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DesideriScuri -> RE: An understanding of political lies. (9/5/2012 8:08:08 AM)
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quote:
ORIGINAL: tazzygirl
How would it on a percentage?
This is where I think a consumption tax (exempting foods currently tax exempt) should be the norm. Those that consume more, pay more. Regardless of income, the more or less you consume, the more or less you pay in taxes.
A flat tax, unless there is an exempt portion of income, will hit the lower wage earners harder. Yes, they would be paying the same % as a high earner, but, that would impact them more because they have less to take from in the first place. Granted, it could be very motivating to make more to have more left.
A VAT tax won't really help any but government. At each manufacturing step, taxes will be paid, but that gets rolled into the cost of the good. Let's just for shits and giggles look at a good that has 4 steps that get hit with a 10% VAT tax. Now, we'll also assume a 10% markup on the cost of goods at each level.
Step 0: $100 cost of goods
Step 1: $121 cost of goods ($100 cost +10% markup +10% VAT)
Step 2: $146.41 cost of goods ($121 cost +10% markup ($12.1) + 10% VAT ($13.31))
Step 3: $177.16 COG ($146.41 COG + 10% Markup + 10% VAT)
Step 4: $214.36 COG ($177.16 COG + 10% Markup + 10% VAT)
Consumer: $235.79 ($214.36 COG + 10% Markup)
So, for a good that originally cost $100, the final cost to a consumer (ignoring sales taxes) is $235.79, or 135.79% more than the cost of the good. That's also assuming that the value added to the original material is included as part of the 10% markup (not likely).
Without a VAT and continuing to assume 10% markup:
Step 0: $100 COG
Step 1: $110 COG ($100 COG + 10% markup)
Step 2: $121 COG ($110 COG + 10% markup)
Step 3: $133.10 COG ($121 COG + 10% markup)
Step 4: $146.41 COG ($133.10 COG + 10% markup)
Consumer: $161.05 ($146.41 COG + 10% markup)
That's a 61.05% increase in price for the consumer.
Perhaps we are in different income categories (I hope for your sake, we are; if not, I'm sorry for you to hear that), but I'd much rather pay 61% markup compared to a 135% markup.
http://www.bbc.co.uk/news/business-12099638
UK raising their VAT tax from 17.5% to 20%. Using 20% as the VAT, and keeping the same assumptions otherwise makes the final cost to the consumer $333.96, or almost 234% increase over original cost of goods.
Consumers end up paying out the nose for these things. Those with lower incomes to begin with feel the pinch harder.
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