Word: vat
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...Detroit is flatly accusing Japan's automakers of "dumping"-that is, exporting cars at prices that are lower than in the home market-U.S. automen grumble that Japanese people pay more for their cars than foreign buyers do. Reason: a 20% value-added tax (VAT) is levied on car purchases in Japan but not on those cars shipped to the U.S. In effect, Detroit automen say, Japanese motorists are subsidizing their auto industry's exports...
...only is the VAT regressive--it is also very complicated. In Europe it has earned a reputation for simplicity only because it replaced a vastly more complex system of business turnover taxes. But in the United States experts predict that the VAT will force businessmen to spend much more time keeping their ledgers in order. By creating more paperwork, the VAT may push marginally profitable enterprises out of business...
Ignoring these defects, Long and Ullman argue that the VAT could break America's inflationary spiral by providing the necessary incentives to boost productivity. Americans save a smaller portion of their incomes than citizens of any other western nation. With savings, so low, banks and business have limited funds to invest in expanding capital to spur productivity. The solution to this problem--for Senator Long and Representative Ullman--lies in a tax on consumption. They even propose that this consumption tax--the VAT--partially replaces the corporate profits tax to free still more money for investment. Evidently, Long and Ullman...
LONG AND ULLMAN correctly calculate that an attack on our falling rate of productivity strikes at the core of America's economic woes. Yet the VAT leads this attack in a painfully misdirected way. There's no reason why the incentives for savings must come from a regressive consumption tax. As long as federal regulations limit banks' interest rates on savings accounts to 5.75% while inflation runs well over double that rate, it will make no sense for consumers to save large parts of their incomes. If the government wants Americans to save money, it must eliminate these interest ceilings...
...attempt to hide his disdain for equitable taxes. Asked what he thought of the American income tax system, Long replied: "I think it is progressive to the point of being counter-productive." He prefers emulation Louis XIV by extracting onerous "taillies" from lower and middle income people. The VAT's hidden character may seem appealing to politicians, but its regressive nature will certainly prove costly to most Americans...