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by fxfan 8y ago

scarface74 8y ago
That’s also a regressive tax poorer people spend more as a percentage of their income.
- fxfan 8y ago
  But poorer people will buy only groceries and cheap androids, all barely taxed.
  - scarface74 8y ago
    If I made a $20K more than I make now, I doubt I would spend most of it. It would go to savings. If I was making $30K a year, I would probably use it to have a more comfortable lifestyle.
- patrickg_zill 8y ago
  Poorer people spend more as a percentage of their income on pretty much everything, however.
- scarejunba 8y ago
  Robert Frank (an economist at Cornell) proposes a progressive consumption tax[0]. You report your income and your savings. The Economist argues for it[1], quoting the following part: > In terms of economic incentives, the most efficient remedy would be to replace the federal income tax with a much more steeply progressive consumption tax. Under such a tax, people would report not only their income but also their annual savings, as many already do under 401(k) plans and other retirement accounts 0: https://inequality.stanford.edu/sites/default/files/media/_media/pdf/pathways/summer_2010/Frank.pdf https://inequality.stanford.edu/sites/default/files/media/_m... 1: https://www.economist.com/democracy-in-america/2010/11/17/all-hail-the-progressive-consumption-tax https://www.economist.com/democracy-in-america/2010/11/17/al...
helge5 8y ago
Isn't that how it actually works in Norway and Denmark (don't know about Sweden)? "Luxury cars" are taxed like a 100%. My understanding is that Tesla's are so popular over there because those are exempt of precisely that luxury tax.
cblum 8y ago
The problem with that is that it's regressive and hurts those who earn less. Let's say sales tax is 10%. If I'm a high earner and buy a cheap Android for $50, the $5 I'm paying in sales tax has a much lower impact on my budget than it does to someone who earns less than I do and wants to buy the same phone.
- fxfan 8y ago
  Thanks for commenting. Please see my edit.
eschaton 8y ago
Yes, you’d be taxing the poor at the expense of the rich even more than today’s tax system, since spending doesn’t scale anywhere near linearly with income. This is also why a “flat tax” is bad compared to increasing marginal tax rates. Remember that most systems don’t tax all income at the same rate; they tax anything above $a ie $(a-0) at x%, anything above $b and only that $(b-a) at (x+2)%, and so on. Anti-tax fundamentalists use terms like “tax brackets” to trick people who don’t understand this system into thinking it’s possible for eg one’s net income to go down as they earn more money. (“Make this much, and you’ll be in the y% bracket!”) Don’t buy into this, it’s not true.

by fxfan 8y ago

That’s also a regressive tax poorer people spend more as a percentage of their income.

fxfan 8y ago
But poorer people will buy only groceries and cheap androids, all barely taxed.
- scarface74 8y ago
  If I made a $20K more than I make now, I doubt I would spend most of it. It would go to savings. If I was making $30K a year, I would probably use it to have a more comfortable lifestyle.
patrickg_zill 8y ago
Poorer people spend more as a percentage of their income on pretty much everything, however.
scarejunba 8y ago
Robert Frank (an economist at Cornell) proposes a progressive consumption tax[0]. You report your income and your savings. The Economist argues for it[1], quoting the following part: > In terms of economic incentives, the most efficient remedy would be to replace the federal income tax with a much more steeply progressive consumption tax. Under such a tax, people would report not only their income but also their annual savings, as many already do under 401(k) plans and other retirement accounts 0: https://inequality.stanford.edu/sites/default/files/media/_media/pdf/pathways/summer_2010/Frank.pdf https://inequality.stanford.edu/sites/default/files/media/_m... 1: https://www.economist.com/democracy-in-america/2010/11/17/all-hail-the-progressive-consumption-tax https://www.economist.com/democracy-in-america/2010/11/17/al...

Isn't that how it actually works in Norway and Denmark (don't know about Sweden)? "Luxury cars" are taxed like a 100%. My understanding is that Tesla's are so popular over there because those are exempt of precisely that luxury tax.

cblum 8y ago

The problem with that is that it's regressive and hurts those who earn less. Let's say sales tax is 10%. If I'm a high earner and buy a cheap Android for $50, the $5 I'm paying in sales tax has a much lower impact on my budget than it does to someone who earns less than I do and wants to buy the same phone.

fxfan 8y ago
Thanks for commenting. Please see my edit.

eschaton 8y ago

Yes, you’d be taxing the poor at the expense of the rich even more than today’s tax system, since spending doesn’t scale anywhere near linearly with income. This is also why a “flat tax” is bad compared to increasing marginal tax rates. Remember that most systems don’t tax all income at the same rate; they tax anything above $a ie $(a-0) at x%, anything above $b and only that $(b-a) at (x+2)%, and so on. Anti-tax fundamentalists use terms like “tax brackets” to trick people who don’t understand this system into thinking it’s possible for eg one’s net income to go down as they earn more money. (“Make this much, and you’ll be in the y% bracket!”) Don’t buy into this, it’s not true.