Reply #2: Dodgy maths - what it really means is that sales tax is less in the USA [View All]

[muriel_volestrangler]

Here's the actual situation:

A German factory produces a car for $20,000 (including all the sales margins). If they sell it in Germany, they have to charge VAT, so the sales price is $23,000. If they sell in in the USA, it's $20,000 (if there's no sales tax in that state).

A US factory produces a car for $20,000. If they sell it in Germany, they have to charge VAT, so the sales price is $23,000. If they sell in in the USA, it's $20,000 (if there's no sales tax in that state).

The difference is that Germany ends up with government revenue for all the cars sold in Germany, whatever the origin. But there's no 'unfair playing field' for the car manufacturers (unless you say "because of their extra revenue, Germany then manages to keep income tax rates down, provide health care, etc.")

The solution that would keep everything fair would be to raise sales taxes on all cars, domestic or foreign, sold in the USA. And on other such items. And a 15% tax on non-essential items might help hold back over-consumption, too. Against that, sales taxes tend to be regressive.