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Why not tax consumption if your concern is consumption? Tax (NET_INCOME-(NET_SAVINGS+POVERTY_LEVEL)) or something. EDIT: The responses are all assuming the tax

Why not tax consumption if your concern is consumption? Tax (NET_INCOME-(NET_SAVINGS+POVERTY_LEVEL)) or something. EDIT: The responses are all assuming the tax is regressive. Note the POVERTY_LEVEL constant in there. And the tax rate itself could be progressive. 0% under 20k (if that's the poverty level), 15% on the next 30k, 25% on the next 50k, etc.

ecnal 11y ago
Progressive consumption taxes based around this enjoy a great deal of support among economists and very little support among politicians, unfortunately.
ArkyBeagle 11y ago
Consumption taxes are quite regressive. The wealthy have the means to define consumption down.
lisper 11y ago
Because taxing consumption is regressive. The real problem is the positive feedback loop where money buys political influence, which then results in laws that favor the already-rich at the expense of everyone else. Taxing consumption won't fix that. Taxing political contributions might fix it, but you can't do that because political contributions (a.k.a. bribes) are now protected under the First Amendment thanks to Citizens United. High marginal income tax rates or a wealth tax (or reversing Citizens United) are the only ways to fix the problem AFAICT.
- prostoalex 11y ago
  > Because taxing consumption is regressive. How come? There are entire categories of consumption that open up with significant wealth? Private aviation, yachts, fine arts are all categories with spending heavily concentrated up top - a poor person is unlikely to own a proportional 1/1000th share of a Gulfstream jet or a Picasso.
  - lisper 11y ago
    Because people who buy Gulfstreams are so rich that the cost of the Gulfstream is only a small fraction of their wealth. It's really hard to fathom how filthy stinking rich some of these people are. A Gulfstream V, the absolute top of the line, costs $50M. That's one year's salary for e.g. Rush Lumbaugh (just to pick a random example out of a hat whose income is publicly known). Also, most jets are not bought by filthy stinking rich people, they are bought by businesses, mainly airlines, which operate on pretty thin margins. If you raised taxes on jets significantly you would probably put a lot of them out of business. If you tried to raise taxes on jets that were disproportionately bought by filthy stinking rich people they'd just go out and buy different jets to avoid the taxes. On the other hand, if you're poor then just the bare necessities of life will cost a significant fraction of your income. The only equitable taxation scheme is a progressive income tax and/or a wealth tax.
    - prostoalex 11y ago
      The way the things are set up now, things that are considered basics (rent, utilities, food) are exempt from consumption tax (which in the US is mostly sales tax). Exempt a category like clothing, and most of the basic consumption remains untaxed.
a_humean 11y ago
Well if the problem is general excessive consumption, then a tax on consumption will help. But consumption tax is not necessarily progressive (or at least not sufficiently progressive enough to warrant the label) as its impacts on the poor (as a matter of marginal welfare as opposed to % of income/consumption) are usually much greater than on the most wealthy. See this 2009 IFS report for the nuance in the context of UK VAT - in particular figure 10.1 and 10.2 (http://www.ifs.org.uk/budgets/gb2009/09chap10.pdf http://www.ifs.org.uk/budgets/gb2009/09chap10.pdf). Often VAT regimes will not tax certain basic good such as bread, eggs, or essential household products, but in the UK most goods including many that you may consider basic have 20% VAT. Someone being taxed say 20% on their consumption when their typical yearly consumption is $1 million has a much smaller impact to their marginal welfare than someone with a typical expenditure of $10k taxed at 10-15%. If someone has an income and consumption of $10k, then you probably don't really want tax them much or anything at all (you probably want to give them money/job/training/something!). Provided you offset the increased taxation by consumption with increased services and benefits to the poorest, then you can mitigate most of the worst regressive effects.
- humanrebar 11y ago
  Note the POVERTY_LEVEL constant in there. And the tax rate itself could be progressive. I didn't say anything about a flat consumption tax.
  - a_humean 11y ago
    Ah sorry. Consumption tax is usually understood to mean a tax collected at the moment of transaction based on the value and type of product/service, not as a yearly calculation that is more akin to a variant of an income tax.
- deleted 11y ago
  [deleted]

ecnal 11y ago

Progressive consumption taxes based around this enjoy a great deal of support among economists and very little support among politicians, unfortunately.

