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The problem is that sales taxes are regressive, disproportionally impacting those for whom consumption is a large % of their total income. Particularly poor peo

The problem is that sales taxes are regressive, disproportionally impacting those for whom consumption is a large % of their total income. Particularly poor people. And sales taxes (vs. VAT) is a terrible idea overall, it is a tax on consumers, not on companies, as it only applies on the final sale to consumer.

NeedMoreTea 8y ago
OK I admit I was thinking of VAT when I made the comment (I'm in the UK), and also the typical exclusions from VAT for food, books etc and partial liability on businesses (sales minus allowable purchases). Undoubtedly a sales tax can be regressive but don't those exceptions move it far enough into being a tax on discretionary purchases? There doesn't seem much anti-VAT feeling in the UK outside of occasional axe-grinding from the popular press.
- ucaetano 8y ago
  Europeans have a more friendly relationship with taxes than Americans. But VAT, despite being regressive, is still required, as today we have very complex businesses and you want to prevent gaming, where corporations optimize for allocating their value into a certain channel that is untaxed. For example, by placing their operations in a separate country with lower taxes and shipping from there. So you need income tax, sales/vat tax, and corporate taxes to prevent any gaps.
leetcrew 8y ago
> And sales taxes (vs. VAT) is a terrible idea overall, it is a tax on consumers, not on companies, as it only applies on the final sale to consumer. you are correct that sales tax is almost always regressive, but please be careful making this kind of "just so" argument regarding taxes. the place in the production pipeline where taxes are collected has almost nothing to do with who ultimately bears the burden of the tax. see https://en.wikipedia.org/wiki/Tax_incidence https://en.wikipedia.org/wiki/Tax_incidence if you're interested in learning more.
- ucaetano 8y ago
  Oh, I know, all the splitting up on price-elasticity of demand and so on. But the issue with sales taxes is that it is applied on the final sale, which generate distortions when the products are being imported, or have a long supply chain spread across a country, as it is a tax on the consumer, the value is only capture at the consumer location, not along the supply chain (that's what I meant as a terrible idea).
  - DomreiRoam 8y ago
    I'm not sure if you oppose sale tax only or also VAT. Both are regressive but VAT, while more complex, is based on taxing the added value so it is collected along the supply chain. In the supply chain everybody is charging VAT on their sales invoice and deduce VAT on their purchase invoice. BTW, you must pay to the tax authority the VAT your charged you client even if he/she didn't pay you. https://tax.thomsonreuters.com/blog/onesource/sales-and-use-tax/difference-sales-tax-vat-2/ https://tax.thomsonreuters.com/blog/onesource/sales-and-use-...
    - ucaetano 8y ago
      I don't oppose a production/consumption tax, it is necessary given the intricacies of the world, but we need to keep in mind that it is regressive, and will impact the poor more, when making decisions about taxation. But between VAT and sales tax, I strongly oppose a pure sales tax, although I would be ok with VAT charging a final tax which is allocated to the consumer location (vs. the location of the business). Pure VAT: taxed where value is generated. Pure Sales: taxed where the consumer is based. Mixed VAT-Sales: mostly taxed where the value is generated, plus where the consumer is based. The mixed VAT-Sales model would generate a better allocation of tax funds across the entire supply chain, all the way to the consumer.
      - DomreiRoam 8y ago
        in theory, when all transactions happens between participants on a free market, then the real value added by a participant tend to be their sale price minus all their cost. I think it's only when you have non perfect market condition (like monopoly, monopsony, captive company) that the real added value is not visible and where your idea of mixed taxes is needed. Do you think it make sense or do you something other in your mind?
megy 8y ago
> The problem is that sales taxes are regressive, disproportionally impacting those for whom consumption is a large % of their total income. So? That is a problem for necessities like food, housing. But not for advertising, phones and computers, gas, cars, etc...

NeedMoreTea 8y ago

OK I admit I was thinking of VAT when I made the comment (I'm in the UK), and also the typical exclusions from VAT for food, books etc and partial liability on businesses (sales minus allowable purchases). Undoubtedly a sales tax can be regressive but don't those exceptions move it far enough into being a tax on discretionary purchases? There doesn't seem much anti-VAT feeling in the UK outside of occasional axe-grinding from the popular press.

ucaetano 8y ago
Europeans have a more friendly relationship with taxes than Americans. But VAT, despite being regressive, is still required, as today we have very complex businesses and you want to prevent gaming, where corporations optimize for allocating their value into a certain channel that is untaxed. For example, by placing their operations in a separate country with lower taxes and shipping from there. So you need income tax, sales/vat tax, and corporate taxes to prevent any gaps.

leetcrew 8y ago

> And sales taxes (vs. VAT) is a terrible idea overall, it is a tax on consumers, not on companies, as it only applies on the final sale to consumer. you are correct that sales tax is almost always regressive, but please be careful making this kind of "just so" argument regarding taxes. the place in the production pipeline where taxes are collected has almost nothing to do with who ultimately bears the burden of the tax. see https://en.wikipedia.org/wiki/Tax_incidence https://en.wikipedia.org/wiki/Tax_incidence if you're interested in learning more.

ucaetano 8y ago
Oh, I know, all the splitting up on price-elasticity of demand and so on. But the issue with sales taxes is that it is applied on the final sale, which generate distortions when the products are being imported, or have a long supply chain spread across a country, as it is a tax on the consumer, the value is only capture at the consumer location, not along the supply chain (that's what I meant as a terrible idea).
- DomreiRoam 8y ago
  I'm not sure if you oppose sale tax only or also VAT. Both are regressive but VAT, while more complex, is based on taxing the added value so it is collected along the supply chain. In the supply chain everybody is charging VAT on their sales invoice and deduce VAT on their purchase invoice. BTW, you must pay to the tax authority the VAT your charged you client even if he/she didn't pay you. https://tax.thomsonreuters.com/blog/onesource/sales-and-use-tax/difference-sales-tax-vat-2/ https://tax.thomsonreuters.com/blog/onesource/sales-and-use-...
  - ucaetano 8y ago
    I don't oppose a production/consumption tax, it is necessary given the intricacies of the world, but we need to keep in mind that it is regressive, and will impact the poor more, when making decisions about taxation. But between VAT and sales tax, I strongly oppose a pure sales tax, although I would be ok with VAT charging a final tax which is allocated to the consumer location (vs. the location of the business). Pure VAT: taxed where value is generated. Pure Sales: taxed where the consumer is based. Mixed VAT-Sales: mostly taxed where the value is generated, plus where the consumer is based. The mixed VAT-Sales model would generate a better allocation of tax funds across the entire supply chain, all the way to the consumer.
    - DomreiRoam 8y ago
      in theory, when all transactions happens between participants on a free market, then the real value added by a participant tend to be their sale price minus all their cost. I think it's only when you have non perfect market condition (like monopoly, monopsony, captive company) that the real added value is not visible and where your idea of mixed taxes is needed. Do you think it make sense or do you something other in your mind?

megy 8y ago

> The problem is that sales taxes are regressive, disproportionally impacting those for whom consumption is a large % of their total income. So? That is a problem for necessities like food, housing. But not for advertising, phones and computers, gas, cars, etc...