4 ms·

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 ag

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?
      - sokoloff 11y ago
        It's quite strange for me to be arguing this side, as I generally favor a flat consumption/VAT tax, if I believed we could actually cut over to it without just increasing the overall tax financial and compliance burden by keeping today's system and ADDING a high rate VAT. I would also be willing to accept a zero-rate VAT on certain essentials, but wouldn't demand it. The reason to oppose regressive income taxation IMO is the decreasing marginal utility of money. If you take the view that some amount of taxation is proper and necessary, the question that follows immediately is how to best raise that money. I'd prefer a flat consumption tax (with minimal, if any, exclusions), but if you can't switch wholesale to that system and instead you retain some amount of income-based taxation, that taxation ought not be regressive (IMO) because that double-credits the most advantaged members of society (decreasing marginal utility coupled with decreasing rate of taxation). I'm also opposed to estate taxes, taxes on dividends and capital gains, etc, and all other forms of multi-level taxation. Ideally, tax the money once, tax it at a level rate for consumption, and minimize the compliance and collection costs and losses.

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?
    - sokoloff 11y ago
      It's quite strange for me to be arguing this side, as I generally favor a flat consumption/VAT tax, if I believed we could actually cut over to it without just increasing the overall tax financial and compliance burden by keeping today's system and ADDING a high rate VAT. I would also be willing to accept a zero-rate VAT on certain essentials, but wouldn't demand it. The reason to oppose regressive income taxation IMO is the decreasing marginal utility of money. If you take the view that some amount of taxation is proper and necessary, the question that follows immediately is how to best raise that money. I'd prefer a flat consumption tax (with minimal, if any, exclusions), but if you can't switch wholesale to that system and instead you retain some amount of income-based taxation, that taxation ought not be regressive (IMO) because that double-credits the most advantaged members of society (decreasing marginal utility coupled with decreasing rate of taxation). I'm also opposed to estate taxes, taxes on dividends and capital gains, etc, and all other forms of multi-level taxation. Ideally, tax the money once, tax it at a level rate for consumption, and minimize the compliance and collection costs and losses.