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View Diary: Grand Bargain 2.0: Obama to offer tax cuts in exchange for investment in jobs (152 comments)

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  •  Simple gross receipts tax favors big businesses (1+ / 0-)
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    Or set a gross receipts tax, which is dead easy to calculate. Take in X, pay Y.
    A "simple" gross receipt tax would encourage and benefit large consolidated businesses.

    Consider two scenarios.

    Scenario 1: Business A, a farmer, grows some food and sells it to Business B, a wholesaler, for $1000 FOB. Business B delivers that food to the loading dock of Business C, a retail market, for $1100. Business C then sells that food to the end consumer for $1200. Assuming (for the sake of argument) a 1% gross receipt tax. The total gross receipt tax owed would be $10+$11+$12=$33 and the price of the food to the end consumer would of course reflect this amount.

    Scenario 2: Investor D buys A, B, and C and forms Business D.  Business D would have gross receipts of only $1200 so would pay total gross receipt taxes of only $12 on the same process as in Scenario 1. Thus, vertical integration saves $21 in taxes alone and either allows D to sell the product for $21 less, make $21 more profit or, most likely, some combination of these. Not only would Walmart be consolidating horizontally, they would now be more motivated to consolidate vertically as well!

    A VAT, of course, addresses this specific problem.

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