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You have it backwards. taxing consumption is actually more regressive than taxing income - the spending a wealthy person has is far more variable (and generally
by Tyrek 9y ago
You have it backwards. taxing consumption is actually more regressive than taxing income - the spending a wealthy person has is far more variable (and generally a lower % of income - some of it goes to investments, etc).
- malandrew 9y agodomestic investments => jobs
- hx87 9y agoNot true if "investments" are just chasing fixed assets like real estate in a zero-sum manner.
- dbcurtis 9y agoActually, there is no reason a consumption tax can't be progressive. Comsumption = income - net_savings. Some years you might even have negative net savings, and the formula still works. It turns out that reports from all the same reporting entities that report to the IRS now are nearly sufficient to implement such a scheme, most of the data is there, it just might have to be reformated, perhaps some bits and pieces added to the report. You can exempt consmption below some amount, say a reasonable amount of money to feed, cloth, and house your family, and provide basic transportation. Then you can have a progressive tax rate applied to consumption above that. Rich people are not going to stop buying yachts, fancy cars, linen suits, and avocado toast. The net effect on the economy should be good overall. Usually when someone says "consumption taxes are regressive": a) they only imagine collecting the tax point-of-sale, and b) they don't imagine a consumption tax with a variable rate. But in reality, a progressive consumption tax is a simple matter of tweaking the current reports sent to the IRS by employers and financial entities for the income tax computation, and then applying different arithemetic.