Quite interesting. Enacting a VAT in the U.S. would mean creating new compliance systems, and since in Europe the VAT passes through as a tax to the consumer, I think that a VAT will increase the burden on the working and middle classes more than it would increase the burden on the wealthy (the wealthy simply can afford to pay more for their goods and services, so it won't hurt as much). A few things about the VAT: In the U.K., where I have some clients, there is an income tax that's higher than the U.S. income tax. Do you remember the George Harrison song "Tax Man?" It has the line "nineteen for you and one for me..." In the 1960s, the U.K. tax was 95% (it's since gone down quite a bit). So the VAT cannot completely replace the income tax, at least not in the countries that currently use the VAT.

Also note: the European VAT doesn't apply to sales to foreigners who are taking the goods out of Europe. It may be that our tax treaties will require the U.S. to do the same. This means that goods sold to tourists at duty-free shops, or sold overseas through the Internet, won't be taxed by the U.S. I see a potential for revenue loss.

If time permits, I'll expand on this in a future posting.

A government commission in California issued recommendations for revising the CA tax laws. The plan includes lower personal income taxes and elimination of the corporate income tax (including elimination of the $800 minimum tax). This will be offset by a business net receipts tax of up to 4% (small businesses with less than $500,000 gross receipts would be exempt).

This is, in my opinion, a fairly radical proposal. For example, reducing taxable income by paying management fees to a related company would no longer reduce taxes. Instead, since it would increase net receipts for the management company without reducing net receipts for the other company, overall state tax would increase. Thus, it would adversely affect tax planning and structures that work well for federal taxes and the taxes of most other states.

The commission recommends implementing the plan over a five-year phase in, beginning in 2012.

I discussed this with my graduate students last night, and one of them (thank you, Mr. Vail!) pointed out that the commissioners appointed by Governor Schwartznegger supported the proposal and the other commissioners opposed it. Another student opined that the proposal is reminiscent of Texas tax law--which brings to mind Molly Ivin's comment that Texas is the laboratory for bad government.

One of my colleagues, Ron Vargo, a CPA in NJ, told me today that he heard that part of the proposal included eliminating sales taxes. Perhaps this was meant to reduce the burden on the middle class, but Ron pointed out that the corporations will likely pass their tax burden through to customers in higher taxes.

Overall, it seems that this proposal does not consider which taxpayers bear the greatest burden--or maybe it does, and the proponents know that it keeps the burden off the wealthy.

A

• The deficit equals the amount politically expedient at the time. For state and local situations, the deficit is set by law to equal zero.
• Revenue equals the sum of tax revenue plus fees (and federal or state aid).

I break down tax revenue in terms of public policy regarding the allocation of the tax burden over society.

• Finally, public expenditures are a matter of political compromise and expediency.

Marvin passed away on June 30, 2009, due to complications from surgery. He entered the hospital 10 weeks ago for hip-replacement surgery and contracted the hospital-borne infection MRSA. The infection settled in his heart, requiring open-heart surgery to replace his previously-installed artificial valve and to clean out an abscess. Massive dosages of antibiotics cleared the MRSA, but he unfortunately developed a different drug-resistant infection. That, too, was conquered, but the antibiotics damaged his kidneys to the point where he needed dialysis. Subsequently, Marvin endured two heart attacks and had been in a persistent vegetative state for the past two weeks.

He died, aged 85, at St. Luke's Hospital in NYC, attended by his daughters Jacqueline and Sandy. The funeral was held on July 2nd at Louis Hirsch & Sons in the Bronx. His remains were interred at the New Cedar Park Cemetery in Paramus NJ.  

Marvin retired in 2007 from his position as a court reporter for the U.S. District Court, Southern District of NY. He had been honored as a Fellow in the Academy of Professional Reporters in 1977. He was known among his colleagues for his technical skill and prodigious memory for quotations. Long before the Internet, other court reporters would turn to Marvin to identify quotes delivered by judges and litigators. Judge Kimba Wood spoke at his retirement dinner, and then-Attorney General Mukasey sent a personal letter to be read to the attendants.

Marvin was a life-long progressive, and frequently described himself as a "yellow-dog Democrat." For those of you who do not know the phrase, it means that if the Democrats nominate a yellow dog, he'd still vote for the Democrat over the Republican.

Marvin was a veteran of the U.S. Army, having served during WWII in the Pacific theater. His wife Flora Birnbaum died in 2001. He is survived by his daughters Jacqueline Birnbaum and Sandra Birnbaum, and his grandchildren Hilary Clark, Joel Penney, Darren Sullivan, Eric Sullivan and Margo Sullivan.