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Mainly because sales tax is a regressive tax. Rich people spend a smaller percentage of their money are are hence taxed at a lower rate than poor people. Also t

Mainly because sales tax is a regressive tax. Rich people spend a smaller percentage of their money are are hence taxed at a lower rate than poor people. Also the sales tax would have to be way higher than 30% if we got rid of other taxes. https://www.citylab.com/life/2015/01/how-local-sales-taxes-target-the-poor-and-widen-the-income-gap/384643/ https://www.citylab.com/life/2015/01/how-local-sales-taxes-t...

zanny 9y ago
There is a distinction to be made between VAT and sales tax, though. Not necessarily in the regressive nature, but its still important to make because the US really should adopt VAT taxes. It is perfectly feasible to impose VATs on the sales of stocks, bonds, or the accumulation of dividends, etc. Those are still goods, they are just treated differently and artificially to give tax breaks to investors. There is no real reason why you cannot VAT a corporate share as much as you VAT a car, just most countries do not do so because TPTB want to maximize their profits off traditional investments.
- kgwgk 9y ago
  It doesn’t make much sense to apply a value-added tax to the sale of a security or the distribution of dividends. And other taxes are already applied anyway.
- vidarh 9y ago
  Capital gains taxes are charged on the difference between purchase price and sales price, and as such has pretty much the same effect.
microcolonel 9y ago
> sales tax is a regressive tax Sales tax is a flat/proportional tax, not a regressive tax.
bluecalm 9y ago
VAT is not regressive. Everyone is taxed at the same rate. Or doesn't matter if rich people spend lower percentage of their income. Sooner or later the money is spent and then it will be taxed. If it's nevertheless spent then someone (the rich person!) provided a service for free as they never asked anything back on it. Seriously, it requires understanding of basic linear algebra to see that VAT isn't regressive. The article you linked makes the same mistake. You will be taxed at some point and if you multiply your money by investing before spending it then you're taxed on bigger amount. The rate ends up being the same for everyone.
- vidarh 9y ago
  > Or doesn't matter if rich people spend lower percentage of their income. Sooner or later the money is spent and then it will be taxed. That'd be true if VAT applied equally to everything, but it doesn't. Your assumptions are invalid.
  - bluecalm 9y ago
    It is applied to consumption. Some, most often necessities are taxed less which lessens the burden for poorer people. Instead of dismissing my statement you could at least try to come up with one counter example. Every time I see "VAT is regressive" nonsense it's always based on misunderstanding. Yes, investments are not taxed but that's ok, if a rich person makes 20% a year from investment then they have 20% more money to be taxed once they engage in consumption (hence linear algebra remark). It really is about basic math to realize VAT isn't regressive but proportional (and even slightly progressive as necessities are taxed at lower % in many countries). You can make consumption based taxed more progressive by taxing luxury goods at higher rate (which already many European countries are doing) as well.
    - vidarh 9y ago
      > Every time I see "VAT is regressive" nonsense it's always based on misunderstanding. Yes, investments are not taxed but that's ok There you provide one example yourself. Another is all consumption achieved by moving your consumption to somewhere else with low or no VAT. I've done the math for my own expenditure from back when I didn't earn much to now, and the difference is stark.

zanny 9y ago

There is a distinction to be made between VAT and sales tax, though. Not necessarily in the regressive nature, but its still important to make because the US really should adopt VAT taxes. It is perfectly feasible to impose VATs on the sales of stocks, bonds, or the accumulation of dividends, etc. Those are still goods, they are just treated differently and artificially to give tax breaks to investors. There is no real reason why you cannot VAT a corporate share as much as you VAT a car, just most countries do not do so because TPTB want to maximize their profits off traditional investments.

kgwgk 9y ago
It doesn’t make much sense to apply a value-added tax to the sale of a security or the distribution of dividends. And other taxes are already applied anyway.
vidarh 9y ago
Capital gains taxes are charged on the difference between purchase price and sales price, and as such has pretty much the same effect.

microcolonel 9y ago

> sales tax is a regressive tax Sales tax is a flat/proportional tax, not a regressive tax.

bluecalm 9y ago

VAT is not regressive. Everyone is taxed at the same rate. Or doesn't matter if rich people spend lower percentage of their income. Sooner or later the money is spent and then it will be taxed. If it's nevertheless spent then someone (the rich person!) provided a service for free as they never asked anything back on it. Seriously, it requires understanding of basic linear algebra to see that VAT isn't regressive. The article you linked makes the same mistake. You will be taxed at some point and if you multiply your money by investing before spending it then you're taxed on bigger amount. The rate ends up being the same for everyone.

vidarh 9y ago
> Or doesn't matter if rich people spend lower percentage of their income. Sooner or later the money is spent and then it will be taxed. That'd be true if VAT applied equally to everything, but it doesn't. Your assumptions are invalid.
- bluecalm 9y ago
  It is applied to consumption. Some, most often necessities are taxed less which lessens the burden for poorer people. Instead of dismissing my statement you could at least try to come up with one counter example. Every time I see "VAT is regressive" nonsense it's always based on misunderstanding. Yes, investments are not taxed but that's ok, if a rich person makes 20% a year from investment then they have 20% more money to be taxed once they engage in consumption (hence linear algebra remark). It really is about basic math to realize VAT isn't regressive but proportional (and even slightly progressive as necessities are taxed at lower % in many countries). You can make consumption based taxed more progressive by taxing luxury goods at higher rate (which already many European countries are doing) as well.
  - vidarh 9y ago
    > Every time I see "VAT is regressive" nonsense it's always based on misunderstanding. Yes, investments are not taxed but that's ok There you provide one example yourself. Another is all consumption achieved by moving your consumption to somewhere else with low or no VAT. I've done the math for my own expenditure from back when I didn't earn much to now, and the difference is stark.