6 ms·

I don't understand your point. Even the rich will have to pay 13% once they spend the money.

danaris 7y ago
But they won't. Spend it, I mean. At least not on things where VAT is relevant. Most people, when money comes in, they spend it on things, so it immediately has to also pay VAT. If they're lucky, they may have some savings, but it's going to be on the order of 2-3 months' worth of income. Rich people make orders of magnitude more money, and mostly need to spend the same order of magnitude to live as the rest of us. The money beyond that, they mostly don't spend on the same kinds of things. After all, what would you do with a million dollars' worth of soap? There's no VAT on lobbying, on buying a house in the Caymans, on hiring six people to clean the mansion. VAT, like all consumption taxes that aren't highly targeted, is hugely regressive.
- itcrowd 7y ago
  > But they won't. Spend it, I mean. At least not on things where VAT is relevant. If we can agree that the VAT is levied because the government has added some value to each product sold (value added tax..) then I don't see why spending money on VAT-exempt items makes VAT a bad tax. If you spend it on labor, housing, there are taxes associated with that other than VAT. Lobbying and charities might be tax-deductible or exempt, that is another discussion. I think your point is that regressive taxes are bad, is that a fair analysis? I don't agree with that.
  - danaris 7y ago
    I mean, I believe that regressive taxes are bad. My point, however, is merely that VAT is a regressive tax.
    - itcrowd 7y ago
      I agree it is a regressive tax. Re-reading my comment I can understand that it may seem that I don't agree with that. Sorry about that. However, I fail to see why regressive taxes are bad in general and why VAT is bad in particular. I was originally interested in the question by someone else before me: > I'd be interested to hear your reasoning for why you think sales tax is so bad.
      - pmiller2 7y ago
        Regressive taxes are bad because they place a higher burden on people least able to pay versus those with more income to pay the tax.
  - pmiller2 7y ago
    > If we can agree that the VAT is levied because the government has added some value to each product sold (value added tax.. What value has the government added to consumer products I purchase in the store, particularly in the USA where tax rates vary from state to state, county to county, or even city to city? There is no national sales tax here, but consumer regulation is still a thing, and factors into the base price of goods. I’m still genuinely interested in what value you see the government adding, but I think this might be why Americans and Europeans are disagreeing here.
    - itcrowd 7y ago
      Roads, sidewalks, bridges, public transport, education (+ buildings), public libraries, emergency services, hospitals, ( ... the list goes on) are all heavily subsidized by the government here. You could design taxes such that these are all funded by the users but it is much easier to have a VAT that funds them all (at least partially). It's not like you can point to a piece of plastic on your chair and say the government made it, but the whole chair ending up inside your house was made possible, partially, by the government. I think it's fair to pay a bit for that.
      - danaris 7y ago
        The government adds value to all our lives, not merely to our consumer goods. So perhaps a more effective and fair means of paying for it is to recognize that those with higher incomes are the most financially able to support the cost, and develop a progressive income tax that ensures that the highest burdens are put on those with the greatest ability to bear them.
        itcrowd 7y ago
        > progressive income tax European countries have this.
        pmiller2 7y ago
        Then why do they need this VAT?
  - tialaramex 7y ago
    That isn't why it's called Value Added Tax. It's called that because the effect of the way the tax is implemented is to tax the _addition_ of value to the product by those being taxed on its way to a consumer. Suppose I buy a vacuum cleaner from a big store nearby for $100 plus $25 VAT. I don't need to care about this, but presumably the big store bought it from a vacuum cleaner manufacturing company. Maybe they want $50. Two things could happen, the manufacturer could charge $62.50 (adding VAT) which the big store then needs to claim back because they only bought it to then sell it to me - or more likely - the two firms exchange details and both create paperwork showing that the vacuum cleaner cost $50 and no VAT was charged. We can see that either way only $12.50 of the VAT is attributable to the big store, the rest is in some sense someone else's fault, either the manufacturer or their suppliers in turn.
chongli 7y ago
That assumes that rich people eventually spend all of their money. They don’t. They let their children inherit the accumulated wealth. Poor people who spend all of their money every month pay more in sales taxes, as a percentage of their income, than rich people who invest and save most of their income.
- CDSlice 7y ago
  But if the rich people and their kids never spend their money, than it might as well not exist, right? Once they spend it they pay the tax otherwise it's just a number that grows with investments and doesn't give them anything else.
  - chongli 7y ago
    Investments aren't just a number on your trading account, they're property. Rich people also invest in property through real estate investment trusts (REITs) which profit when people pay rent in those buildings. By not taxing rich people as effectively as we tax the poor (via sales taxes), we enable rich people to own more of the society we live in and levy rents on poor people.
    - CDSlice 7y ago
      Isn't it kind of a tautology that rich people own more of society? I mean they're rich, by definition they own more than most people. If they didn't they wouldn't be rich. And why can't poor people invest? Unless they are being banned from investing because they are poor shouldn't we be working to make the poor wealthier so they can invest instead of dragging down the rich?
      - NeedMoreTea 7y ago
        > why can't poor people invest? That has to be satire, right? On the chance it isn't: Because they are poor. You know, spending all their income on housing, food, clothing and getting to and from work. A simple car repair, or broken cooker could tip a poor family into crisis. There's nothing left in the pot for investing.

