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what is the point of taxing corporations? Well, then just tax the income of the employees and shareholders! But what is the point of taxing income? After all,

what is the point of taxing corporations? Well, then just tax the income of the employees and shareholders! But what is the point of taxing income? After all, they have to spend that money sooner or later to buy things. So instead just have a sales tax! And away we go: you can chase down a bunch of rabbit holes of "why tax this when sooner later people have to do that, you could just tax that instead!" and end up with cycles of taxing corporate profits, taxing incomes, taxing sales, taxing land... The real issue is that the only reliable way we know of to maintain civilization is to have some sort of government. Whether you want it to be ultra-minimal or not actually makes no difference, since even a "contract and property-rights enforcement and nothing else" minimal government still needs some money to run, and can't just rely on random charitable donations. So it will sooner or later have to capture some percentage of the value generated by its presence in order to fund itself, and that means tax. But the instant you tax one thing, people find a way to avoid it and do some other thing instead. So you tax the other thing, and then the thing they go to after that, and sooner or later you have to have at least a nominal tax on everything just to cover all the bases and make it impossible to (legally) completely avoid taxation. Which in turn means the question is not "why do we tax this", but "what is the correct balance of how much to tax this vs. how much to tax that vs. how much to tax that other thing, in order to achieve the revenue necessary to support the government we've decided to have".

yummyfajitas 11y ago
But what is the point of taxing income? After all, they have to spend that money sooner or later to buy things. So instead just have a sales tax! Economists agree that a VAT is, indeed, the most efficient form of taxation (besides pigouvian taxes and maybe a land value tax). The reason we don't do that is that a sales tax obviously hits people in proportion to the benefits they receive from society rather than in proportion to the value they create. If you tax corporations you can hide this fact from voters. "Don't blame we the politicians, blame the evil corporations for raising prices!"
- sokoloff 11y ago
  > The reason we don't do that is that a sales tax obviously hits people in proportion to the benefits they receive from society Really? I buy perhaps 2x what the average American and maybe 4x what the poorest Americans who are not on government support buy. I'm pretty sure that I get more than that ratio of benefit from a stable society. Warren Buffett gets some massive multiple of the benefit than I get, but I doubt he pays more than 10x in sales tax what pay.
  - yummyfajitas 11y ago
    What benefit does Buffet gain? He lives in a normal sized house, maybe he has a driver and flies first class. How is that a massive multiple of what a software engineer (guessing at your profession) gets? The poorest Americans probably benefit more than you from a stable society - the poor suffer the most from an unstable society. Wealthier people can usually pay for stability to some extent.
    - sokoloff 11y ago
      I have safety and peace that allows me to plan multiple years ahead, invest in property, take out a 30-year mortgage, buy securities, education (mine, my kids), or build a business and know that the world is (overwhelmingly, not perfectly) stable and predictable. I pay (dearly, IMO) for that stability already through my various taxes. I believe that the rich (and upper middle class such as myself) benefit sub-linearly (but still positively) with income but since our required expenses are such a smaller fraction of our income than the working poor, that a sales tax is regressive in practice. (That's why many locales start to patch sales taxes by excluding non-prepared food, milk, clothing, etc. to make it somewhat less regressive.) I'm not sure that a steeply progressive tax on income is "better", but surely a regressive tax structure is something that I'd prefer strongly to avoid.
      - yummyfajitas 11y ago
        Why is regressiveness (measured with respect to income) a bad thing? As you note, high income people don't remotely consume everything they produce. What they don't consume is invested, increasing productivity in the future. A progressive (w.r.t income) tax merely reduces investment (since high productivity folks have less to invest), and will be consumed if it is redistributed to lower productivity people. Why is a shift from investment to consumption considered a universally good thing? Could a situation arise when you'd favor a regressive tax structure in order to increase investment and reduce consumption?
eru 11y ago
Taxing land is actually a really good idea. You can't hide land from the tax man, and you can't decide to produce more or less land---so the taxes won't impact supply.
- zo1 11y ago
  And then when people start artificially building vertically rather than laterally in order to avoid paying taxes? Then you change your tax calculation to be based on square-footage of space-available, and then you're back to square one where 'taxes impact supply'.
  - pessimizer 11y ago
    Or you could not tax them more, or at a lower rate that accounts for the sunshine they block out and the airspace they occupy. That would encourage the density that every wealthy technocrat is gagging for.
  - eru 11y ago
    No, you want them to build up. Tax will be levied on the value / rental income of the unimproved land---not on a fixed charge per area. (There are some ways to use auctions to set these taxes automatically in an economically efficient way.) See eg http://www.economist.com/blogs/economist-explains/2014/11/economist-explains-0 http://www.economist.com/blogs/economist-explains/2014/11/ec... or https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax Very beloved by economists.
- pessimizer 11y ago
  https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism "Economists since Adam Smith have observed that, unlike other taxes, a public levy on land value does not cause economic inefficiency. A land value tax is often said to have progressive tax effects, in that it is paid primarily by the wealthy (the landowners), and it cannot be passed on to tenants, workers, or users of land. Land value capture would reduce economic inequality, increase wages, remove incentives to misuse real estate, and reduce the vulnerability that economies face from credit and property bubbles."
kartickv 11y ago
There's a good reason for income taxes, which is that you can tax richer people more, which is good. That's an argument for getting rid of sales tax and corporation tax.

