business income tax, and for once make some money on those imports. Yes the cost of goods would be higher (5% to 10%), but the increase in jobs, tax revenue and decreased trade deficit would more than make up for it. Combined with a simpler personal income tax code, a hybrid private/public health car system, and tighter financial regulations would REALLY help america in the long run!

But don't expect it...:(

[loveliberty1776]

@joewalter222 I've never fathomed the absurdity of taxing oneself into prosperity. What about the farmer whose income is in fluctuation? In a bad year rather than pay taxes on basis of profit or loss, all the raw materials from feed to fertilizer is subjected to the expensive VAT. It would be a nightmare coincident with an already high personal and corporate income tax.

Cato Institute demolished the VAT myths.

[ajpmathwiz]

It's not taxing oneself into prosperity; it's that the VAT is much simpler than the income tax system, allowing for less room for cheating and having fewer compliance costs.

[loveliberty1776]

I would agree it's simpler and preferable in and of itself. But we can never have the VAT instituted unless the personal income tax is repealed. Politicians in Europe never repealed the income tax, they erected the VAT alongside the income tax. It only aggrandizes the power and size of government.

[SexxyyAmber88]

i really do need a new boy toy hihi ^^

[seaplaneguy1]

This is another attempt to turn America into Europe. Promoter of VAT should go live in Europe if they like it there so much.

[ajpmathwiz]

Europe's problem is not that it has a VAT, but that it has a VAT AND and income tax.

[Futuramapwnsall]

@ajpmathwiz so if we have 30% income tax and a 25% VAT and 5-10% sales tax, I'm pretty sure we're boned too.

[ajpmathwiz]

@Futuramapwnsall Which is why I would never endorse a VAT if we were going to keep the income tax. A national consumption tax must replace the income tax, not supplement it.

[asleeperj]

@ajpmathwiz You sir are some what correct. Europe's problem is that they have too high a tax rate on consumers. They have no true investment and savings, too much spending on social programs, too much spending helping America with it's unjustified wars; they have, a central bank in each country that prints money, and a slew of other problems. I believe in a consumer side tax, if it is the only tax, is the best way to go, but not in addition to other taxes.

[imso4socr]

i agree with thomas jefferson when he said, "i predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of 'taking care' of them."

[imso4socr]

"the answer, of course, is that politicians love to buy boats by spending other peoples money" hahahaha...of course that's why they want to implement this tax! i wish people would realize the scary truth of what's happening in their country and fight back against this oversized, perverted government that uses legal plunder to get what they want out of the people.

[somercet1]

The VAT is not a bad tax. The problem is the U.S. method of enacting taxes and publishing the cost. Sales taxes are cheerfully line-itemed on your every receipt by businesses eager to distance themselves from the extra cost.

What America needs is a flat tax amendment to limit the damage all our taxes do.

[tutorturtle]

We drift inexorably towards Socialism and slavery. The founding fathers warned a bloated central Government with too much power would lead to the very corruption and and abuse of power we are seeing today. We let it happen.

Barry H.O., has got to go!

[askmeaboutpins]

man, it's cool the way anyone who tries to argue anything has their post deleted. such freedom, such open mindedness, such rationality.

[JanBoxeaza]

The path to Socialism is a slow but sure one.

[louis12346]

Who the Hell would want to start a small business .TAX, Paper Work ,Fines Lic. Permits, law suites Jail & bankrupt .

untie the Hands of Americans FREEDOM

[suedeslounge]

Dan is the man.

[laplinp]

You want your government to do things for your country and help you etc. Yet when they raise or introduce a new tax you all get angry and protest. Newsflash everythng costs money, man power, electricity that runs almost everything now and everything else. We pay a higher tax rate, we also have free health care for everyone. Yes it has its probles, however it has saved countless lives whether it be politicians who use the service or even the homeless man who has just had an epileptic fit.

[PairoftheSocks]

newsflash, we've been rasing our taxes for years. What planet do you live on? Our corporate tax is terribly high, and our taxation is overbloated and inefficient. Since when have we won a tax protest? lol, i dont know your exact country, but canada has a healthcare crisis every 2-3 years or so. Thats very "reliable"...

[Shawnee470]

I keep seeing the "R" word (Revolution). It was taxes that started the American Revolution. People have had enough!!

