V.A.T. will drive the last nail into the coffin of the remaining small U.S. manufacturers.

[David Zephyr]

I knew this day would come, but I never figured it would be from the hand of a Democratic President. Today, we learn that President Obama is warming to bringing the value-added tax V.A.T.) to "the table".

The sheer weight of accounting that this will add to the last remaining small manufacturers of the last of truly "made in America" products will be crushing. Small manufacturers, already on their knees in competition to offshore manufacturing will simply collapse with this accounting burden. I ran manufacturing facilities for three Fortune 500 companies for decades. I know a lot about the V.A.T. concept. The GOP has loved it for years. I am surprised that it didn't gain traction during the Bush/Cheney years. It's been floated for decades as the "easy tax" that is invisible to the wage earner, but it's a job killer, especially in this day and age. Politicians like it because it allows them to raise taxes without the visibility of doing so to the public. And Republicans have long loved the V.A.T., but domestic manufacturers had too much clout once upon a time.

The V.A.T. concept, floated for decades in the U.S. and favored by the transnational corporations who market their goods here under "American" brands, but that are made off-shore love the V.A.T. because all of their off-shore manufactured products arrive to our shores as "finished goods". The stack up of taxes at every level that would be imposed upon domestic manufacturers would not apply to their goods.

Why President Obama would entertain this domestic job-killing tax isn't beyond me. His advisers are all Wall Street people who made their fortunes on paper their entire lives, not by making products or by working in factories. As Michael Moore pointed out, the Wall Street firms got bailouts while General Motors was forced into Chapter 11. Two standards: One standard for the folks who've never made anything themselves and one for those who do.

The V.A.T. is the darling of mega-corporations, Wall Street and it will be the kiss of death to small manufacturers who are hanging on by threads already and it will be mother of all ultimate union busters.

Hopefully, the American trade unions will rise up also against this. If they don't, they will wish they had after it is too late.

[existentialist]

1. Don't the effects of a value added tax

greatly depend on the details?

I realize that in some variations a value added tax could indeed be as devastating as you state.

Is that necessarily so?

[David Zephyr]

6. It's an accounting burden at every level of production.

As a raw item is received at the dock of a factory it is taxed, as it moves to the warehouse an into "inventory" it is taxed (add the the forklift and the driver that carried it there and the inventory handler who took it to the corresponding pallet rack). As the raw good (now already at a higher "value") moves to an assembly line, the raw item will go into a sub, sub, sub assembly and then into a sub, sub assembly and so on until it is at the final assembly stage. The VAT adds tax (adds "value") all along the way with the labor of quality personnel added and so forth.

Most production houses already have these steps broken into stages of production, some with and without new part numbers as they ride toward the finished good destination. These are "built" on what is called "indentured bills of material" or multi-level bills of material and many times the costs are exploded out. Small manufacturers typically build on single level or at most two level bills of material. V.A.T. requires not only the multi-level bill of material, but that a tax now be added at each stage of production. It's an accounting wet dream...for a while until the small business owner tosses in the towel and closes the company or joins the off-shoring parade with all the big guys.

The American people are so asleep at the wheel, caught up in who's winning the American Idol or Dancing With the Stars that this is far too insidious to even try to explain to them. Owners of small manufacturing businesses will understand the burden it will cause to them, unions will also see the inevitable outcome of more off-shoring, but the public will be blind to this, which is why politicians love it. No one sees the tax on their paycheck or as a sales tax. It's invisible like a toxic gas.

Ten to one, this will pass with bi-partisan support and a happy President signing a bill...and then the flood comes.

[indepat]

2. Republicans have never seen a regressive tax that they didn't love, all of which raises

the question as to just far to the right BHO is. :shrug:

[Newsjock]

3. Obama spokesman: No Value Added Tax

Source: USA Today
Apr 19, 2010

President Obama is not considering any sort of Value Added Tax, his spokesman said today.

The Value Added Tax -- a form of sales tax that is assessed at each stage of manufacture and distribution -- has been much discussed since White House outside adviser Paul Volcker raised the topic recently.

