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And poverty level wages plus tips are also passed onto the consumer in the form of increased social welfare program costs, which require more taxes. An increase

by cjslep 8y ago

And poverty level wages plus tips are also passed onto the consumer in the form of increased social welfare program costs, which require more taxes. An increase of taxes tends to have a disproportionately larger impact on those with less money to begin with. On the one hand you have society paying for this externality, and on the other you force employers to accurately reflect the market conditions and price that externality in.

acqq 8y ago
> An increase of taxes tends to have a disproportionately larger impact on those with less money to begin with. Not generally, but probably common in the current political attitude of “reducing the taxes of the rich and taxing the poor.”
- Xylakant 8y ago
  > Not generally, It depends on the tax. If the tax is a fixed percentage of wage/income/property, then, at least in general, they affect everyone equally. However, taxes such as VAT or sales tax, affect the population with less money harder because they make everything, even the basic necessities, more expensive. People that have a substantial chunk of income that they invest/save are hit substantially less by those taxes since they don't intend to spend the investment in the first place.
  - Qwertystop 8y ago
    If the tax is a fixed percentage, it still hits people with less money harder in that cost-of-living is /not/ a percentage. If your fixed expenses (food, rent, utilities) are 80% of your monthly pay, and the tax reduces everyone's monthly pay by 5%, you're going to have to cut something (cheaper food, small luxuries, or just no longer saving money for emergencies). If you make enough that your cost-of-living is only 50% of your monthly pay, it might dip your savings a little but you'll get through it just fine.
    - acqq 8y ago
      Exactly. That's why the tax should not be fixed percentage, but should have the "starting point" under which you don't tax somebody at all, and it should have "protect the poorest taxpayers" area which also can be different from the "it's effectively equal" area. But somehow in the US people are trained not to think in that direction. It's more common to be aware of such possibilities in Europe, or to expect from the system not to completely ruin the life of the poorest.
    - Xylakant 8y ago
      True in general, but the effect of a consumption tax is substantially more pronounced. A VAT hike of 2% hits people that spend their entire income with the full 2%. But people that spend only 50% of their income in the first place effectively only have a 1% hike.

by cjslep 8y ago

acqq 8y ago

> An increase of taxes tends to have a disproportionately larger impact on those with less money to begin with. Not generally, but probably common in the current political attitude of “reducing the taxes of the rich and taxing the poor.”

Xylakant 8y ago
> Not generally, It depends on the tax. If the tax is a fixed percentage of wage/income/property, then, at least in general, they affect everyone equally. However, taxes such as VAT or sales tax, affect the population with less money harder because they make everything, even the basic necessities, more expensive. People that have a substantial chunk of income that they invest/save are hit substantially less by those taxes since they don't intend to spend the investment in the first place.
- Qwertystop 8y ago
  If the tax is a fixed percentage, it still hits people with less money harder in that cost-of-living is /not/ a percentage. If your fixed expenses (food, rent, utilities) are 80% of your monthly pay, and the tax reduces everyone's monthly pay by 5%, you're going to have to cut something (cheaper food, small luxuries, or just no longer saving money for emergencies). If you make enough that your cost-of-living is only 50% of your monthly pay, it might dip your savings a little but you'll get through it just fine.
  - acqq 8y ago
    Exactly. That's why the tax should not be fixed percentage, but should have the "starting point" under which you don't tax somebody at all, and it should have "protect the poorest taxpayers" area which also can be different from the "it's effectively equal" area. But somehow in the US people are trained not to think in that direction. It's more common to be aware of such possibilities in Europe, or to expect from the system not to completely ruin the life of the poorest.
  - Xylakant 8y ago
    True in general, but the effect of a consumption tax is substantially more pronounced. A VAT hike of 2% hits people that spend their entire income with the full 2%. But people that spend only 50% of their income in the first place effectively only have a 1% hike.