Quote:
Originally Posted by djplong
In another thread, someone metionad about how much money you'd pay in taxes to buy a car under the 9-9-9 plan.
It got me thinking.
If I buy a car for $30,000 (bottom line) and I sell it years later for $10,000, there's a big difference between a VAT and a sales tax.
Under a sales tax, I have to pay $900 on that $10,000 sale.
Under a VAT, I pay nothing since I sold the car for less than I paid for it. VAT, for those who don't know, means Value Added Tax. In short, if I buy something for $100 and sell it for $120, I pay tax on the $20 - the 'value added'.
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Not quite accurate...the car would have cost you a lot more than $10,000 to buy it in the first place.
Each of the following classes of businesses would have added 9% to the value they added to the car you bought (the tax would be paid on the difference between what they paid for raw materials and parts to make their product or component and what they sold their product for)...
- All the raw materials suppliers (steel, copper, aluminum, plastic, glass, etc.)
- The suppliers who manufactured the parts that went into the car (engine, transmission, electronics, wiring harnesses, carpeting, seats, trim, etc.)
- The car company that assembled the car
- The transporter that hauled the car from the assembly plant to the dealer
- And the dealer himself.
At each level, the supplier or sub-assembly contractor pays the 9% tax on the difference between what he paid for the parts and raw materials he used to make his product and what he sold it for to the next level in the supply chain.
So as you can see, it's a virtual certainty that you would have paid a lot more than $10,000 for your car. By the way, that's one of the criticisms of the VAT tax--the tax simply gets burined in the cost of the products purchased and no one is particularly sensitive to the actual tax rate itself.