yummyfajitas 11y ago

But what is the point of taxing income? After all, they have to spend that money sooner or later to buy things. So instead just have a sales tax! Economists agree that a VAT is, indeed, the most efficient form of taxation (besides pigouvian taxes and maybe a land value tax). The reason we don't do that is that a sales tax obviously hits people in proportion to the benefits they receive from society rather than in proportion to the value they create. If you tax corporations you can hide this fact from voters. "Don't blame we the politicians, blame the evil corporations for raising prices!"

sokoloff 11y ago
> The reason we don't do that is that a sales tax obviously hits people in proportion to the benefits they receive from society Really? I buy perhaps 2x what the average American and maybe 4x what the poorest Americans who are not on government support buy. I'm pretty sure that I get more than that ratio of benefit from a stable society. Warren Buffett gets some massive multiple of the benefit than I get, but I doubt he pays more than 10x in sales tax what pay.
- yummyfajitas 11y ago
  What benefit does Buffet gain? He lives in a normal sized house, maybe he has a driver and flies first class. How is that a massive multiple of what a software engineer (guessing at your profession) gets? The poorest Americans probably benefit more than you from a stable society - the poor suffer the most from an unstable society. Wealthier people can usually pay for stability to some extent.
  - sokoloff 11y ago
    I have safety and peace that allows me to plan multiple years ahead, invest in property, take out a 30-year mortgage, buy securities, education (mine, my kids), or build a business and know that the world is (overwhelmingly, not perfectly) stable and predictable. I pay (dearly, IMO) for that stability already through my various taxes. I believe that the rich (and upper middle class such as myself) benefit sub-linearly (but still positively) with income but since our required expenses are such a smaller fraction of our income than the working poor, that a sales tax is regressive in practice. (That's why many locales start to patch sales taxes by excluding non-prepared food, milk, clothing, etc. to make it somewhat less regressive.) I'm not sure that a steeply progressive tax on income is "better", but surely a regressive tax structure is something that I'd prefer strongly to avoid.
    - yummyfajitas 11y ago
      Why is regressiveness (measured with respect to income) a bad thing? As you note, high income people don't remotely consume everything they produce. What they don't consume is invested, increasing productivity in the future. A progressive (w.r.t income) tax merely reduces investment (since high productivity folks have less to invest), and will be consumed if it is redistributed to lower productivity people. Why is a shift from investment to consumption considered a universally good thing? Could a situation arise when you'd favor a regressive tax structure in order to increase investment and reduce consumption?

eru 11y ago

Taxing land is actually a really good idea. You can't hide land from the tax man, and you can't decide to produce more or less land---so the taxes won't impact supply.

zo1 11y ago
And then when people start artificially building vertically rather than laterally in order to avoid paying taxes? Then you change your tax calculation to be based on square-footage of space-available, and then you're back to square one where 'taxes impact supply'.
- pessimizer 11y ago
  Or you could not tax them more, or at a lower rate that accounts for the sunshine they block out and the airspace they occupy. That would encourage the density that every wealthy technocrat is gagging for.
- eru 11y ago
  No, you want them to build up. Tax will be levied on the value / rental income of the unimproved land---not on a fixed charge per area. (There are some ways to use auctions to set these taxes automatically in an economically efficient way.) See eg http://www.economist.com/blogs/economist-explains/2014/11/economist-explains-0 http://www.economist.com/blogs/economist-explains/2014/11/ec... or https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax Very beloved by economists.
pessimizer 11y ago
https://en.wikipedia.org/wiki/Georgism https://en.wikipedia.org/wiki/Georgism "Economists since Adam Smith have observed that, unlike other taxes, a public levy on land value does not cause economic inefficiency. A land value tax is often said to have progressive tax effects, in that it is paid primarily by the wealthy (the landowners), and it cannot be passed on to tenants, workers, or users of land. Land value capture would reduce economic inequality, increase wages, remove incentives to misuse real estate, and reduce the vulnerability that economies face from credit and property bubbles."

kartickv 11y ago

There's a good reason for income taxes, which is that you can tax richer people more, which is good. That's an argument for getting rid of sales tax and corporation tax.