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The week's question
In March 2025, in the thread "Re: OT, out", Umm asked the members: "Do you think it is because America is made up of magical soil that makes businesses based in America magically profitable?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
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Author: mungofitch ✹✺ SILVER
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Number: of 22354 
Subject: Re: o/t, debtors and creditors,
Date: 07/09/24 3:04 PM
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There is no Federal sales tax, only state & local sales tax. If the US implemented a VAT, either the states & cities would be cut out and get no tax, or (most likely) people would be paying 25% VAT and 6%-10% sales tax.

It probably wouldn't have to be anywhere near 25% at the national level. Total US retail sales are what, about 7.3 trillion? A small percentage is a big number.

Canada's national rate is 5%, plus whatever number a given province chooses to ask to be added on for them--the smart provinces folded their provincial sales tax units and just take a share of the combined total collected in their borders, known as HST "harmonized sales tax". So, for example, it's 13% in Ontario, made up of 5 for the feds and 8 for the province. The sum of the two ranges from 5% to 15% depending on the location. Since some provinces are curmudgeonly, they refused to unify their sales tax with the national one, so they do it separately. Total waste of effort, solely for the purpose of provincial legislators to believe themselves to be important, but what can you do.

By analogy, US states could just piggyback on the same tax collection system at whatever rate they wanted, without consumers or companies having to make two calculations and remittances.

The US is *really* what it says: a set of sovereign states, united.

Canada too, though that's not nearly as well known. In some ways it is more extreme in Canada than in the US> It is explicitly unconstitutional for the national government to pass a law in a governmental function which is an area of provincial responsibility. Like the US, they've had to use hacks like offering federal money for that activity conditional on the province following some rules (the underpinning of national health care), but they can't legislate anything in a long list of ares including health, transport...and among other things, direct taxation. This is why one historically saw quirks like it being prohibited to purchase liquor in one province and consume it another, or even brew beer in one province and sell it in another, or having an architect's or engineer's licenses recognized in only one province. Or having to register securities for sale in every province individually, something a US state seems generally happy to leave to the SEC. As a friend once noted, it's rather like an economy the size of Texas with 11 governments. But in the real world, the hacks and workarounds mostly work, in both countries. I'm pretty sure it wouldn't require a constitutional amendment in the US, it would merely require something seemingly even less likely: legislators interested in the day job of governance. (not that I'm saying US representatives are anywhere near the worst or even atypical in this regard--it's not an isolated problem)

Jim
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This community has written 21,861 posts about Berkshire Hathaway. The article-length ones it recommended most:
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