I understand that that VAT taxes for products sold in Europe are applied to both imports and to domestically produced items. However, the VAT is stripped off of exports to the US. The manufacturer gets the VAT reimbursed or credited by the government.
Yes, VAT only applies to items purchased in the country charging VAT.
However, because the US does not have a VAT tax, other US taxes a corporation pays including property taxes, local taxes, etc, are still carried in the cost of the product exported to Europe.
Firstly, the US DOES have a VAT equivalent. 45 states collect statewide sales taxes and 38 states collect local sales taxes. These taxes are the same as a VAT. They are not charged when a US company exports (i.e. I don't pay sales tax when I buy something from the US, just as many in the US don't pay sales taxes if they buy from interstate). The only real difference is that VAT is nationwide.
You're also assuming that EU countries don't impose any other sorts of taxes that are not removed for export. You're wrong in that assumption. All those taxes are carried in the same way as they are by US companies.
All other production costs being equal, European products shipped to America are effectively cheaper than similar products made in the US.
Nope.
But US products shipped to Europe not only have the European VAT tax added, but still carry the tax load from America.
Just as EU products shipped to the US have taxes other than VAT still carried. You still demonstrate that you don't understand what a VAT is. It's a sales tax.
On top of that, the EU has an average tax/GDP percentage that is about 9% higher than the US, so the EU generally pays more tax, so it is likely that their underlying taxes which burden the cost of sale are on average higher than the US.
It seems to make the playing field equal, the US could strip US tax costs on exported items.
Only if you don't understand that VAT and sales tax are essentially the same thing and that both EU and US firms face other taxes that add to their costs and which are not removed for either. Also, it's the
US that adds those other taxes to US exports, not the EU, so how has the EU got anything to do with that? If you're not competitive because of your internal tax system, that's your problem and nothing to do with the EU.
That would reduce the price of America products sold in Europe and make our products more competitive there. But America still faces the problem with imports since they have no taxes while American goods still carry US taxes.
Complete false. EU produced items still carry tax costs from an economic zone with higher overall taxation than the US. You have a natural competitive advantage, not to mention that imported items to the US may face tariffs and they definitely carry shipping and handling costs that are higher than domestically produced items. If you can't compete against that, it's your fault, nothing to do with the EU.
This puts American produced products at a disadvantage in our own country. It's costs are higher because of the US taxes.
Nope, see above.
The other option would be to add a tax on imports to raise it's cost to match American taxes collected on American products. After all, Europe does basically the same thing when it applies the VAT.
Ummm, no. In the US, if some company imports from the EU (let's say it's a BMW dealer since Trump had a go at them), the US states collect sales tax just as they would on a locally produced car. Adding a tax on imports is called a tariff and as I've pointed out several times, on a straight number basis the US has a higher tariff rate than the EU already, but on a fairer trade-weighted basis they're the same to 1 decimal point.
Plus, as I've mentioned, the EU products already have other taxes that are not VAT carried on them, the same as US ones, plus additional freight and handling.
Now, if an individual imports and item bought, say, online, then they may not pay state sales taxes. The same thing happens here in Australia - anything under $1,000- as a personal import is not subject to GST (our VAT). Over that, and you have to pay it. It probably varies a little by country, but the EU members will be similar and have a threshold over which VAT is due. If the US states don't do the same, that's their problem but it's not going to make a big difference in whether someone buys a BMW or a Chevy.
I realize this is all not simple.
Actually, it is. But you need to understand some basic concepts first, and you don't, which means your entire premise is wrong.
And I understand that Europe doesn't like Trump's threats.
Most of the US doesn't like Trump, let alone the rest of the world.
But the American President is responsible for protecting American industry and our workers and jobs. And this imbalance hurts America. He should address it as he said he would during the campaign.
Except there is no imbalance in terms of fairness. The EU is just better at some things than the US, or China can make them cheaper, or whatever the particular item is. Trump doesn't understand how simple this is or what's really happening. He is fixated that a trade deficit for the US is a bad thing, not realising that the US long ago stopped being a manufacturing base and moved into services and capital. The whole world can't run at a trade surplus. The global economy is a closed loop. It has to balance. Some people export more some import more, some have more capital coming in and some have more going out. None of any of it is particularly bad or good - just different parts of the same process.
Here's an article from the Huffington Post, not exactly a conservative media outlet, that agrees there's a disadvantage to America. http://www.huffingtonpost.com/ian-fletcher/sorry-but-the-us-does-ind_b_12242314.html
The author also misses the point that you DO collect VAT (sales taxes) in the US. The difference is only that you don't do it at the national level and instead do it at the state level. If that prevents you from collecting it on imports then you do indeed need to fix that, but that's your problem, and nothing to do with the EU.
We went through the switch to GST (VAT) nearly 20 years ago - quite new compared to a lot of EU members. It meant the states had to forgo a lot of their tax collection so the federal government would collect GST on their behalf and then fund it back to them (the federal government does not use a single cent of GST in its funding - it all goes back to the states). There's some argument from the states about the allocation, but the reality is they all get a say on it along with federal guidelines (so the states can't be silly about it and have to base it on a common process agreed when it was setup) and it all works.
The states do have a few other tax income streams, and the federal government relies mostly on income tax and a few duties and tariffs.
So, yeah, maybe you need to change the way you do taxes to catch taxes on some imports, but only those that are directly imported by consumers. Those that come in and are resold do have local US state taxes applied and contrary to the author's assertions it doesn't just "zero out" - it's no different than what happens when the EU imports US products.
It is a level playing field, but the US may be hobbling itself slightly if the states haven't worked out how to collect tax from people importing items directly.
Again, not an EU problem and nothing that Trump has said or done addresses the actual issue.
Oh, and that author you felt couldn't be right wing because he's on Huff?
https://www.forbes.com/sites/timworstall/2011/09/01/in-response-to-ian-fletcher/#589be4b71637Fletcher is an isolationist with unsupported economic theories who basically thinks that building a big wall (economically speaking) will help the US. No wonder he appeals to Trumpeters.
