Taxes that are a Drag on the Economy

To hell with raising property taxes until the intransigent, incompetent buffoons at VIBIR and the Lt Gov Office identify and assess all properties in the territory. The VI Gov doesn't even know who owns half the undeveloped properties in my neighborhood.

But I'm right there with you on the other points.

I'd definitely be in favor of a Sales Tax versus the Gross Receipts tax and much much higher taxes on alcohol and tabacco. As far as Property Taxes go, I've only paid that once in the 5 years I've owned my home. Lets not change that!!!

With the latest vote from our senate yesterday, Gross Receipts will increase to 5% on March 1.

Now this means the tax is 10% on goods in the VI. Businesses already pays 5% when goods come on the island and now another 5% gross receipts tax.

Whoa how many of our small businesses will survive?

What a way to bolster the economy! NOT:X

It's a 1/2% increase in the gross receipts tax. However, I prefer to think of it as an 11% increase in tax expense. That's on top of RECENT 1/2% gross receipts increase which corresponded to a 12.5% increase in tax expense. It's a 25% increase in tax within 6 months. So our government made a decision to appropriate more money from small businesses, which are job creators, in order to keep more government workers on the payroll.

Does the senate and the governor have a grasp of economics? Never mind.

http://stthomassource.com/content/news/local-news/2012/02/10/senate-passes-gross-receipts-tax-increase

Unfortunately I don't think there was much of a choice where the GRT is concerned but note that the Governor is setting up a volunteer commission specifically designed to investigate alternatives to the GRT. Maybe this will result in a general sales tax. Nothing is going to be popular with everyone but c'est la vie.

When it comes to tax increases "they never have a choice". Why? Because of their short sightedness they leave things go to the critical breaking point. Now with the increase they can all breath easier and go back to business as usual .... until the "shit hits the fan again".

I believe Lucy is on the mark. Although Old Tart points out that the governor is setting up a commission to explore alternatives to the GRT, taxes are sticky. It wouldn't surprise me if we ended up with BOTH a GRT and sales tax.

Why is the VI government so out of touch with developments in the states? Both sides of the aisle -- federal and states -- are proposing tax reductions to stimulate the economy. The debate is who gets the breaks. The VI government, on the other hand, is all about raising taxes for everyone.

I hope that they explore a VAT, which has advantages over a sales tax or GRT.

GRT is paid multiple times along the sales chain, as mentioned above. It's also frequently evaded, even by local businesses.

Sales tax is paid once at the end, but is also frequently evaded.

VAT, is effectively paid just once by the end consumer, but there is a stronger incentive to collect and pay the tax.

From http://en.wikipedia.org/wiki/Value_added_tax :

The "value added" to a product by a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs. A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products.

Personal end-consumers of products and services cannot recover VAT on purchases, but businesses are able to recover VAT (input tax) on the products and services that they buy in order to produce further goods or services that will be sold to yet another business in the supply chain or directly to a final consumer. In this way, the total tax levied at each stage in the economic chain of supply is a constant fraction of the value added by a business to its products, and most of the cost of collecting the tax is borne by business, rather than by the state. Value added taxes were introduced in part because they create stronger incentives to collect than a sales tax does. Both types of consumption tax create an incentive by end consumers to avoid or evade the tax, but the sales tax offers the buyer a mechanism to avoid or evade the tax—persuade the seller that he (the buyer) is not really an end consumer, and therefore the seller is not legally required to collect it. The burden of determining whether the buyer's motivation is to consume or re-sell is on the seller, but the seller has no direct economic incentive to collect it. The VAT approach gives sellers a direct financial stake in collecting the tax, and eliminates the problematic decision by the seller about whether the buyer is or is not an end consumer.

I believe Michigan is the only US state which implements a VAT system although it's common throughout Europe. I don't know enough about it to comment on either its efficacy here or how it would be set up and at what cost in comparison to a state sales tax.