But "this is not something the president has proposed, nor is it under consideration," spokesman Robert Gibbs said.

U.S. Rep. Sander Levin, D-Mich., chairman of the House Ways and Means Committee, also says a VAT is "not on the agenda."

Read more: http://content.usatoday.com/communities/theoval/post/2010/04/obama-spokesman-no-consideration-of-value-added-tax/1

[Fumesucker]

5. Yeah, and Obama promised he'd support a filibuster of FISA and telecom immunity..

How did that work out, eh?

[kath]

51. Didn't he also say he wouldn't sign a "health care" bill without a public option?

Oh, and wasn't he VERY much against mandating the purchase of health insurance during the campaign?

[Statistical]

52. Repealing DADT? Oppose "Cadillac Tax"?

[David Zephyr]

7. Here's a more recent breaking story.

http://news.yahoo.com/s/ap/20100421/ap_on_bi_ge/us_obama_tax

[Newsjock]

8. From that story

"After the interview, White House deputy communications director Jen Psaki said nothing has changed and the White House is 'not considering' a VAT."

Just more trash journalism from the AP's Washington bureau, with the lead thoroughly knocked down by the sixth graf.

[David Zephyr]

9. Not trash journalism. They are called "trial balloons".

Trust me, Newsjock, the V.A.T. will be policy sooner or later. It's important that any trial balloon from any WH source is reacted to with strong opposition. Unfortunately, the public doesn't give a flip anymore. Most Americans believe Obama created the deficits, most Americans believe he started and the bailouts and a great amount believe he started the War in Afghanistan.

[dionysus]

12. and watch the usuals lap it up just like the teabaggers.

[David Zephyr]

18. The "teabaggers" will love the VAT, so you have self-inflicted a paradox upon yourself.

Ignorance has a way of doing that to people.

[dionysus]

20. ignorance is seizing on shit that won't ever happen, just to get a daily fix of poutrage.

PS the teabaggers won't

[David Zephyr]

22. You clearly don't understand the issue at all.

Barney Fife fired his only bullet...and at the wrong time. You truly look silly as hell.

[dionysus]

24. i understand clearly you are manufacturing outrage over something that will never happen

[David Zephyr]

27. You are the only one outraged.

You bore me with your ignorance. Try reading. Less typing on the internet.

[Greyhound]

4. And that, I fear, is the purpose.

As long as the U.S. maintained at least a minimum of real manufacturing (products produced here by American using local suppliers and resources), we retain at least the possibility of independence. We're at a tipping point and I think you are right in the effect it will have on the classic American small business.

We could literally end up being completely dependent upon foreign manufacturing. The list of necessities that cannot be had here is already quite long, this might make it all inclusive.

[David Zephyr]

10. This would be the final nail.

It won't take much more anyway. Your comments are spot on the mark.

[dionysus]

11. the transformation to teabaggers is now complete "HE'S GONNA RAISE MY TAXES!!11!!11!"

:eyes:

[Fumesucker]

15. Most of us here want Obama to raise taxes..

On those who can most afford to pay.

The VAT will have greatest effect on those who can least afford to pay.

[dionysus]

16. yes, and who here REALLY thinks he's going to slap a VAT on the middle class? seriously.

people hypothesize about shit that's political suicide, that simply won't be done. just like the "he's going to privatize SS!!11!!" shit you see from time to time.

[Fumesucker]

19. I'm beyond surprise..

Nothing the politicians do will surprise me any more.

Now if I could just get beyond caring or paying attention I'd be much happier.

Edited for speling.

[Name removed]

25. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Fumesucker]

29. Unfortunately for my peace of mind I have grandchildren..

I care a great deal about the world they will be coming into, for myself not so much, I've already had a pretty decent life and could check out today without too many regrets.