But they won't. Spend it, I mean. At least not on things where VAT is relevant. Most people, when money comes in, they spend it on things, so it immediately has to also pay VAT. If they're lucky, they may have some savings, but it's going to be on the order of 2-3 months' worth of income. Rich people make orders of magnitude more money, and mostly need to spend the same order of magnitude to live as the rest of us. The money beyond that, they mostly don't spend on the same kinds of things. After all, what would you do with a million dollars' worth of soap? There's no VAT on lobbying, on buying a house in the Caymans, on hiring six people to clean the mansion. VAT, like all consumption taxes that aren't highly targeted, is hugely regressive.

itcrowd 7y ago
> But they won't. Spend it, I mean. At least not on things where VAT is relevant. If we can agree that the VAT is levied because the government has added some value to each product sold (value added tax..) then I don't see why spending money on VAT-exempt items makes VAT a bad tax. If you spend it on labor, housing, there are taxes associated with that other than VAT. Lobbying and charities might be tax-deductible or exempt, that is another discussion. I think your point is that regressive taxes are bad, is that a fair analysis? I don't agree with that.
- danaris 7y ago
  I mean, I believe that regressive taxes are bad. My point, however, is merely that VAT is a regressive tax.
  - itcrowd 7y ago
    I agree it is a regressive tax. Re-reading my comment I can understand that it may seem that I don't agree with that. Sorry about that. However, I fail to see why regressive taxes are bad in general and why VAT is bad in particular. I was originally interested in the question by someone else before me: > I'd be interested to hear your reasoning for why you think sales tax is so bad.
    - pmiller2 7y ago
      Regressive taxes are bad because they place a higher burden on people least able to pay versus those with more income to pay the tax.
- pmiller2 7y ago
  > If we can agree that the VAT is levied because the government has added some value to each product sold (value added tax.. What value has the government added to consumer products I purchase in the store, particularly in the USA where tax rates vary from state to state, county to county, or even city to city? There is no national sales tax here, but consumer regulation is still a thing, and factors into the base price of goods. I’m still genuinely interested in what value you see the government adding, but I think this might be why Americans and Europeans are disagreeing here.
  - itcrowd 7y ago
    Roads, sidewalks, bridges, public transport, education (+ buildings), public libraries, emergency services, hospitals, ( ... the list goes on) are all heavily subsidized by the government here. You could design taxes such that these are all funded by the users but it is much easier to have a VAT that funds them all (at least partially). It's not like you can point to a piece of plastic on your chair and say the government made it, but the whole chair ending up inside your house was made possible, partially, by the government. I think it's fair to pay a bit for that.
    - danaris 7y ago
      The government adds value to all our lives, not merely to our consumer goods. So perhaps a more effective and fair means of paying for it is to recognize that those with higher incomes are the most financially able to support the cost, and develop a progressive income tax that ensures that the highest burdens are put on those with the greatest ability to bear them.
      - itcrowd 7y ago
        > progressive income tax European countries have this.
        pmiller2 7y ago
        Then why do they need this VAT?
- tialaramex 7y ago
  That isn't why it's called Value Added Tax. It's called that because the effect of the way the tax is implemented is to tax the _addition_ of value to the product by those being taxed on its way to a consumer. Suppose I buy a vacuum cleaner from a big store nearby for $100 plus $25 VAT. I don't need to care about this, but presumably the big store bought it from a vacuum cleaner manufacturing company. Maybe they want $50. Two things could happen, the manufacturer could charge $62.50 (adding VAT) which the big store then needs to claim back because they only bought it to then sell it to me - or more likely - the two firms exchange details and both create paperwork showing that the vacuum cleaner cost $50 and no VAT was charged. We can see that either way only $12.50 of the VAT is attributable to the big store, the rest is in some sense someone else's fault, either the manufacturer or their suppliers in turn.

chongli 7y ago

That assumes that rich people eventually spend all of their money. They don’t. They let their children inherit the accumulated wealth. Poor people who spend all of their money every month pay more in sales taxes, as a percentage of their income, than rich people who invest and save most of their income.

CDSlice 7y ago
But if the rich people and their kids never spend their money, than it might as well not exist, right? Once they spend it they pay the tax otherwise it's just a number that grows with investments and doesn't give them anything else.
- chongli 7y ago
  Investments aren't just a number on your trading account, they're property. Rich people also invest in property through real estate investment trusts (REITs) which profit when people pay rent in those buildings. By not taxing rich people as effectively as we tax the poor (via sales taxes), we enable rich people to own more of the society we live in and levy rents on poor people.
  - CDSlice 7y ago
    Isn't it kind of a tautology that rich people own more of society? I mean they're rich, by definition they own more than most people. If they didn't they wouldn't be rich. And why can't poor people invest? Unless they are being banned from investing because they are poor shouldn't we be working to make the poor wealthier so they can invest instead of dragging down the rich?
    - NeedMoreTea 7y ago
      > why can't poor people invest? That has to be satire, right? On the chance it isn't: Because they are poor. You know, spending all their income on housing, food, clothing and getting to and from work. A simple car repair, or broken cooker could tip a poor family into crisis. There's nothing left in the pot for investing.