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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,
by 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 agoExactly. 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 agoTrue 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.