Re: conservation of Euros

I didn't think you'd be one to toss the Constitution so easily.

A lot of states use the IRS as a crutch now. There's no reason to believe they won't follow suit.

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And labor. All the taxes on that labor would be collected in one fell swoop: workers' income taxes, payroll, Medicare, Social Security, etc., plus Boeing's corporate income tax, and so forth. Boeing would save all those costs, and could sell the airplanes for less.

The answer to Joerg's worry about competitiveness is that right now, today, Boeing's competitiveness is compromised by the system we have-- their price is artificially already inflated by all those hidden taxes, plus paying the bean counters to count them.

Boeing has an advantage over Airbus in that Boeing's burden is still superficially lower than Airbus'. Europe is worse. (I'm not sure it is when our deficit spending is factored in.)

-- Cheers, James Arthur

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Yes, I understood that. Materials will be taxed, and small operators might cheat paying tax on their services. Do you think that a licensed handyman chain is going to cheat? That Roto-Rooter is going to skip paying tax?

That's what I meant.

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Well, here's what going to happen presently, if you have your way: Paul Volcker, former Fed Chairman, is on the President's Orwellian- titled Economic Recovery Advisory Board. Their plan to fix the deficit? Raise income taxes, and a VAT, and a carbon tax:

Is that vision really what you want? A firestorm of taxation from all directions? That will surely cost you far more, at every level--time, money, quality of life, opportunity, and liberty--than any possible alternative.

-- Cheers, James Arthur

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Yes and no, many states that have income tax, model it after Feuderal Income Taxes; and if that model goes away, the states (like Calipornia) will be having sudden legislative sessions to unlink their systems.

Boeing does.

Nothing unproven there. I have data but not at liberty to share. Think about it: The large engines on most Boeings are from Rolls-Royce, are a hugely expensive component of a jet airliner and AFAIK still made in Derby. That happens to be located in the UK and they will in all likelihood not participate in a "fair tax' scheme :-)

And the expensive Trent engines are imported from England, representing a sizeabale chunk of the cost of each aircraft. Now how exactly are you planning to get her majesty to sign up for "fair tax"?

A consumption tax would be paid by anyone who consumes stuff. In the case of direct imports, that would be the buyer, ultimately the airline. As a Californian, you are already obliged to pay sales tax on anything you buy from out of state.

If europeans subsidize their engine companies and airlines, I suppose we could make adjustments to keep our companies from being disadvantaged. There are already international trade agreements that are supposed to do that, although the europeans cheat a lot.

Exports wouldn't be sales taxed, because the buyer is out of range. This asymmetry helps the balance of trade.

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Those will start to gradually lose business, which will then be picked up by fly-under-radar-screen operators. I've seen that happen, in Europe. Politicians thought that willy-nilly raises of the VAT whenever they screwed up the budgets would just be swallowed by Joe Q.Public. Well, Joe didn't.

A guy who worked in a tax investigator unit over there described it this way: They go out to some construction site for a raid. But beforehand they had to scope it out and place police at strategic and unusual points. That is because on many construction sites just about everybody was paid under the table and people were instructed to scurry away in all directions when someone yelled "The goons are coming!"

Of course that is not my vision. But voters are ultimately making those decisions and ... well, let's not go there. We'll just have to wait and see what happens in November. Fact is, as you said before reckless spending will simply continue and then it's "Oh, darn, we must raise the "fair tax", again". "Borrowing" from the chunk that's supposed to go towards social security is also going to be much easier because it becomes much less visible.

Quote from your NY-Post link: [VAT] ... "Imposing it would pretty well finish the transformation of our country into a European-style slow-growth nation. The right way to close Uncle Sam's gaping deficits is to reverse the continued explosion of federal spending." _That_ is IMHO 100% correct. The slapping on of another VAT or consumption tax is not.

I regard our constitution very highly. Wish everybody would. What I was saying is that _if_ there is just one state refusing to go with this flat system it is going to fail in terms of reducing compliance costs. At least in those states. Completely. Because then there is not going to be any noticeable reduction in compliance costs for Joe Q.Public.

In California that's a bit different. First, they have different exemption levels. Lower ones, of course. Then they have sales taxes. Then they have property taxes. Voters luckily staved of the worst there but in some other states retirees and others still get taxed out of their homes. You have to undo _all_ of this and politicians of a certain type will fight that kicking and screaming.

So, now manufacturers have to pay that for they materials purchases? That would for sure bring a lot of stuff to a grinding halt in our country.

Sure. But how about that foreign airline?

So you mean if a Boeing 777 is sold to Dubai it's not taxed at all under the new scheme? And the workers get social security for free, meaning paid by you and me? What if a company exports most of their stuff? Ok, then we could lay off some politicians to make up for the tax losses, may not be so bad after all :-)

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Yes. It's a sort of legal export subsidy.

And the workers get social security for free, meaning

All workers would get whatever government benefits from the taxes on domestic consumption. Since the Boeing workers have jobs, and buy stuff, they pay too. The cool thing about a consumption tax is that's it's voluntary: don't want to pay the tax? Buy less stuff.

More Boeing workers, and all sorts of other workers, have jobs if we can find a way to not drive companies offshore. The new Boeing planes are assembled in the USA, but major sections are outsourced, many of them offshore. Corporate taxes and the machinists' union arranged for that.

John

A consumption tax would be neutral as regards RR or GE or P&W. No taxes would be paid by Boeing, bacause Boeing makes airplanes and doesn't consume them.

That's the heart of a consumption tax: don't tax people for making stuff and creating jobs.

Are most Boeing engines RR? There's sure a lot of GE and CFM engines out there. I think the CFM56 is the biggest seller.

John

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They've effectively gotten an enormous subsidy from the Japanese government by 'outsourcing' the wings.

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Or move to Cancun and buy your stuff there. Problem solved.

So what would be the answer to my question on whether Boeing would have to pay this flat tax on the Rolls-Royce engines they buy from the UK?

If we don't tax that and also not tax all the aircraft delivered to foreign airlines then two things will happen:

a. Our tax collections will fall short of expectations. Way short. If that starves the beast a bit that may be ok but I assume they'll simply raise the rates on anyone else, like usual.

b. Foreign airlines will pay less for aircraft and thus be able fly tourists for less, hence ...

AFAIK the RR engines are preferred on really big airplane for fuel economy reasons.

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Exactly. One less person needing government services. It works.

As I said, Boeing would pay no consumption tax on engines because they don't consume them. No OEM would pay sales tax on stuff that they buy for resale, just like it is now. We pay sales tax on beer and oscilloscopes, which we use, and none on parts, which we resell.

This concept is too simple and too beneficial, so it will never happen.

John

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Sure you could live there and have to pay the 15% VAT in Mexico (and

The only sensible way would be no. Only domestic _consumption_ should attract a net tax. Whether it's paid and rebated or exempted is an implementation issues.

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No. We'll create zillions of jobs, and the workers will buy stuff, and pay sales tax. If they save some of their pay, that's investment fodder, also good.

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But the sales tax is so *visible*

Don't they have VAT?

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Sorry, wrong, the guy is still entitled to his social security and medicare. As long as he has paid up his 40 quarters.

That will result in a serious tax collection shortfall. The more final products get exported, the more serious the shortfall will be. In other words then you'd see rather hefty collections swings that depend on currency exchange rates.

That's actually how VAT works in Europe, with one major difference: Businesses get a full refund on the VAT paid on oscilloscopes. Not on beer consumed after hours though :-)

I know, because I've lived there and had a business there.