Just read a new book (A Time To Stand by Oliver) that parallels modern day Americans to colonial Americans who fought govt. tyranny. Its based, in part, on real people/events in a small, American town that revolts against federal tyranny. Its fast pace & intense. It was so compelling I couldnt put it down. Its insightful.its a must read thriller.

booksbyoliver. com

[RMMHS4RP]

Remember Lew Rockwell's maxim: It's not HOW they tax us, it's HOW MUCH they tax us. An as Dan has shown, new taxes always lead to higher overall taxes.

Oh, and Dan, tax loopholes are not corrupt. They are oases of freedom. Would that we had more of them.

[THEFuzzyGoddess]

Isn't it cute how this is called a, free country!?

And yet everything we do costs money. To the point, in some cities and towns, it's illegal to be homeless!

[rambo26]

As with almost all government action, once it starts it's impossible to get rid of!

[MigDanskeren]

The man is right. 50 years ago my country (Denmark) had the lowest tax rate in the Western world. Today we have the highest tax in the WORLD and our VAT is 25 %!

[luciferiexcelsil]

@MigDanskeren but the per capita in Denmark is almost 55k $. whereas in the U.S is barely 30k $...

[MigDanskeren]

@luciferiexcelsil

46k in the US.

The thing is that GDP includes public consumption and as Denmark has a lot of wasteful public consumption the GDP is artificially high, but people are no better off regardless of these inflated numbers.

The other problem is that even a more honest representation of production is not worth very much to the people if government takes more than half.

[luke19631963]

@MigDanskeren And I wonder what value you get from your govt for all those high taxes, not much I gather just like here in the USA. Taxes are nothing more than a transfer of wealth.

[claudialepo]

@MigDanskeren Don`t worry, Hungary reached you (25% as well)

[claudialepo]

@MigDanskeren Don`t worry, Hungary reached you! 25%

[elbuggo]

A fantastic tool for tax-lovers. VAT is now here 25%.

[askmeaboutpins]

there wasn't even a justification, beyond "Oh god, the government well have money to spend on boats." god forbid a government have money.

it's worsened by the tired old fact that correlation =/= causation. at least back it up with some shit about gdp, standard of living, etc. if you're going to equate two essentially seperate things, you might as well do it convincingly.

[mwangolatrue]

We don't need conplicated figure or intelectual looking nice data, its very simple:

When a government have 100$, they make a budget of 150$.

If you give them the opportunity to have 150$ revenue, they got a 200$ budget.

And you will be 50$ poor in the process, all the factual efidencies point that raising taxes worsen your pockets situation and the government spending

[Ovedya2006]

"'Cause I'm the tax man. Yeah, I'm the tax ma-a-annn, and you;re working for no one but me."

[BloodiCheeseCake]

If you drive a car, Ill tax the street,

If you try to sit, Ill tax your seat,

If you get too cold, Ill tax the heat,

If you take a walk, Ill tax your feet.

[TOL1488]

Great message but the lavender suit and the nasally voice certainly detract from the watchability.

[LLORT3]

i shall play the world's smallest violin for the rich

[Scoforever]

I love the flat tax. Put in a constitutional amendment to end all taxes except the income tax. In the second part of this amendment limit the level of this tax to 20%. No rebate. It could be used for class warfare.

[greenghost2008]

wat kind of accent is that?

[Scoforever]

An annoying one. I really like Dan but his voice is really annoying.

[bertly71]

It would be a very regressive tax on those who could lest afford it. It is another bad idea from the power brokers in Washington.

[BDizzle66]

This guy needs to invest in some clothes. A decent jacket and tie would be a "value added" to this video. Great message -- terrible suit jacket!!!

[Reaps51]

I'd rather have the GST included in the price than what some of the US states do which is tack it onto the price. Wind up paying some ridiculous prices.

Far as I'm aware it wasn't intended to 'replace income tax', but wipe out some of the hidden taxes, especially some of those that each individual state did.

Why a Liberal federal government would expect a Labour state government to *reduce* taxes is a little beyond me, though..

[iiooioooi]

Dan you should run for a senator or a congressman. this is time for someone like you to step up and draw a line on the history. and tell the future generations that freedom won again like founding fathers did.

[IRONMANAustralia]

In Australia we call the VAT, the "GST", (Goods and Services Tax), adopted in 2000.

I recall trying to explain to people before the fact, that it was NOT a total reform of the existing system.

In a recent conversation I rolled my eyes as a friend of mine who had been in favour of it said, "I thought it was gonna replace income tax".

That never was the promise, but it was a common misconception on the street, (that the government make no effort to correct I might add).

[whoo689]

why aren't these videos posted on the original cato youtube channel? Just curious. The Center for Freedom and Prosperity is part of Cato Institute, isn't it?