Value-added: the tax increase that may fly

[mawilson 2,133]

They are not US-style ARMS. The closest thing to an ARMS is a one year "introductory" rate.

Can you explain the difference?

Don't know where you got the idea that almost all carry that sort of an adjustable or variable-rate.

I looked into it a while back. Why, am I wrong?

[Ali G. 37]

Can you explain the difference?

First major difference is that with an ARM, it can range from three to seven years. The introductory rate on an AUS loan is a teaser for one year max. Furthermore, you have to actually qualify for the loan at the variable post reset rate, rather than the introductory rate. It's a lot easier for a lender and borrower to predict what will happen in a year than it is in five or seven years.

In summary, 12 months is not the same as the usual 60 month ARM.

Edited April 20, 2010 by Ali G.

[DEDixon 39]

http://www.reuters.com/article/idCNN1921497120100419?rpc=44

WASHINGTON, April 19 (Reuters) - U.S. lawmakers are seriously mulling a tax on banks to recoup government bailout funds but a value-added tax is a nonstarter, the acting chairman of the tax-writing panel in the U.S. House of Representatives said on Monday.

The idea of a value-added tax, or VAT, has gained attention recently after Paul Volcker, an adviser to President Barack Obama, repeated his backing for it. Some Republicans have blasted Democrats for suggesting new taxes, citing the VAT, but the top House tax-writer said it would not get support.

"I've heard almost nobody within our ranks discuss it," Representative Sander Levin, chairman of the House Ways and Means Committee told a press lunch in Washington, saying if it did come up it would be a "goner."

Shortly after Levin's remarks, Obama spokesman Robert Gibbs told a press briefing that a VAT is not under consideration.

Most industrialized countries have some form of VAT, which is assessed at every stage of production of a good, with the ultimate cost borne by the consumer.

Soon after Volcker's most recent comments, Republican House leader John Boehner wrote reporters criticizing the VAT as a Democrat idea to pile on more taxes, citing a memo from an economist arguing it would lock in a "welfare state".

Levin said Republicans were exaggerating the idea's potential support in an attempt to peg Democrats as free-wheeling taxers.

The 14-term Michigan Democrat took over the panel last month after Representative Charles Rangel stepped down, facing a congressional ethics probe.

BANK TAX HEARING ON TUESDAY

One tax idea gaining some traction among House lawmakers is Obama's plan to tax financial institutions to recoup government funds used during the recent economic meltdown. Levin said he has been talking to the administration about the structure of such a tax.

"One way or another we are going to consider this issue as a financial fee," Levin said.

Obama in January proposed a 0.15 percent tax on liabilities of big financial institutions to deter risk taking that contributed to the economic free fall beginning in 2008 and culminated in the government spending billions of dollars to prop up Citigroup (C.N), American International Group (AIG.N) and others.

The idea will get its first Senate hearing on Tuesday, when the Finance Committee hears from Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program, the government's bailout program during the economic meltdown.

The idea is seen having far less support in the Senate, where the tax-writing Senate Finance Committee is led by a more conservative Democrat, Max Baucus.

Talks in the House Ways and Means committee are further along. Staff there are looking at revisions to Obama's $50 billion asset cap and basing the tax on profit rather than liabilities.

Levin poured cold water on the idea of taxing securities transactions, which some lawmakers have proposed, saying it would not be acceptable.

[mawilson 2,133]

First major difference is that with an ARM, it can range from three to seven years. The introductory rate on an AUS loan is a teaser for one year max.

How's that better than a 3- or 5-year ARM?

[Ali G. 37]

How's that better than a 3- or 5-year ARM?

The risk on both loans is completely different. As also mentioned, you must qualify for the post 12 month rate rather than the introduction rate. Hence, less than 1% of their loans defaulting. Regulation of lending practices clearly works, as it has over there.

[Dan J 277]

The risk on both loans is completely different. As also mentioned, you must qualify for the post 12 month rate rather than the introduction rate. Hence, less than 1% of their loans defaulting. Regulation of lending practices clearly works, as it has over there.

Its not really an ARM, as the post introductory rate would have to be known.

[Ali G. 37]

Its not really an ARM, as the post introductory rate would have to be known.

Exactly right, it's not as if the interest rate is going to jump 5% within 12 months.

Nevertheless, what was happening here is that people who barely qualified for the initial lower ARM rate were approved, regardless of the fact that they would struggle once the rate reset. The brokers and loan officers that pushed these sort of loans are still walking Scot-free.

The mentality with banking and various greedy people here is that as long as something is hidden in the T&C, all is acceptable. Or that the borrower is the one who needs the ensure all is in order. Whereas, that does not fly in most other first world countries.

Edited April 20, 2010 by Ali G.

[PhiLandShiR 18]

We need a tax that's inversely proportional to a persons IQ.

That pretty much taxes the ####### out of everyone here on VJ....

[Ali G. 37]

That pretty much taxes the ####### out of everyone here on VJ....

With you being the highest tax of us all..

[Texanadian 10]

On topic, a federal GST / VAT would be great for the country. It would eliminate a number of the present loopholes and even ensure illegal aliens paid their 'fair share' of tax. Much like it's implementation in AUS, as the government's debt starts to go down, they could then start to lower income tax. Interestingly enough, it's the conservatives that implemented the GST in AUS, while the left wing opposed it and preferred the US style sales tax they previously used. A 5% rate would be more than enough to begin with here.

In Canada, GST was brought in by the conservatives. The next election, the conservative party was crushed. Liberals took over on the election promise to get rid of GST.

Fast forward 10 years down the road, the federal election had the liberals, who wanted to cut personal income taxes. While the conservatives wanted to lower the GST......The conservatives won.

So I guess the conservatives are the party of the low-middle class while the liberals are the party of the rich.

[mawilson 2,133]

I like GST because it hits the poor more than the rich and I hate the poor.

[Ali G. 37]

In Canada, GST was brought in by the conservatives. The next election, the conservative party was crushed. Liberals took over on the election promise to get rid of GST.

Fast forward 10 years down the road, the federal election had the liberals, who wanted to cut personal income taxes. While the conservatives wanted to lower the GST......The conservatives won.

So I guess the conservatives are the party of the low-middle class while the liberals are the party of the rich.

Interesting. Ironically the Liberal party in Australia are the conservatives.

The fact is that the GST is the best tax system out there. It delivered eight straight years of a federal surplus in AUS. It closed some loopholes and greatly impacted the black market.

[Ali G. 37]

I like GST because it hits the poor more than the rich and I hate the poor.

That can easily be offset with an equivalent increase in minimum wage or benefits. If the GST is 5% and someone receives $1,000 in unemployment benefits, increase the benefit by $50 and the problem will be solved.

If I purchase something from newegg in CA, I currently pay no tax. Yet if I was to purchase a PC worth $1.5K with a GST of 5%, I would pay $75. Certainly won't break the bank but at least I will pay some tax on it. Eventually this will allow federal income taxes to be reduced, as has been the case in AUS.

Edited April 21, 2010 by Ali G.

[mawilson 2,133]

If I purchase something from newegg in CA, I currently pay no tax.

But you are supposed to declare it when you file your state return, at least in NY.

[Ali G. 37]

But you are supposed to declare it when you file your state return, at least in NY.

There is actually a lawsuit against Amazon from the state of NC regarding this.