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This could get complex fast, but if the consumption tax was graduated according to a subjective measure of how critical the need was ... Food purchases get tax

This could get complex fast, but if the consumption tax was graduated according to a subjective measure of how critical the need was ... Food purchases get taxed at 1% Car purchases get taxed at 2% First home purchases get taxed at 3% Second home purchases get taxed at 6% Private airplane purchases get taxed at 99% that sort of thing

nemo44x 8y ago
I don’t like it. Who gets to decide what tax rate each thing gets? There are just so many things. Make it flat at 20% for any time money is traded for something. This would be for toilet paper to a house to a political donation and include capital gains profits. Everything is taxed at 20%. Then eliminate income and corporate taxes. States can define other taxes like local income tax, property tax etc. Then every adult gets a check for 20% of the agreed upon poverty level in January. Now taxes are not tied to income, to only those that work or capitalize, etc.
- mbostleman 8y ago
  Exactly. And a huge shift in freedom and privacy moves back to the public. And, while it may or may not be significant (I'm not really sure), as an added bonus those with illicit or under the table income are suddenly paying taxes.
- mbostleman 8y ago
  It should also be noted that the elimination of corporate taxation would further reduce the overall regressivity.
- nybble41 8y ago
  > Everything is taxed at 20%. You'd need to exclude resale of used items, unless it's your intent to kill the market for used goods and ensure that they end up straight in the trash. With a 20% sales tax on used items you might as well buy new instead, especially for durable goods which wouldn't trade at much of a discount. Apart from that change, what you're describing is essentially the "Fair Tax", except that they calculated that the rate would need to be more like 30% to remain revenue-neutral with the current income tax scheme.
  - nkurz 8y ago
    With a 20% sales tax on used items you might as well buy new instead I don't see why this follows. For example, most states currently charge sales tax on the sales of used cars and there seems to be a thriving market for used cars. Do you believe that raising this rate from 5-10% to 20% would significantly impact the sales of used vehicles? especially for durable goods which wouldn't trade at much of a discount While I don't think it's a likely outcome, suppose that for some reason all buyers balked at paying a 20% tax. I think it's likely that this would cause sellers to reduce their asking price to clear the market. Why do you think sellers would throw the item in the trash rather than reducing the price?
    - nybble41 8y ago
      > For example, most states currently charge sales tax on the sales of used cars and there seems to be a thriving market for used cars. Do you believe that raising this rate from 5-10% to 20% would significantly impact the sales of used vehicles? First, it would be raised by 20%, to 25-30%. Adding a federal sales taxes wouldn't negate the existing state taxes. Second, vehicles are a special case in the tax code. When you trade in a used vehicle you typically only pay the tax once, on the value of the new vehicle. (Technically, one tax on the trade-in value and another on whatever extra you paid for the new vehicle to make up the difference.) Under your scheme there would be a 20% federal tax on the value of the old vehicle plus another 20% federal tax on the value of the replacement. (Unless you don't intend to apply the sales tax to barter... with the predictable consequence that all significant transactions thereafter will avoid any actual exchange of currency.) More importantly, used cars tend to be much