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Politics : The Trump Presidency -- Ignore unavailable to you. Want to Upgrade?

To: bentway who wrote (4650)	1/4/2017 12:35:39 PM
From: Steve Lokness	Respond to of 358096

<<<<<Under the US sales tax system an American corporation does not pay sales tax on the things it buys–it only applies to those final sales to the final consumer.>>>> Well to start with, the US doesn't have a sales tax system. States do, but not all of them; when I buy a big ticket item like the camera I just bought, I visited my favorite tax free state - Oregon - and bought it there. ........So to be clear, the US government gets zero revenue from the sales tax. Additionally; If you are Keenes and make a shoe in America and sell it through REI. The corporate manufacturer doesn't pay - or more correctly - doesn't collect the sales tax, the retailer does. Additionally; Krugman is wrong to suggest a VAT tax is the same as a sales tax. The VAT tax is applied at every point along the manufacturing line. So your company only pays the tax for that amount of the item where you added value. Sales tax is not based on value at all - but on total sales price. Clearly many do not agree with this argument as the Trade agreements have been attacked from both the left (Bernie) and the right (Trump). If there is no evil here, why did Hillary flip like a wet noodle as soon as Bernie started hammering on this issue. Why haven't the believers in free trade been able make an argument that stands up?

To: bentway who wrote (4650)	1/4/2017 2:17:57 PM
From: Katelew	Read Replies (2) \| Respond to of 358096

<<Consider a U.S.-manufactured car that sells for $20,000. When the car arrives in Germany, a 19 percent VAT will be added on to the $20,000 price, meaning the car will be sold in Germany for $23,800. Yet no tax comparable to a VAT is imposed on a German manufactured car imported into the United States. Consider a German car that is sold in Germany for $20,000 after the 19 percent VAT is imposed. When the German car is imported to the U.S., Germany rebates the 19 percent VAT to the manufacturer, allowing the export value of the car to be $16,807 ($20,000/1.19). When the German car is imported to the U.S., no U.S. tax comparable to the VAT is assessed, so the car is allowed to enter the U.S. market at a price under $17,000. In short, the U.S. manufacturer suffers price disadvantages when the U.S. car is exported to be sold in Germany, compared to the price advantages the Germany manufacturer receives when the German car is exported to be sold in the U.S. In this example, U.S. producers are disadvantaged in two ways. On export, a U.S. product that otherwise sells for the same price in domestic markets starts off with a disadvantage of $3,800 because of Germany’s VAT. At the same time, the German car — which sells at home for the same price as the U.S. car does in America — is sold to the U.S. for a price that is $3,193 less than the U.S. car. When you add these two factors, U.S. car companies face a combined disadvantage (at home and abroad) that totals $6,993. In effect, the VAT rebate for German exports serves as a government export subsidy, while the imposition of VAT on the U.S. car serves as a tariff imposed on U.S. exports to Germany>> Trump made a garbled attempt to explain himself, and it looks like the London metals trader who wrote in Forbes was simply riffing off the garbled explanation in an effort to obfuscate the underlying trade issue. Or the writer may be speaking somewhat truthfully because it is Mexico they are referring to and not Europe as I initially referred to. Nevertheless there are real trade issues with VATs creating an uneven or unfair playing field. The example above, based on European VATs, is commonly used in any argument and can be found all over the internet. Europe gets away with it because the WTO refuses to label VATS as illegal trade barriers. The VAT functions as a de facto tarrif however. Krugman dismisses the effects VATs have on trade by saying that imports, such as the German car above, will face a sales tax. Thus he equates them, saying it's much ado about nothing because a VAT is just a sales tax. This would be true if the percentages were the same. But they are not. In the US, sales taxes range from around 7% up to as much as near 10% depending on the state you live in. On the other hand, the German VAT in the above example is 19%. So even though the sales tax applied at the end of the process will serve to reduce the combined disadvantage of $6,993 to a smaller disadvantage, it still leaves the German imported car with a big price advantage over a similar American car exported to Europe. I've got leave and go back to lurking for awhile. Ya'll can keep up the good work and hash it out. :)

To: bentway who wrote (4650)	1/5/2017 2:35:36 PM
From: TimF	Read Replies (1) \| Respond to of 358096

As Worstall points out rather well, a VAT isn't' a straight up trade barrier. Neither a US seller to Europe, nor a European seller to the US has to pay the European VAT for the product sold. OTOH the European producer would be encouraged to export by the fact that he doesn't have to pay the VAT on exports but does for domestic sales. Also if products are more expensive you could suppress demand in Europe relative to the US, resulting in a boost of exports from Europe relative to exports from the US. But that last point is pretty weak, since its not like the US doesn't have taxation, and the taxes the US does impose can indirectly have a similar effect. If you tax the consumers income he or she has less left over to buy things with. If you tax companies profits, they have less incentive to invest (the after tax rate of return on the investment will be less) resulting in less production capacity (so less ability to produce for export or fully satisfy the domestic market), and/or less efficent production (making the goods more expensive and thus less desirable), or less improvement in product (again making the goods less desirable); unless they can jack up the price to compensate, and if they can then the higher price directly reduces demand (and can create lower revenue, which feeds back on to lower profit).