[David Zephyr]

34. I also have a grand daughter.

But there are things we simply can not change. The SCOTUS ruling permiting corporations to participate without restraints in the American electoral process coupled with the abdication forever more of our healthcare to insurance corporations, magnified by the alarming rate of religious (Christian) fanaticism, the disdain for science and more, there's little left to fight for anymore.

My home and my estate is in a very defined trust. I've told my son-in-law that he will have to stay at my daughter's side even if she lives to be 90 because the home will carry down to my grand daughter afterwards and the money will arrive in yearly amounts stretched out for a very, very long time.

As Voltaire said, "tend your garden".

We will never see the U.S. the way we'd once hoped it might be. We've lost. Change what we can, deal with what we can't.

My OP was to point out the toxicity of the VAT and how it will further diminish the standard of living of working class Americans. No wonder meth and crack are so popular. People just give up. By the way, tonight we'll learn the most important thing in our nation: who gets eliminated from the American Idol show.

[Fumesucker]

37. Yeah, but it's like having a tornado bearing down on you..

There's little to nothing you can do about it but you can't look away and just ignore it either. My urge to "fix" things is all but overwhelming and I find I can't turn it off no matter how hard I try.

I had no idea American Idol was even on the air any more, I pay almost zero attention to popular culture any more and haven't for quite a few years now.

[Name removed]

28. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Hannah Bell]

43. He's always on that side of things.

[bvar22]

33. I didn't think he would slap a "Cadillac Tax" on the Working Class either

Especially after he campaigned AGAINST it.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=385x420430

Surprise, surprise!

[crazyjoe]

47. right after he repeals DADT

[Statistical]

53. A 5% VAT would raise about $700 billion in first year.

$700 billion would balance the budget, fix SS, and allow paying down the national debt.
Don't think this administration isn't at least slightly tempted to look at VAT as a quick fix. I mean it is only 5%. Right?

VAT is a regressive tax but so is gasoline excise tax, sales taxes, payroll taxes, real estate taxes.
Most Americans have no idea what "regressive" even means.

[Heywood J]

58. $700 billion wouldn't go far today.

According to the http://www.cbo.gov/ftpdocs/112xx/doc11231/index.cfm">CBO, the deficit is just shy of $1.4T. $700B wouldn't even balance the current budget, let alone allow for debt paydown or paying into Social Security.

[Name removed]

21. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Name removed]

23. Deleted message

Message removed by moderator. Click here to review the message board rules.

[The Straight Story]

26. He already raised taxes via SCHIP, which affects the poor more than anyone else - why didn't he

raise taxes on things mostly purchased by the wealthy?

[Fumesucker]

30. Because the wealthy own the politicians..

Not to mention most of the politicians are wealthy themselves.

[David Zephyr]

17. The GOP loves the VAT. They have for decades now.

Big corporations who build their products already offshore will be immune to the VAT.

It penalizes small American manufacturers who actually still employ Americans to work in their companies.

Teabaggers, who are the dupes of the GOP and the corporations, will love the VAT because they will never "see" it on a paycheck or "see" it in sales tax.

I am a socialist, by the way. A life long socialist.

[Abq_Sarah]

32. Corporatists love the VAT

And unfortunately, both parties have far too many corporatist in office.

Here's a hint: When any industry leaders start discussing how they should be regulated with Congress, you can bet your ass both the industry and Congress are doing it to line their own pockets and prevent smaller companies from ever gaining a foothold. Big Pharma is a perfect example. What they pay out in campaign donations and special fees to the government are a drop in the bucket compared to what they can get from the consumers by making sure it's too expensive and too burdensome for anyone else to follow in their footsteps.

[David Zephyr]

35. +1

Word.

[Abq_Sarah]

31. I'm no teabagger

But he did raise my taxes, in a violation of his campaign pledge.

At least until I quit smoking cigarettes.

Let's face facts. President Obama is a politician. Policians love to spend and hate to cut programs. Eventually they'll run out of "sin" to tax and start targeting everyone else.

I have no doubt the VAT comments are nothing more than a trial balloon and I'm sure we haven't heard the last of it.