cheaper than new ones. There's some basis to that joke about losing half the value just driving the car off the lot. Even a 25-30% tax wouldn't make up for that much of a difference in price, though it would make used vehicle trades more expensive and probably put a damper on the market. Do you believe that imposing an extra cost of anywhere from hundreds to thousands of dollars in taxes on any used vehicle sale wouldn't significantly impact the sales of used vehicles? I think people would be more likely to buy their vehicles new, when they can afford it, and hold on to them longer. The ones that would be available used would consequently tend to be older and in worse condition, on average. > Why do you think sellers would throw the item in the trash rather than reducing the price? How much do you think they can reduce the price before it isn't worth the trouble? Finding a buyer is not necessarily an effortless process, and given that buyers aren't likely to want to pay more (incl. tax) than they do now the seller will have to lower their pre-tax price by at least 16% to make the sale. I already see perfectly good items sitting out on the curb with a "free" sign in less-than-ideal weather because they'd be too much trouble to sell; reducing the incentive to advertise and locate someone who values the item will only make that more prevalent. Besides, do you really want individuals collecting and remitting sales tax on behalf of the federal government? Sales of used items are much more likely to be person-to-person. Taxes on the sales of new items tend to be collected by registered businesses, which makes it a more manageable problem.
jcranmer 8y ago
That scenario tends to end up requiring you to answer the question "for tax purposes, are tomatoes fruits or vegetables?" (the Supreme Court ruled that it was a vegetable).
- mbostleman 8y ago
  Yes. I was trying to imagine some of the behaviors that would create as producers try to move themselves down-luxury.
ars 8y ago
So what you are saying is that you shouldn't buy your second home, rather have your wife or child buy it? And instead of buying that private airplane, lease it for 20 years from Boeing? That's kind of the point of the article: There are ways to structure purchases to avoid this kind of thing.
- mbostleman 8y ago
  Given a sales tax there is no "you" to the government. It doesn't matter who buys the house - sales tax is charged. Regarding leasing, I'm sure that provisions could be made for that sort of thing. Presumably the goal would be to be revenue neutral with the current system.
  - ars 8y ago
    > It doesn't matter who buys the house - sales tax is charged. He specifically differentiated first from second homes, so it does matter who buys it. > Regarding leasing, I'm sure that provisions could be made for that sort of thing. It can get complicated fast, what if you share the plane? Presumably you only pay your portion. What if the plane is idle most of the time? Presumably Boeing won't pay the tax just for making a plane. What if I build a home instead of buy it? What if I buy a $20,000 home and upgrade it? This stuff gets really complicated very fast, what seems "oh it's simple, do abc", suddenly isn't.
    - mbostleman 8y ago
      I don't think there's any over optimism built in to this. Any attempt to tax an almost $20 trillion market is going to be complex. I find it hard to imagine that it would be any more complex than the current scheme. And on that point, that's all it really needs to be: not worse. The real benefits are in other areas.
    - mbostleman 8y ago
      Also, it should be noted that all but 5 states already have sales tax. So the infrastructure and processes to collect are already in place. And the questions that you ask about what should or shouldn't be taxed already have a history of debate and consideration.