ArkyBeagle 11y ago

Consumption taxes are quite regressive. The wealthy have the means to define consumption down.

lisper 11y ago

Because taxing consumption is regressive. The real problem is the positive feedback loop where money buys political influence, which then results in laws that favor the already-rich at the expense of everyone else. Taxing consumption won't fix that. Taxing political contributions might fix it, but you can't do that because political contributions (a.k.a. bribes) are now protected under the First Amendment thanks to Citizens United. High marginal income tax rates or a wealth tax (or reversing Citizens United) are the only ways to fix the problem AFAICT.

prostoalex 11y ago
> Because taxing consumption is regressive. How come? There are entire categories of consumption that open up with significant wealth? Private aviation, yachts, fine arts are all categories with spending heavily concentrated up top - a poor person is unlikely to own a proportional 1/1000th share of a Gulfstream jet or a Picasso.
- lisper 11y ago
  Because people who buy Gulfstreams are so rich that the cost of the Gulfstream is only a small fraction of their wealth. It's really hard to fathom how filthy stinking rich some of these people are. A Gulfstream V, the absolute top of the line, costs $50M. That's one year's salary for e.g. Rush Lumbaugh (just to pick a random example out of a hat whose income is publicly known). Also, most jets are not bought by filthy stinking rich people, they are bought by businesses, mainly airlines, which operate on pretty thin margins. If you raised taxes on jets significantly you would probably put a lot of them out of business. If you tried to raise taxes on jets that were disproportionately bought by filthy stinking rich people they'd just go out and buy different jets to avoid the taxes. On the other hand, if you're poor then just the bare necessities of life will cost a significant fraction of your income. The only equitable taxation scheme is a progressive income tax and/or a wealth tax.
  - prostoalex 11y ago
    The way the things are set up now, things that are considered basics (rent, utilities, food) are exempt from consumption tax (which in the US is mostly sales tax). Exempt a category like clothing, and most of the basic consumption remains untaxed.

a_humean 11y ago

Well if the problem is general excessive consumption, then a tax on consumption will help. But consumption tax is not necessarily progressive (or at least not sufficiently progressive enough to warrant the label) as its impacts on the poor (as a matter of marginal welfare as opposed to % of income/consumption) are usually much greater than on the most wealthy. See this 2009 IFS report for the nuance in the context of UK VAT - in particular figure 10.1 and 10.2 (http://www.ifs.org.uk/budgets/gb2009/09chap10.pdf http://www.ifs.org.uk/budgets/gb2009/09chap10.pdf). Often VAT regimes will not tax certain basic good such as bread, eggs, or essential household products, but in the UK most goods including many that you may consider basic have 20% VAT. Someone being taxed say 20% on their consumption when their typical yearly consumption is $1 million has a much smaller impact to their marginal welfare than someone with a typical expenditure of $10k taxed at 10-15%. If someone has an income and consumption of $10k, then you probably don't really want tax them much or anything at all (you probably want to give them money/job/training/something!). Provided you offset the increased taxation by consumption with increased services and benefits to the poorest, then you can mitigate most of the worst regressive effects.

humanrebar 11y ago
Note the POVERTY_LEVEL constant in there. And the tax rate itself could be progressive. I didn't say anything about a flat consumption tax.
- a_humean 11y ago
  Ah sorry. Consumption tax is usually understood to mean a tax collected at the moment of transaction based on the value and type of product/service, not as a yearly calculation that is more akin to a variant of an income tax.
deleted 11y ago
[deleted]