[David Zephyr]

36. It was a trial balloon.

And you are right, we haven't heard the last of it.

It will be easy to pass VAT through Congress because it is an invisible tax and the GOP will support it because it will be the alternative to Obama's letting the Bush tax cuts on the uber rich expire.

Let's hope Obama doesn't go down this road. But the trial balloons have begun which is why I posted the OP.

[Zynx]

13. Who the hell says a VAT is even going to be proposed?

[dionysus]

14. just the usual kneejerkery. i guess obama didn't condemn it, so it plays right into the meme of

the "he's purposefully going to destroy the middle class" folks.

[Xenotime]

38. Who says it's a bad thing. It works in Europe quite well.

We should be so lucky.

[Hannah Bell]

44. You're not going to get a european-style welfare state with your new tax, you know.

you're just going to get more taxes, falling disproportionately on the lower & middle brackets.

and you're still going to have an income tax, like most european states do, as well.

plus, if you're a businessperson, a whole lot more paperwork. which means, even higher costs, in addition to the tax itself.

win-win!!!

[Statistical]

54. Does Europe have FICA (15%) and State Sales Tax (5% to 10%)?

If VAT replaced all other forms of regressive tax it would be one thing. To issue it on top of the massive amount of regressive taxes is just another straw on the back of middle class?

[David Zephyr]

60. Carousel Fraud also works quite well in Europe, too.

And leaving aside the real issue of carousel fraud which would happen here as well (probably with loopholes for the large corporations and not the small businesses as that's how our laws have been written since 1980), Europe is hardly a hotbed of small start-up manufacturers like the U.S. Why? VAT is one of several reasons, but believe me it is a component. VAT presents a horrific burden on small manufacturers who are still producing products "Made in America". VAT will be the straw that breaks that poor camel's back once and for all.

Obama needs to man up and let the Bush Tax Cuts to the Top 2% expire as he said he would. That's the friggin' problem. VAT is an "invisible tax" on the weakened U.S. manufacturing base that will be like a toxic gas. It's easy for politicians to pass it because it won't hit a paycheck and it won't show up as a sales tax, but it will close businesses, send more of our products offshore to be built and will bust unions and kill good jobs.

Let the Bush tax cut for the rich expire which takes the rich back to the same tax level they paid under Ronald Reagan. That's the answer. But that will take guts.

[dflprincess]

39. Some things are so horrible and do so much damage to the working & middle classes

that only a Democrat can get by away with it. Like NAFTA or the Health Insurance Profit Protection Act (imagine if Bush had pushed for that scam and called it health "care" reform).

Just wait until they turn their attention to Social Security & Medicare - Rahm and his DLC pals have wanted to go after those programs for a long time.

[kath]

55. "imagine if Bush had pushed for that scam and called it health "care" reform" --

Yep - the Health Insurance Profit Protection Act. It still totally boggles my mind that that abomination of a bill is what we ended up with.


And NAFTA - another abomination, and passed by a "Democrat".

[Nikki Stone1]

40. Yes it will. Real capitalism is dead. Only predatory capitalism by those who have "theirs"

is allowed now.

[jeanpalmer]

41. It will happen after the election

He's pretty open about it.

In the CNBC interview, Obama said he was waiting for recommendations from a bipartisan fiscal advisory commission on ways to tackle the deficit and other problems.

When asked if he could see a potential VAT in this nation, the president said: "I know that there's been a lot of talk around town lately about the value-added tax. That is something that has worked for some countries. It's something that would be novel for the United States."

"And before, you know, I start saying 'this makes sense or that makes sense,' I want to get a better picture of what our options are," Obama said.

He said his first priority "is to figure out how can we reduce wasteful spending so that, you know, we have a baseline of the core services that we need and the government should provide. And then we decide how do we pay for that."

http://news.yahoo.com/s/ap/20100421/ap_on_bi_ge/us_obama_tax

I don't see any denial in there. He clearly doesn't rule it out. I would expect an ironclad statement from him saying it will not happen during his term. After all, he promised not to raise taxes on middle and low income people.