nemo44x 8y ago

I don’t like it. Who gets to decide what tax rate each thing gets? There are just so many things. Make it flat at 20% for any time money is traded for something. This would be for toilet paper to a house to a political donation and include capital gains profits. Everything is taxed at 20%. Then eliminate income and corporate taxes. States can define other taxes like local income tax, property tax etc. Then every adult gets a check for 20% of the agreed upon poverty level in January. Now taxes are not tied to income, to only those that work or capitalize, etc.

mbostleman 8y ago
Exactly. And a huge shift in freedom and privacy moves back to the public. And, while it may or may not be significant (I'm not really sure), as an added bonus those with illicit or under the table income are suddenly paying taxes.
mbostleman 8y ago
It should also be noted that the elimination of corporate taxation would further reduce the overall regressivity.
nybble41 8y ago
> Everything is taxed at 20%. You'd need to exclude resale of used items, unless it's your intent to kill the market for used goods and ensure that they end up straight in the trash. With a 20% sales tax on used items you might as well buy new instead, especially for durable goods which wouldn't trade at much of a discount. Apart from that change, what you're describing is essentially the "Fair Tax", except that they calculated that the rate would need to be more like 30% to remain revenue-neutral with the current income tax scheme.
- nkurz 8y ago
  With a 20% sales tax on used items you might as well buy new instead I don't see why this follows. For example, most states currently charge sales tax on the sales of used cars and there seems to be a thriving market for used cars. Do you believe that raising this rate from 5-10% to 20% would significantly impact the sales of used vehicles? especially for durable goods which wouldn't trade at much of a discount While I don't think it's a likely outcome, suppose that for some reason all buyers balked at paying a 20% tax. I think it's likely that this would cause sellers to reduce their asking price to clear the market. Why do you think sellers would throw the item in the trash rather than reducing the price?
  - nybble41 8y ago
    > For example, most states currently charge sales tax on the sales of used cars and there seems to be a thriving market for used cars. Do you believe that raising this rate from 5-10% to 20% would significantly impact the sales of used vehicles? First, it would be raised by 20%, to 25-30%. Adding a federal sales taxes wouldn't negate the existing state taxes. Second, vehicles are a special case in the tax code. When you trade in a used vehicle you typically only pay the tax once, on the value of the new vehicle. (Technically, one tax on the trade-in value and another on whatever extra you paid for the new vehicle to make up the difference.) Under your scheme there would be a 20% federal tax on the value of the old vehicle plus another 20% federal tax on the value of the replacement. (Unless you don't intend to apply the sales tax to barter... with the predictable consequence that all significant transactions thereafter will avoid any actual exchange of currency.) More importantly, used cars tend to be much cheaper than new ones. There's some basis to that joke about losing half the value just driving the car off the lot. Even a 25-30% tax wouldn't make up for that much of a difference in price, though it would make used vehicle trades more expensive and probably put a damper on the market. Do you believe that imposing an extra cost of anywhere from hundreds to thousands of dollars in taxes on any used vehicle sale wouldn't significantly impact the sales of used vehicles? I think people would be more likely to buy their vehicles new, when they can afford it, and hold on to them longer. The ones that would be available used would consequently tend to be older and in worse condition, on average. > Why do you think sellers would throw the item in the trash rather than reducing the price? How much do you think they can reduce the price before it isn't worth the trouble? Finding a buyer is not necessarily an effortless process, and given that buyers aren't likely to want to pay more (incl. tax) than they do now the seller will have to lower their pre-tax price by at least 16% to make the sale. I already see perfectly good items sitting out on the curb with a "free" sign in less-than-ideal weather because they'd be too much trouble to sell; reducing the incentive to advertise and locate someone who values the item will only make that more prevalent. Besides, do you really want individuals collecting and remitting sales tax on behalf of the federal government? Sales of used items are much more likely to be person-to-person. Taxes on the sales of new items tend to be collected by registered businesses, which makes it a more manageable problem.

jcranmer 8y ago

That scenario tends to end up requiring you to answer the question "for tax purposes, are tomatoes fruits or vegetables?" (the Supreme Court ruled that it was a vegetable).

mbostleman 8y ago
Yes. I was trying to imagine some of the behaviors that would create as producers try to move themselves down-luxury.

ars 8y ago

So what you are saying is that you shouldn't buy your second home, rather have your wife or child buy it? And instead of buying that private airplane, lease it for 20 years from Boeing? That's kind of the point of the article: There are ways to structure purchases to avoid this kind of thing.

mbostleman 8y ago
Given a sales tax there is no "you" to the government. It doesn't matter who buys the house - sales tax is charged. Regarding leasing, I'm sure that provisions could be made for that sort of thing. Presumably the goal would be to be revenue neutral with the current system.
- ars 8y ago
  > It doesn't matter who buys the house - sales tax is charged. He specifically differentiated first from second homes, so it does matter who buys it. > Regarding leasing, I'm sure that provisions could be made for that sort of thing. It can get complicated fast, what if you share the plane? Presumably you only pay your portion. What if the plane is idle most of the time? Presumably Boeing won't pay the tax just for making a plane. What if I build a home instead of buy it? What if I buy a $20,000 home and upgrade it? This stuff gets really complicated very fast, what seems "oh it's simple, do abc", suddenly isn't.
  - mbostleman 8y ago
    I don't think there's any over optimism built in to this. Any attempt to tax an almost $20 trillion market is going to be complex. I find it hard to imagine that it would be any more complex than the current scheme. And on that point, that's all it really needs to be: not worse. The real benefits are in other areas.
  - mbostleman 8y ago
    Also, it should be noted that all but 5 states already have sales tax. So the infrastructure and processes to collect are already in place. And the questions that you ask about what should or shouldn't be taxed already have a history of debate and consideration.