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A lot of economists consider sales tax to be the best way to tax. The reason is it doesn't hinder savings and investments

Radle 7y ago
"The reason is it doesn't hinder savings and investments" -Said no low income earner ever. Sales taxes are regressive taxes. It's stealing out of the pockets of people who are too poor to find time for politics or who are too uneducated to understand that they are being mugged. If I was an economist with a college degree, I would also support sales tax.
- mikemotherwell 7y ago
  Tax is undeniably complicated, and I have no firm opinion what is better, and I'm often shocked when people do. The regressive nature of a sales tax is bad, but then, income tax is so easy to avoid. We all need things, making sales tax almost unavoidable, and what's the point of being rich if you can't spend it? The problem with income tax is that it encourages the richest to run scams where the ROI is "cost of accountant + tax saved < expected tax = do it". If your income exceeds $100,000, it is almost guaranteed to be worth it to hire expensive lawyers. Then there are the terrible scams like the one I read (which I can't confirm) where startup founders with public companies receive a minimal income, like $1 per year, and instead borrow their yearly requirements against the value of their shares. That could be $10M tax free - it is borrowing so it isn't income - and a sales tax starts to look like a pretty good idea! That'd be $1M in tax on a sales tax of 10%, vs $0. Anyway, like I said, tax is complicated!
  - dragonwriter 7y ago
    > We all need things, making sales tax almost unavoidable Sales tax is easy to avoid, especially for the rich: buy things outside of the taxing jurisdiction.
- Causality1 7y ago
  Indeed. If I buy a gun or a car or a TV I pay sales tax. If I sell it I have to collect sales tax and then pay income tax on the sale despite buying it with money that was already taxed once. If I buy stocks I pay no tax at all unless I manage to sell them at a profit, which is insane. Treat stocks like any other property: collect sales tax on the purchase and then income tax on the gross revenue after selling them regardless of whether you made a profit.
dragonwriter 7y ago
> A lot of economists consider sales tax to be the best way to tax “Best” is always specific to a value system. An economist who pretends “best” is an objective question has confused their subjective value system with universal truth. > The reason is it doesn't hinder savings and investments That's only true if you only consider first-order effects, just like saying taxes on corporate income are best because they don't effect consumers ability to afford goods and services would be. Consumption taxes negatively impact investment returns (and thereby also the incentive to invest) by depressing quantity traded of consumer goods at any price level.

Radle 7y ago

"The reason is it doesn't hinder savings and investments" -Said no low income earner ever. Sales taxes are regressive taxes. It's stealing out of the pockets of people who are too poor to find time for politics or who are too uneducated to understand that they are being mugged. If I was an economist with a college degree, I would also support sales tax.

mikemotherwell 7y ago
Tax is undeniably complicated, and I have no firm opinion what is better, and I'm often shocked when people do. The regressive nature of a sales tax is bad, but then, income tax is so easy to avoid. We all need things, making sales tax almost unavoidable, and what's the point of being rich if you can't spend it? The problem with income tax is that it encourages the richest to run scams where the ROI is "cost of accountant + tax saved < expected tax = do it". If your income exceeds $100,000, it is almost guaranteed to be worth it to hire expensive lawyers. Then there are the terrible scams like the one I read (which I can't confirm) where startup founders with public companies receive a minimal income, like $1 per year, and instead borrow their yearly requirements against the value of their shares. That could be $10M tax free - it is borrowing so it isn't income - and a sales tax starts to look like a pretty good idea! That'd be $1M in tax on a sales tax of 10%, vs $0. Anyway, like I said, tax is complicated!
- dragonwriter 7y ago
  > We all need things, making sales tax almost unavoidable Sales tax is easy to avoid, especially for the rich: buy things outside of the taxing jurisdiction.
Causality1 7y ago
Indeed. If I buy a gun or a car or a TV I pay sales tax. If I sell it I have to collect sales tax and then pay income tax on the sale despite buying it with money that was already taxed once. If I buy stocks I pay no tax at all unless I manage to sell them at a profit, which is insane. Treat stocks like any other property: collect sales tax on the purchase and then income tax on the gross revenue after selling them regardless of whether you made a profit.

dragonwriter 7y ago

> A lot of economists consider sales tax to be the best way to tax “Best” is always specific to a value system. An economist who pretends “best” is an objective question has confused their subjective value system with universal truth. > The reason is it doesn't hinder savings and investments That's only true if you only consider first-order effects, just like saying taxes on corporate income are best because they don't effect consumers ability to afford goods and services would be. Consumption taxes negatively impact investment returns (and thereby also the incentive to invest) by depressing quantity traded of consumer goods at any price level.