[Hannah Bell]

42. +100

It's a boon to multinationals, plain & simple.

[Pharlo]

45. There is one condition that would make VAT tax in the US acceptable -

and that is ONLY if it is accompanied by a corresponding import tax against any imported product competing against any US manufactured item being hit by the VAT tax.

Without that stipulation, yes, a VAT tax would hit US manufacturers unnecessarily hard.

Most manufacturers have cut back as far as they can in order to compete at a global level. Add more cost to their production rates while being forced to compete in a market that will force their customers to look for a cheaper alternative, and suddenly, it's costing the US manufacturer to produce at a net loss. Not a sustainable situation. If US manufacturing were running at a 30% profit and could absorb the cost with a lot of bitching and grumbling, that would be one thing, but they're not. Most US manufacturers are running as lean as possible with low profit margins - but still a profit margin.

A US VAT tax in the 1970's would have been survivable for most US manufacturers. Today, not so much. Too much has changed in the interim for US manufacturing.

[Statistical]

57. There is no need for "corresponding tax".

VAT applies equally to
100% domestic goods
100% foreign goods
domestic assembly with foreign raw material
etc

Still VAT still isn't good idea because it is horribly regressive. The majority of VAT will be paid for by the poor and middle class.

The richest 1% have 90% of the wealth and under VAT they would pay LESS than 1% (ultra rich "spend" very little of their income). The bottom 90% have 10% of the wealth and would pay MORE than 90% of the VAT. It is a Republican dream come true.

Overtime they would push to expand VAT (proposals now are for 5%) and reduce income tax. Eventually moving everything to VAT and placing all burden of taxation on the poor and middle class.

VAT needs to be opposed no matter what the terms & conditions are.

[David Zephyr]

59. You've put the issue in a capsule with the proper perspective.

Phario, thank for pointing out the thin limb that U.S. manufacturers ("Made in America") are already out on and hanging their for their lives against foreign cheap labor products. I don't think that people get that fact. VAT will truly snap the limb...a limb that is already about to snap as it is.

Liberals and unions need to see this as a very wicked way that will permit Congress to avoid taxing the uber rich (letting Bush's tax cut to the top 2% expire) and raising taxes in an "invisible way" that will kill U.S. manufacturing.

[JCMach1]

46. VAT is the ghost of the Flat tax and just as idiotic and regressive

Tell liberterians and any neo-liberals who spout this shite to go fk themselves.

[muriel_volestrangler]

48. In Europe, VAT is applied to the value of imported goods too

and I'd imagine that anyone proposing it in the US would include that in the proposal.

[quaker bill]

49. This could be an interesting discussion

If a VAT tax were proposed, considered, or remotely on any agenda. I do love how we parrot Republican talking points about taxes "killing business".

Taxes don't kill businesses and a lack of taxes does not cause them to start or grow. Tons of very large businesses have failed or lost very large sums of money over the last two years, and paid no taxes at all. The fact that they were paying no taxes did not keep them afloat.

[Statistical]

56. Try reading and responding to the actual argument.

Small business is already squeeze. Health Cares costs, low cost competitors in China, larger companies having higher economics of scale.

VAT tax is complex to calculate. It isn't as simple as an income, payroll, or sales tax. You need to determine how much value is added at each step of the process, caclulate the VAT tax and apply credit for VAT tax already included in product (paid by supplier).

All this requires accounting, and paperwork, receipts, proof.

This creates an ADMINISTRATIVE BURDEN on small business at a time when they can least afford it.
Many will just say fuck it, sell out to larger competitor who will offshore 99% of the jobs to China.

Raising income taxes on rich by 5% would create far less administrative burden on small business.

[David Zephyr]

61. +1

Well said, well explained. Obama needs to let the Bush tax cuts for the super rich expire. VAT is a cop-out to avoid doing so. VAT does create an "administrative burden" on small businesses and manufacturers "at a time when they can least afford it." You summed it perfectly.

[Faryn Balyncd]

50. k and r